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Mr. BLACK. They have assisted us by giving us technical assistance. They have sent some of their technical men to us advising us on some of the technical aspects of the problem, and their attitude has been very helpful and friendly all the way through.

Senator POPE. I have received letters in which they have offered to give all the information they have accumulated to the Government in its efforts. · Senator McGILL. Practically all of those private companies, mutual companies, with reference to wheat they have insured so many dollars per acre, and would pay off on the basis of the percentage of loss per acre in money, based on the policy. Practically all of those concerns have failed?

Mr. BLACK. Yes; because it so happened that their attempts usually went into effect just at the point when they experienced a very severe price decline. Even if the crop had been fairly good, the low price at the time of harvest gave a value per acre of less than it · was insured for, and thus they had claims for insurance because the value of the crop was reduced. Losses forced them out of the activity.

Senator POPE. Now, this feature of storing grain and paying in kind, both as to premiums and indemnities, is a field that private insurance companies have never undertaken and probably could not undertake?

Mr. BLACK. They have never undertaken it. However, they seem to be favorably impressed with that approach, because it is an approach that they had not been able to make, and they feel that it does eliminate this price-insurance feature, which up to the present at least we do not feel can be insured against.

Senator POPE. On that point, the attempt to insure as against price fluctuation, as you say, has proven-well, they have never undertaken to eliminate the price-insurance feature?

Mr. BLACK. That is right.

Senator POPE. And the attempt to insure the yield and also the price is too great an undertaking?

Mr. BLACK. Too great an undertaking, and the price stabilization is really another problem. That is being approached, of course, in many other ways through triple-A activities and by other means, but we feel that it is not a real part of true crop insurance. It is a separate problem.

Senator POPE. In this program would there be any duplication or overlapping with the other programs which the Government has under way for the benefit of the farmers?

Mr. Black. No; very definitely not; because it would merely supplement the other programs.

Senator McGILL. You would not want to go along with this sort of a program unless you had a control program in effect? That would be impossible, would it not? Mr. BLACK. It would be inadvisable, to say the least.

Senator McGILL. If you did not have a control program, wouldn't this sort of measure have a tendency to cause the farmer to produce all that he possible could ?

Mr. Black. Well, this would not have any connection, of course, with the control feature.

Senator McGILL. If you did not have the control feature and you had this law, would it not have a tendency to cause the farmers to produce all of the given commodities they could?

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Mr. BLACK. Yes; it would. We feel, however, that insurance of this type ought definitely to apply, only to farms that are operating under the Soil Conservation Act.

Senator McGILL. Where the control program is in effect. . Mr. BLACK. Well, even more important than that, because operating under that act farmers are following certain farming practices which eliminate to a considerable degree certain of the risks that are present. If farmers are following these farming practices it will eliminate a certain amount of that personal risk element. We feel this would be helpful in making the insurance program successful.

For example, in your territory it is found that farms lying side by side, where one farmer fallows consistently, another farmer does not, that the loss rates are about half, aren't they, Mr. Green, on the farms where the farmers are following fallowing practices?

If insurance is restricted to farms that are in the conservation program where that may be one of these practices followed, you can see, of course, the risk there is materially reduced.

Senator POPE. Are there any other questions?

Senator SCHWELLENBACH. Do you want to talk about the question of cash equivalent or will somebody else take that up? Mr. BLACK. What aspect of it, Senator?

Senator SCHWELLENBACH. I wanted to inquire about the provision here that losses shall be paid either in wheat or in cash equivalent. To what extent do you estimate you are going to make your payments in cash equivalent?

Mr. BLACK. That would be difficult to say. You are referring, of course, to payments of indemnity?

Senator SCHWELLENBACH. Yes.

Mr. BLACK. The payments might be made by merely advancing to a farmer a warehouse receipt or an evidence of grain received, and he might dispose of that as he saw fit. They might be made payable to his order; that is, he might order the company to dispose of wheat on a certain day and transmit the cash to him.

We feel that the farmer, who in effect is being paid in grain, should be the one who determines when that grain is going to be disposed of, when it is going to be turned into cash. There should be certain limits on the time when it will be disposed of.

I think the grain ought to be disposed of within a reasonable length of time after the settlement is made, to avoid—well, to avoid his speculating with it.

Senator SCHWELLENBACH. How long do you figure it will take you after the farmer files a claim to dispose of the grain?

Mr. BLACK. I don't know how long it would take.

Senator ScHWELLENBACH. The point I have in mind is this: Suppose we have a farmer who sustains a loss out there, and he files a claim, and the price will be a certain amount on the day he files the claim. Then at the time settlement is made with him and he is given the cash equivalent, the price has gone down 10 cents a bushel. Aren't you going to run up against a lot of criticism and complaint from the farmers that they didn't get what they actually lost; that they lost $1.16 a bushel and they only got $1.06 à bushel?

Mr. Black. I would think that in administering the whole operation a good deal of that criticism might be avoided by administrative regulations.

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Senator POPE. Of course, it provides in the bill that the date of settlement shall be the date at which he will receive his wheat, his certificate, or his money.

Mr Black. There would also have to be provided dates for filing claims, I should think, that claims should not be filed before a certain date or after other dates. There is a possibility of the claim that you mentioned resulting, if these claims were delayed unduly and it was a matter of months rather than a relatively short time before the claims were paid, but I think that is a question of efficiency in management, but just what time would elapse it is very hard to tell.

Senator SCHWELLENBACH. It seems to me that you will probably find the most important factor in the success of this whole plan is the speed with which it settles claims.

This is insurance, and they pay premiums, and people are sold on the idea now that when they have a claim against an insurance company on this kind of insurance, they are paid immediately. They are told the story about the man jumping out of the twentieth story building, and as he passed the fifth story the insurance company handed his wife a check for his insurance.

People have the idea that on this sort of a claim against an insurance company they have got to be paid immediately, and if you can set up your business side of it so as to pay the claims quickly, then they are going to be satisfied, but if there is delay of even a few weeks it means they are going to be very much dissatisfied."

Mr. BLACK. Yes; I agree that questions of that sort have to be handled very promptly or there will be serious reaction against it.

Senator SCHWELLENBACH. Insurance companies have failed, a number of them, because of underwriting, improper underwriting, just because of their inability to handle that detail of their business.

Senator POPE. Are there other questions?

Senator McGILL. Mr. Black may have a further general statement. I did not mean to interrupt what you have to say.

Senator POPE. Did you have some other general matters?

Mr. BLACK. I wanted to mention the matter of our conferences with the insurance companies, but that has already been brought in. I wanted to mention the question of the inclusion of these other crops.

Senator Pope. You might mention the results of your conferences with the warehousemen, and their attitude toward such a program.

Mr. BLACK. The attitude of the warehousemen was that they wanted to cooperate, because for one reason they hoped that in storing grain their facilities might be available for this purpose. Because this grain would be stored for rather long periods they indicated that rather favorable rates could be granted, more favorable than could be given where the grain was subject to removal.

Senator POPE. What about the space in the warehouses being sufficient to take care of the grain that might be stored by the Government?

Mr. Black. That has been looked into, and there appears to be a very large amount of available storage space in the country.

Senator POPE. And it is thought sufficient to take care of the requirements of this program? - Mr. BLACK. I think without a doubt it is.

Senator POPE. Are there other questions? I think while we are discussing this general phase of the subject we will call Mr. Farrell,

who has a great deal of experience with the Agricultural Adjustment Act, and get any suggestions that he may have, or any observations he may have to make on this program and its integration with his program.

Mr. Farrell, you have sat in on conferences with respect to this matter, with reference to the drafting of the bill, and you might just state whatever you have to say as to this program and how it will fit in with your program, STATEMENT OF GEORGE E. FARRELL, DIRECTOR OF THE WESTERN

DIVISION, AGRICULTURAL ADJUSTMENT ADMINISTRATION Mr. FARRELL. I might say as to the program of crop insurance, from an administrative standpoint, it seems very practical and could be ntegrated with the soil-conservation program in such a way that a number of economies might be effected.

We now have a county association in each of the agricultural counties handling soil-conservation work. In the offices of these county associations there are the records of the old wheat associations and the new soil-conservation records. They would be available to the officers handling the insurance within the county, and the crop-insurance work will integrate very well with the soil-conservation work; that is, when the duties of handling crop insurance were heaviest, the duties of handling the soil-conservation work would be the lightest.

Probably these county associations might be used as a means of carrying through the crop-insurance program. The associations, of course, are made up of groups of armers with elected officers in each of the counties. If it should be decided that that was the most satisfactory way to admin ster the program we feel that it could be done most economically by people who have had considerable expeience and by farmers that have the confidence of the farmers themselves.

Then, too, the matter of adjusting losses, and so on, could be carried r‘ght along parallel with the work of the Soil Conservation and Domestic Allotment Act, and economies could be effected in that way.

We see no serious difficulty in administering the program and believe that it should be done along with the work that is being done now, and in a way that would prove satisfactory to the farmers.

The question has been raised as to how rapidly payments could be made, and it might be of interest to the committee to know that we are now making payments on the Soil Conservation Act in 3 weeks, and probably that time will be shortened as we go on.

That means that all of the business of getting the necessary papers, getting them through the county office, running them through the State office and getting checks back to producers is done in 3 weeks. I imagine in connection with crop insurance that that time could be shortened somewhat, because there is a definite time of loss and definite method of appraisal and reports that would go in and be audited and the checks drawn or wheat delivered rather rapidly.

I might say that we have had some experience in dealing with wheat farmers. We have had about 580,000 wheat farmers in the wheat program under the Agricultural Adjustment Act, and those records are available for use with the crop insurance program.

That is about all I have to say, Senator.

Senator POPE. Have you given some thought to this—I suppose Mr. Green will cover it later—where there is a field that has not been planted in wheat, we will say, at all. Under the provisions of the bill the history over a period to be determined by the board will be used in determining the average yield. This would form the basis of the insurance premium and also a basis for the percentage of coverage.

Suppose there is no history to this particular land, are you familiar with the way that is covered in the bill and the considerations that entered into that matter?

Mr. FARRELL. There probably will have to be some adjustment. That is, we have land that has had a difficult time during the short period, as it may have experienced two hailstorms, may have experienced two floods, consequently there is a statistical matter of ironing out all of this data so that it will be equitable between crops as well as between counties.

Senator POPE. There is the history of the individual farm, if it has a history, and then there is a history of the surrounding farms in the region or locality.

Mr. FARRELL. Yes.

Senator POPE. And the bill provides that both of those factors shall be taken into consideration in fixing an average yield upon which to base your premiums. That is what you meant in adjusting, giving the board power to adjust this average yield so as to be fair to the individual farmer?

Mr. FARRELL. Yes. I think I might say that in reading the report of the committee that handled this crop insurance there were some illustrations in it that were not illustrations of facts to be applied but just merely illustrations of tentative figures taking a few counties in one State. I believe, Mr. Green, that these were not illustrations of actual figures to be used, but merely illustrations of the method of applying data.

Senator POPE. Are there any other questions that members want to ask? If not, then you may go ahead with your data, Mr. Green.

STATEMENT OF R. M. GREEN, IN CHARGE, DIVISION OF AGRI

CULTURAL FINANCE, BUREAU OF AGRICULTURAL ECONOMICS, DEPARTMENT OF AGRICULTURE Mr. GREEN. Well, I think the committee has heard it brought out that there have been two principal difficulties to overcome in all these attempts at crop insurance.

In leading up to what I am going to discuss I might say in a general way that the application of crop insurance to the treatment of agricultural distress is not a new or novel idea. The fact is that in the previous big depression period between 1878 and 1896 a German economist made a rather complete report to the Japanese Government on the subject, indicating what to him seemed to be the proper place of crop insurance in a complete agricultural program.

At that time the Japanese farmers were subject to an increasing number of farm foreclosures and were being aided by relief funds. This writer pointed out that the relief funds protected the farmer against want, but that the farmer who still had some resources of his own had no benefit from these funds until by his losses he had been reduced to the point of want, and that the place of agricultural insur

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