So that the farm organizations are in the life-insurance field of activity now.

It looks reasonable for us to conclude that the next step in insurance might be crop insurance, and we are happy to know that we have some foundational data tracing back to 1923, and some of more intangible nature still prior to that year, which we can rely upon in order to build up the actuarial foundations upon which any insurance

must stand.

So in a sort of an evolutionary, progressive way we get up to crop insurance now, and last November, on or about the 9th of that month, Secretary Wallace, as President O'Neal has already recalled, called 75 or 100 representatives of various farm groups here to Washington to consider crop insurance.

They discussed that in connection with other farm problems and adopted a resolution in favor of crop insurance, along with other farm activities. Then a month later than that, or thereabouts, the American Farm Bureau Federation met in its eighteenth annual convention in Pasadena, Calif., and adopted this resolution, the effect of which when I read it will show that we are not overly enthusiastic about crop insurance, but we are friendly to it and are willing to enter into it, may I say, somewhat cautiously.

The resolution reads as follows:

Factual data thus far available does not seem to justify any definite statement of policy on crop insurance. Should such information become available and its studies seem to justify, the American Farm Bureau Federation should give its support, at least on a trial basis, for not more than one or two commodities, providing such a program calls only for the voluntary cooperation and participation of farmers producing such commodities.

The two particular points in that resolution are these:

That we are approaching the question consecutively and cautiously, and that the insurance should be on a voluntary basis, like all other insurance activities that farm organizations for the last 40 or more years have sponsored, he who wants to come in comes in on a voluntary basis; if he comes in, he pays the premium necessary to keep the organization going and to meet the losses as they develop.

Those are the two main ideas in this resolution.

Still later than last December, when the American Farm Bureau Federation made that statement which I have just read, the farm organizations again were called into Washington by Secretary Wallace on February 8 and 9, not specifically to consider crop insurance, as was the case last November, but to consider the entire farm program for this session of Congress under the general term or slogan, if I may so call it, of the "ever normal granary", into which term or slogan many projects fit. At that meeting, after 2 days deliberation, where about the same number of farm representatives from about the same organizations came as in November last year, this resolution was adopted, which is a part of many others of the conference:

The principle of an actuarially sound crop-insurance program is endorsed. Senator POPE. In making that endorsement you had in mind the combination of the ever normal granary idea and the insurance idea? Mr. GRAY. I would judge so, yes.

Senator POPE. Do you think that the somewhat novel feature of including the ever-ready granary idea, the payment in kind in premiums and the payment of indemnities in a commodity, would add to the value of the measure?

Mr. GRAY. Yes, especially in the light of the fact that we are trying to integrate or correlate the various and sundry activities of the Federal Government which relate to agriculture into a composite program, and if we care to call that program at the present time the ever-normal granary, which may mean about the same as we used a few years ago, equality for agriculture, it is advisable to fit them all into one machinery as much as may be. If the farmer can pay his premium losses, his premium assessments I mean, in the commodity, then that commodity will be put into storage, and as Senator McGill was suggesting awhile ago, if the premiums paid in the commodity get too terrifically large held in storage, they might have a bearish influence on the market, but our thought is to integrate crop insurance as much as may be with these other activities, one of which is the Commodity Credit Corporation.

Another one is a Surplus Commodity Corporation, and there are other corporations that are doing certain purchasing and selling and disposing business for agricultural commodities, so that if and when these commodities in storage, as wheat and cotton, say, gets to be too large we will have other instrumentalities of the Federal Government presently existing under Federal law or by Executive order to act as selling and disposing agencies.

It is not our thought that the crop-insurance activity itself will be a purchasing or a selling agency, but we have other instrumentalities of Government with which the corporation provided in Senator Pope's bill can easily enter into an agreement to do the thing of getting rid of the crop that is in storage as much as the market demands here and abroad will permit; and if unfortunately we have to continue on the part of the Federal Government rather fortuitously giving these crops away for relief, then the Surplus Commodities Corporation will have a better chance to dispose of the storage commodities, those paid in premiums and otherwise, than normally might be the case.

I will confess that if these premium payments go along in commodities too long and they pile up and accumulate from year to year, and if relief should stop, which we hope it will soon, or eventually, and the Government would not have that avenue of getting rid of the surplus commodities which it has enjoyed for the last few years, then either this insurance corporation would be compelled to dispose of the premiums stored in undue quantity or make a contract with some of these other governmental corporations to do that thing.

Senator MCGILL. Then the terms of the bill would have to be changed slightly in order to make that possible?

Mr. GRAY. Perhaps so. The bill is not perfect and we do not care to go on record for the bill exactly in its present text. The idea of crop insurance, though, and entering into it in a cautious way, we approve of.

Senator POPE. Now, the enactment of such a law as this, in your opinion, would tend to help with other programs of benefit to the farmer?

Mr. GRAY. That is our thought, and would fit into it. It would integrate with, it would correlate with, unless we are greatly mistaken, some of these other activities which the Government has been exercising in behalf of agriculture.

Senator MCGILL. Do you also think a control program is necessary in order to go along with this sort of a crop-insurance program?

Mr. GRAY. If not necessary, at least advisable.

Senator MCGILL. Unless you have a control program wouldn't this have a tendency, this kind of a law, have a tendency to cause the farmer to produce all that he could possibly produce?

Mr. GRAY. No; I think not, because the prospective provision in the plan is for a 75-percent coverage. I think that will pretty nearly, maybe not wholly, but it will very nearly cover the situation that you have in mind. Just like it is-let me make the application-in the cooperative automobile insurance, that I spoke of a while ago, in which I have my auto insured through one of our State Farm Bureau Federations. If I have a loss I only get 80 percent of the loss and I pay the rest of it myself. That keeps me from deliberately going out and cracking up my old auto to get more than it is worth, because I get only 80 percent, and that is one beauty about mutual insurance activities; you don't get your full loss.

You, as a cooperator, help the corporation or the insurance agency meet the loss and you do it on the ratio of about 20 percent--80 percent; whereas, in your bill I meet my crop loss 25 percent and the insurance agency meets it 75 percent. Not wholly but to a large extent that 75-percent coverage will almost obviate or remove the difficulty that you had in mind, I believe.

Senator POPE. You would see no advantage in buying two or three more automobiles in order to insure them and get the indemnity in case of loss, and there would not be any particular inducement for a man to plant more acreage than he could really take care of when he would get, at most, only a coverage of about 75 percent for his losses.

Mr. GRAY. I think that is not conclusive but at least a tentative conclusion in regard to this insurance proposition inducing overproduction. I cannot see that danger.

However, if we are going to have in the future severe or modified control of production, as the cases may require in future years, there is no reason why crop insurance should not correlate with that program. However severe or however modest the control of production may be in future years, and perhaps especially on wheat, cotton, and tobacco, we are going to need rather indefinitely in the future more than for any other commodities, some method of control and balancing of production with demand-this plan of crop insurance needs to be incorporated with that attempt to balance production with demand.

Senator MCGILL. That program, it seems to me, the control program with reference to wheat-and that is the commodity we are considering-under the present market we have for the commodity it is absolutely necessary in order to have an adequate price.

Mr. GRAY. Yes.

Senator MCGILL. And that is my thought, that this program ought to be one that would be carried forward in conjunction with a control program.

Mr. GRAY. Yes. Now may I, Mr. Chairman, refer to a letter which was sent out to our State farm bureau federations last year, in May, when you introduced your first crop-insurance bill, which obviously was merely a feeler into the proposition as to whether or not and in what way the Federal Government should enter into the crop-insurance filed.

Senator POPE. Yes.

Mr. GRAY. I sent that bill out to our State federations and told them frankly that it was not intended to be a final word, and I took the liberty of stating frankly that I was sure you, as its introducer, did not intend that its terms and provisions were final in any sense of the word.

Senator POPE. That is entirely true, Mr. Gray. It was more a feeler than anything else. I wanted to get the reaction of the farm groups and the farmers to the idea of crop insurance, and therefore I introduced the measure mainly for that purpose.

Mr. GRAY. In that letter that went out to the State federations, an effort was made to summarize the results of our studies and the studies of other people, governmental and otherwise, on crop insurance for the last decade. Some of those paragraphs which are applicable to the present situation and to the present bill may be of interest. One paragraph says:

The plan must be national in scope or as wide as the commodity is grown. Too small geographic areas have wrecked many insurance projects. States have tried crop insurance and, partly because of the small area covered, a bad season, blight, or what not, caused such heavy assessments on the insured as to ruin the enterprise.

Applying this to the present discussion and to the bill before us, in whatever form it may be finally reported, will overcome the disadvantages of former experiences where, as was mentioned a while ago, the area was too limited. There is no limit of area in the pending bill. It may be a regional proposition, as I would interpret the bill, or in some commodities it might have a national coverage.

Senator POPE. Yes.

Mr. GRAY. Just as the commodity and the producers thereof voluntarily thought best.

Reading again from the letter that was sent to our State federations: The plan must be crop damage insurance, not price insurance.

Senator FRAZIER. Not what?

Mr. GRAY. Not price insurance.

Too many efforts have failed because they tried to guarantee price or profit rather than to reimburse the insured for losses.

The bill pending is a yield insurance proposition; that is, if by plant and animal diseases, if by depredations of one kind or another, if by weather conditions that are unfavorable you have more than a 25percent loss, this policy, this plan, comes into operation, not to guarantee price, not to guarantee profit, but to bring your yield up to 75 percent.

That is as this letter from which I am reading would state it. You cover the damages on 75 percent of the crop. As to the remaining 25 percent the farmer bears those damages, at least theoretically, if I may interpret the bill, himself.

Senator FRAZIER. The percentage is not set in the bill.

Mr. GRAY. NO; but the talk around town is 75 percent. Some people began to talk at first when we began to discuss this measure actively last September about 90 percent. That seemed too high and should not be further considered.

Senator POPE. Do you not think in different sections of the country it might be advisable to have different percentages? Or at least give the farmer opportunity, as Mr. Green stated yesterday, of 50-percent

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insurance where the rates would be very much lower or 75-percent insurance where they would be correspondingly higher?

Mr. GRAY. I am using the 75 percent and not 100 percent because no insurance company can pay all losses if it is to be liquid and pay all claims.

Senator POPE. I am very much interested in the mature conclusions of that letter, Mr. Gray. It seems to me you have arrived at just about what those responsible for this bill have arrived at.

Mr. GRAY. I see you are using the pronoun in the plural. These conclusions are not mine, but conclusions more or less of people who have given close application and study to the subject for 10 years or

more.

Senator MCGILL. The payment of claims in the commodity itself is an important factor. I see intended the payment of claims in the commodity. I presume that means so many bushels. It could be that means cash equivalent at the time of payment.

Senator POPE. And at the option of the farmer.

Senator MCGILL. Based on the price at the time of the payment of a claim.

Mr. GRAY. Reading on from it, and I am using this letter because it summarizes the matter much better than any statement that I can make. May I read?

Senator POPE. Yes, sir; proceed.

Mr. GRAY (reading):

The plan must be limited to the payment of crop damages to the assured incurred at the date of damage.

For instance, if a man is hailed out in June, or strawberries are frozen in bloomtime, the assured should not be entitled to damages. equal to the value of the ordinary marketable crop at maturity.

There is a difference there, somewhat, from Senator Pope's bill, for under his bill, if strawberries were insurable under the plan, which they will not be, but taking a hypothetical case, should they be frozen out in bloomtime, under the plan of your bill, Senator, if I may continue to use 75 percent as the loss coverage

Senator POPE. Yes.

Mr. GRAY. The farmer would get a payment. We may say that he would receive 75 percent of his crop, estimated on some base period.

Senator POPE. Yes, sir.

Mr. GRAY. Our studies, until the last few months, have indicated that if a man is frozen out in bloomtime he would receive payment of costs incurred down to that time; and would not get any yield guarantee as if the crop had gone ahead to full market maturity.

There are possibilities however, in the plan and one should be now presented willing to go ahead on the assumption that it might be more reasonable and equitable to have damages paid on a yield basis for the year than a cost basis of damage at the date of damage.

Senator POPE. It might be easier to calculate in the first place and more equitable in the second place.

Mr. GRAY. The statement I have read indicates we would have accurate cost of production figures.

Senator POPE. Yes, sir.

Mr. GRAY. And with reasonable accuracy the Department of Agriculture could indicate by its data what strawberries at blossom