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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 orly 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 McG.LL. 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. Nc; 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 seenied 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. ĜRAY. 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

time had cost the farmer to bring the crop down to that period of annual production, but frankly the cost of production data has not developed in the last 10 years as it was hoped 10 years ago. This condition may make it necessary for us to hesitate from the earlier point of view and more definitely take the point of view of Senator Pope's bill that the insurance shall be on the yield.

Senator POPE. That may be true with reference to strawberries or any other crops which require continuous labor up to maturity. Your idea might more equitably apply to strawberries than to wheat. If the flood comes along when the wheat is half grown and destroys the entire crop it might be entirely equitable for him to have his average production yield.

It doesn't require any more actual labor and you do not have to employ labor to carry on the work and mature the crop. The wheat after being planted will mature itself. Mr. GRAY. I think those remarks are very helpful to the discussion. Reading on again:

The plan must include damage to crops from weather conditions such as hair, drought, flood, heat, insect, rodent, and predatory damages, also blight and diseases.

So often people think of crop insurance as being only insurance against drought and weather conditions such as hail, drought, and floods, but we in the Farm Bureau have not limited our point of view, and stood on such narrow ground as that. The items that have been indicated in the last extract I read, the damages that might occur, and the sources from which the damage may come are covered in the bill except as to rodents and predatory animals.

Senator FRAZIER. It says "and such other causes as may be determinted by the board."

Senator McGill. What page are you reading from, Senator?
Senator FRAZIER. The top of page 7.
Senator McGILL. May I ask a question with reference to that?
Senator Pope. Yes, sir.

Senator McGILL. Ought we specify with reference to such other causes as may be determined by the board the construction of that last phrase would be that such other causes would be of like character to those specifically set out in the language of the bill?

Senator POPE. Yes; I think that would be the interpretation.
Senator McGILL. Could not be just anything.

Senator POPE. I think that would be the interpretation, but we use the broader clause "such other causes as may be determined by the board” to include damage by rodents and even damage by animals getting into the crop under certain conditions where there would be no element of negligence on the part of the farmer. I suppose you could say damage by rodents, by forest fires, and damage by lightning would be similar to these other cases, but we were not quite sure they would be similar and thought under such circumstances the board might determine there would be protection.

Senator McGILL. That might be possible, but I believe the courts will put a construction on that language to apply the rule it means cases of like character.

Mr. Gray. I may say this, if I may interrupt, if I have a neighbor next to my Missouri farm and am insured under this plan, and that neighbor's cattle breaks through a fence of mine which is in bad condition and that I have not properly cared for, or his fence that he has not properly cared for, in that case this insurance should not apply because we have State laws to take care of cases of that kind.

That is not an insurable damage in the sense this bill is contemplating, but if the animal you speak of should be a wild animal, a deer or bear, or if there should be rodents, such as are in different sections of the country, it would be assumed from the language of your bill that such losses should be paid.

Senator McGILL. I doubt this. Mr. GRAY. If you doubt it I would suggest the language be made clear.

Senator POPE. In our discussions I may say these very illustrations you used of animals, of forest fires, of lightning and so forth, were all discussed and it was thought that the board should have some discretion to determine which of those causes might be properly included in the policy, and that regulations could be made and the policy could be so drawn as to cover those points where there ought to be insurance. As you have mentioned, they may be some question whether there ought to be insurance in the case where the neighbor's animals do damage. There may be an action for damages against him. There may be hazards that might or might not be properly insured against so we left the matter to the board.

Senator McGILL. Do you think, seriously, with that general language following the character or classes you designate, that a fire could be included in the policy?

Senator POPE. I think so.
Senator FRAZIER. What?
Senator McGILL. Fire.
Senator FRAZIER. Lightning does not damage corn crops.
Senator POPE. Well, it does damage wheat in some sections.

Senator McGill. Well, a forest fire, and I suppose there are regions where wheat is grown in the State of Washington that might be damaged by forest fires. I don't see how you can include that in this language.

Senator POPE. Well, I think you can. In the language describing these causes you will notice, after naming specifically drought, flood, hail, wind, tornado, insect infestation, plant disease, it covers such other causes as may be determined by the board. That would include lightning. It would include even forest fires if in the discretion of the board it should be included.

Senator McGill. I think it might include lightning due to the fact you have wind and tornado, indicating storms, but in other cases I think the court is bound to apply the rule that those causes must be of like character to the ones designated in the act. They cannot cover any other field.

Senator FRAZIER. This says and such other causes as may be determined by the board.

Mr. GRAY. I think you are right.

Senator McGill. I know that, but they will apply a rule to the construction of the language in the law that those determinations of the board must be of similar character to the ones specified in the act where you set out certain things for which insurance is provided and you have a general clause following that which must relate back to the ones specifically set out.

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