Senator SCHELLENBACH. With reference to that point, the private companies that have undertaken to write crop insurance have almost invariably, have they not, sought to insure against the price hazard as well as the yield hazard?

Mr. GREEN. Yes.

Senator POPE. And, in your opinion, does that not contribute to the failure of these companies in the crop insurance field?

Mr. GREEN. Yes; there is not much question about that. That was a big cause of crop insurance losses in 1920 and 1921. It likewise was a major factor, one of the major factors at least, in the failure of the last effort in 1930 and 1931 in Kansas. This undertaking got started just at the time prices began to decline and their record, which we have examined, indicates that they would not have gotten into so much difficulty had wheat stayed at 50 cents a bushel or above. So the price element has contributed to the difficulties of these private attempts. And you can see why. We have just noticed some bases for judging the risks in insuring yields. When it comes to insuring what price is going to do, when there are so many factors, neither under the control of the farmer nor the insurance company, the effort ceases to be insurance. It is just taking a gamble on what the price may be, and it has contributed to the failure of several past efforts.

Now, I believe, Mr. Chairman, unless there are some questions on the chart, there is a point or two you might be interested in. There is the matter of coverage, three-fourths of the average yield. You might be interested in what that would mean in dollars and cents. I believe recently they have quoted the parity price at about $1.13 for wheat. I don't know whether that is right up to date. You can see that on a farm with an 8-bushel average, insuring three-fourths of the average or 6 bushels, if somewhere near that parity price were maintained, that would figure out $6.78 an acre, and even down to a 6-bushel average yield, three-fourths of that would be 41⁄2 bushels, and at your parity price $1.13, $5.08 an acre.

In this connection you might be interested in the comment that has been made by a number of other agencies that have been looking into the same question. Some officials of Canada have been corresponding with us. They are looking into the problem very carefully. In the preliminary report of the committee on crop insurance, Department of Agriculture, Regina, Saskatchewan, page 13 of their report, they say:

In order that the insured may be able to continue farming operations following a year of crop failure, it would appear that the indemnity should be at least $4 per acre in case of total loss.

Then a report on the rehabilitation of the dry areas of Alberta, and crop insurance, 1935-36, by Hon. W. N. Chance, Minister of Agriculture. On page 79 of that report he says [reading]:

Six or eight bushels of wheat, or its equivalent in other crops, or if the guaranty is in dollars, not more than $5 or $6 per acre, should be the outside limit of insurance.

I quote these because they do check with the experience that we have had in working this matter out. Here is one other reference to the matter of coverage [reading]:

If his insurance is used as a basis for credit or to avoid what might be called the catastrophe hazard, he need be covered to an amount of perhaps not more than $5 or $6 per acre.

That is by Mr. G. Wright Hoffman, professor of insurance at Pennsylvania University, reported in the Annals of the American Academy of Political and Social Science for January 1925, and appears in a discussion of crop insurance.

So it is felt that if the other agencies can maintain parity price, this plan of crop insurance will do the job of giving protection with threefourths coverage, or if a man wants a little less than that, 50-percent coverage will generally give ample coverage for the purpose of protection against catastrophe hazards, and at the same time neither case will give such excessive coverage as to promote or even encourage slovenly farming.

I believe, Senator, that unless there are some questions, that is about all I have to say.

Senator POPE. Are there any questions? If not, I think we will ask Mr. Shields to make any comment he desires with reference to the suggestion of Senator Schwellenbach yesterday as to including a provision of law in the contract that is entered into with the farmers. STATEMENT OF ROBERT H. SHIELDS, ATTORNEY, SOLICITOR'S

OFFICE, DEPARTMENT OF AGRICULTURE-(Resumed)

Mr. SHIELDS. With respect to your suggestion yesterday, Senator, I think it would have a very wholesome effect both on the Corporation and on farmers. It is a little difficult for me to see how a particular farmer could show a specific loss to himself if the provision was not carried out. But I see no objection to the provision at all. The only point I want to make is that in the event the provision were violated, which of course, probably should not be anticipated, but in the event that it were, I do not see how an individual producer could prove specific injury to him because his interest would be so small. The case of Massachusetts v. Mellon, the situation of the interest of a taxpayer in the spending of public funds, seems to me analogous. Senator SCHWELLENBACH. No; you have got a contractual relation here.

Mr. SHIELDS. That is true, but suppose a producer sued to recover damages for the violation of that provision: it is very difficult for me to see how he could prove any damage. That is my point. I am not objecting to the provision at all. I think it is a very good provision.

Senator SCHWELLENBACH. Regardless of the legal rights that anybody might have, if we write that provision into this law and it is in the contract, and somebody gets up here on the floor of the Senate and says, "Let's sell all of this stuff", you can always answer him and say, "No; we cannot do that. We have made an actual contract with several thousand farmers and we cannot breach that contract."

Mr. SHIELDS. That is true. I think it is a very wholesome provision, and I think it would have the effect that you wish. I just wanted to point out what appears to me to be the legal effect of it. Senator MCGILL. The thought is that the law should provide that this provision must go into each contract?

Senator SCHWELLENBACH. Yes.

Senator POPE. That concludes for the present the statements with reference to the method of arriving at the results that are sought to be covered by the bill.

Mr. Thatcher, are you ready to make a statement now as to your view of this matter, representing one of the large farm organizations? Can you give us the benefit of your experience in considering the matter during the last year or two?

STATEMENT OF M. W. THATCHER, REPRESENTING THE NORTHWEST FARMERS UNION, THE WHEAT CONSERVATION CONFERENCE, AND THE FARMERS NATIONAL GRAIN CORPORATION Mr. THATCHER. Mr. Chairman, with reference to the Wheat Conservation Conference, that represents a group of farmers who came here to Washington on the invitation of the Secretary of Agriculture to participate on December 2 and 3, 1936, in a general discussion of crop insurance, particularly in reference to wheat. There were some 42 representatives of the wheat States and all of the wheat States were represented by one or more gentlemen who have some long-time standing in connection with some cooperative organization or State farm organization. They met here in Washington during those 2 days and created a standing committee of 15 with a chairman, with the responsibility of pursuing this question of legislation, crop insurance, and exerting efforts looking toward the successful conclusion of legislation in the matter. I was chosen chairman of that conference, and by arrangement with the chairman of this committee and to save time, it was agreed and approved by the chairman of this committee that owing to the fact that different phases of the subject were handled by their respective groups of the Department and sometimes the chairman would not be able to sit at meetings here, having other plans, the so-called "farm group" might make appearance before this committee beginning on the morning of March 8, and have time for that group continuously until that testimony is concluded. At that time we shall want to present the farmer's side of this. They will be here for 2 or 3 days and will have an opportunity to read over the record that has been made by the representatives of the Department who have testified here, and we will try to present the testimony succinctly, avoid duplication, conserve your time, and try to make the record complete as to the producer notions about it.

I had not anticipated that I would be called on at this time, but I do wish to make this one observation at this time: I think it is very important that we go into it-that in connection with the question developed by Senator Schwellenbach, in connection with the discussion of Mr. Roy Green on the effect on price caused by a certain amount of wheat premiums being put away in a reserve stock, premium stock-as to what effect putting those premiums away, not subject to the discretion of somebody to move them out onto the market, but resting thereunder, I hope, a legal restriction that the stock may only be moved out in harmony with the provisions of the contract between the agency and the farmer, and what effect movement of the wheat in and out under such a program of legal restriction will have in comparison with the experience and the history of the farm board operations, I, of course, believe that it will have some effect, some good effect, but it does have-I will not attempt to reply to Senator Schwellenbach, but it does suffer the limitation of the possibility of lower price, and the effect of domestic stocks so impounded under this crop-insurance program could, of course, except

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where we are, as we are now, on a deficiency basis-could have an effect on domestic prices, although stock so impounded and withheld would be small in relation to the world's carry-over of wheat stocks, but even then, that could at times be quite appreciable.

Ordinarily, the world carry-over of wheat stocks runs around six or seven hundred million bushels, and if we had an excess of production under the crop-insurance program, very conceivably our stocks could be as much as 70 or 75 million bushels, and that is 10 percent of the carry-over, and we would have the situation where, with the world carry-over of some six or seven hundred million bushels ordinarily, the possibility that this 10 percent might be dumped into the market at any time might affect the price. Here is a case where we have 10 percent of the world carry-over put away in such form that the buyers in the world market would know that that was carry-over against future social needs, but it would only be delivered on the market under certain legal restrictions, as compared to dumping it on the market at the discretion of an individual or group of individuals governed by considerations as to profits, and so forth.

I think you have raised a very important point in your question, Senator Schwellenbach, and I do think that this program is going to affect price to some extent, and it is a suggestion to me to give the matter considerable study, and when we make our appearance here I will try to have more definite data to present to the committee on that subject.

Senator POPE. Here is a rather interesting suggestion with reference to the matter of insurance that was made by Prof. Nathaniel Royce of Harvard in quite a remarkable essay on war and insurance. He was assuming that the demand for wheat or for our products might be very great, coming from foreign nations, and he said this. [reading]:

Flood, famine, pestilence, earthquakes, and volcanoes may interfere in various fashion with the economic as well as the rest of the social life of people thus afflicted. Apart from actual famine, considerable failure of their crops may impair for a season the normal supplies of individual nations.

For instance, suppose demand were so great that we had no surplus crops or no surplus wheat in this country, and then we should have a very large crop failure, it might affect the whole economic situation in our country. There might be an actual need of wheat. Well, the fact that we might have stored 70 or 75 million bushels that could not be sold, whatever the demand was, except in the way indicated here, might mean that we would have on hand at least some wheat in storage which we otherwise would not have. That he pointed out as far back as 1914, and it seemed to me as I read that, that this might at least be somewhat in line with his suggestion at that time. I thought there was interest enough in that to mention it.

Now, I have arranged with some other representatives of farm organizations to be heard, if they desire to be heard, the representative of the National Grange, a representative of the Farmers Unionand who does Mr. Robin Hood represent?

Mr. THATCHER. The National Cooperative Council.

Senator POPE. Yes. They are all expected to be here. It was not expected that we would get through in time for them to be heard today, but they will be ready to present their views on this matter at any time we call them.

Mr. THATCHER. Has the Farm Bureau made an appearance?
Senator POPE. No.

Mr. THATCHER. They hope to be heard.

Senator POPE. Yes. Who is their representative?

Mr. THATCHER. Mr. Chester Gray.

Senator POPE. Yes; I called Mr. Gray and also Mr. O'Neal. Mr. Gray was here yesterday and said that they would be ready when we wanted them. I am just advised that Mr. O'Neal or Mr. Gray will be ready to be heard tomorrow morning, and I think also Mr. Robin Hood and Mr. Brenckman will also be ready tomorrow morning. Unless there is someone else who wants to be heard between now and 12 o'clock, we might have a recess until tomorrow morning at 10 o'clock, at which time the farm leaders will be here and give their views on the subject.

(Whereupon, at 11:40 a. m., the subcommittee adjourned until 10 a. m., Saturday, Feb. 27, 1937.)