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duced, we face the possibility of having a stagnation of salable cotton.
It has been my idea that we have got to address ourselves to the reduction of this surplus and for that reason, I introduced the bill that I did for the Government to take what cotton it had and sell it to the farmer in lieu of his this year's production, sell it on credit at the present prices. I believe it would have been a wise thing and a very profitable thing if two years ago when wheat went so disastrously low and cotton was so low if the Government had appropriated money enough to have bought that surplus and offered it to the farmers in lieu of their yearly crop. We would have given him an equity in this Government supply and also would have relieved that surplus and congestion and started him on the way.
Mr. BLALOCK. Senator, I agree with you absolutely. I think if your bill could have become a law, it would have helped us very materially, cut down the carry-over and also had the very effect you suggested of helping us to curtail that acreage, the increase of acreage we are now facing.
Senator POPE. How much cotton has the Government now?
Mr. BLALOCK. I would say in round figures, seed loan, and all, possibly two and a half million bales.
The CHAIRMAN. Now, it must be remembered that the trade must have from two to three million bales carry-over of old cotton.
Mr. BLALOCK. Oh, yes.
The CHAIRMAN. Therefore, if we could get rid of two and a half or three million bales of surplus and have a reduction in production, it would almost relieve the situation so far as the law of supply and demand in cotton is concerned. But back of all that there has got to be some relief in this financial situation. We can't talk about surpluses being the cause for the reason that articles that we have of which there is no surplus are cheap or cheaper than those of which there is a surplus. We have got to address ourselves as a body of farmers and American citizens to seeing that the amount of money in circulation shall be increased to where there will be bargaining power all along the line or all this legislation is merely treating symptoms temporarily with doubtful relief.
Mr. BLALOCK. We had no abnormal carry-over since 1921 in cotton until we began to step up after 1929.
Senator Pops. That was due to lack of consumption?
Mr. BLALOCK. Yes; and heavy overproduction, too. duced the second largest crop ever produced in the South in 1930.
Senator SHIPSTEAD. The lower the price, the greater the production? As the price goes down, it is necessary for the farmer to produce more and therefore he increases his production? Do you think that is true?
Mr. BLALOCK. I think it is absolutely true. The seed-loan people are now trying to hold down the production of cotton to 30 percent less than last year where they make a loan. One of them told me “Cotton is the only thing the farmer can get anything out of, and if we adhere to that rule, he can't repay his loan." As long as I have known about cotton farmers, they figure they have to make more bales to get the same amount of money. The payment on the mortgages is the same, the payment on taxes is the same, they have to get more money somehow. That is the way they figure it.
Senator FRAZIER. There seems to be a wide difference of opinion among those who have testified as to whether this bill
far enough to give the farmers the cost of production. We all admit they must have cost of production if they are going to put their business on a paying basis. What is your opinion on that?
Mr. BlALOCK. Senator, I have no criticism, you might say, to offer against any other proposal that has been submitted here. My thought, however, is that these farmers agreed upon this proposition. We were in hopes we could agree on something and get some action. I mean no reflection on any Senator or anybody else but somebody asked me yesterday what would be the success of this bill and I told him it depended on how long Nero fiddled, if we didn't get some action on some bill it would be too late to do anybody any good.
Senator Pope. How do you feel about fixing the price of cotton for domestic consumption?
Mr. BlALOCK. As cotton producers we are just as vitally interested in not seeing a tax too high to cut down consumption. We rather disagree with our cotton-manufacturing friends that they will not be able to pass on an excise or processing tax. The tobacco manufacturers pass it on to the consumer. We heard the head of the Millers' Association say every dollar would be passed on to the consumer, and I am satisfied they can do likewise, but we don't want to see a tax imposed on the manufacturers that would be high enough to curtail consumption. I think under this bill the Secretary of Agriculture is given the authority and the power there to discuss the situation with the cotton manufacturers, discuss the situation with the cotton producers and reach a fair basis for the tax. We don't want to cut down consumption any more than the cotton manufacturers do.
Senator Pope. I had in mind particularly Mr. Clair's plan, pegging the price of domestic cotton at 18 cents.
Mr. BLALOCK. Mr. Clair has a very fine plan, I think. We were discussing it with him last night. I think there is one thing lacking that always has to be taken into consideration: If you give us too high a price for cotton, we are going to continue to heavily overproduce. There is a possibility, unless there was some way to control acreage, if you had unlimited acreage production and you were to give us 18 cents a pound for our domestic consumption and the world price was 6 cents for cotton. There is one third used in this country and two thirds shipped abroad. That would give us 10 cents a pound. If you had unlimited wide-open authority to produce all the cotton you want, I was telling one of my Texan friends there was no power under heaven to keep them from planting everything in cotton, Consequently instead of cutting down your surplus cotton, you would add to it. I think any kind of measure like that must have some kind of limitation on acreage.
Senator FRAZIER. Would that apply to the cotton growers in your State?
Mr. BLALOCK. Yes, sir; they would produce more cotton by far than they are even at 10 cents a pound. We grow a great deal of tobacco. Tobacco is our largest cash crop.
Senator SHIPSTEAD. What was the price of your cotton from 1912 to 1914?
Mr. BLALOCK. About 12 cents a pound.
Senator SHIPSTEAD. If you could get 20 cents a pound now with the present high taxes, do you think you could work out?
Mr. BLALOCK. We would start all right, but of course as cotton became more profitable, other things entering into the production of cotton would go up. For instance, we are buying our fertilizer this year on a very cheap basis. If the price of cotton goes up, labor goes up, fertilizer goes up, everything that enters into the cost of production goes up, so eventually your margin of profit would be greatly reduced.
Senator SHIPSTEAD. You testified in behalf of the House bill?
Senator SHIPSTEAD. Are you familiar with Senator Smith's amendment to the House bill?
Mr. BLALOCK. Yes.
Mr. BLALOCK. If we can't get the original House bill, I would like to see Senator Smith's bill enacted right away.
Senator SHIPSTEAD. Would you rather have the House bill as it was?
Mr. BLALOCK. I think so. I say that in this way, that was the bill that the farm organizations-practically all of them-agreed upon, in fact, all that were represented and all that were asked to be represented, they agreed upon that plan, and I believe in standing by your agreements.
Senator SHIPSTEAD. What I am interested in is whether you think the Smith amendment improves the bill. If it improves it, there is no reason why we shouldn't adopt it.
Mr. BLALOCK. As I see it, I would prefer the original bill; I believe it gives more latitude, and I have confidence in the President and the Secretary of Agriculture that they will use those provisions wisely. I think it is in their minds to call in the various groups that will be affected by any of the operations of the bill and have them in as advisers. I don't believe they will go wrong.
The CHAIRMAN. Before Mr. Blalock leaves the chair, as he is one of the witnesses that have appeared for the bill, when he spoke a moment ago about raising the price with decreased production, historically that is not the fact, but it must be taken into consideration that 70 percent of all the cotton used outside of America is American cotton, and if we ever get to the point where we fix the price of American rather than let Liverpool fix it, we will automatically fix the price of the world's cotton.
That is unquestioned, because 70 percent of all the cotton consumed in the world is American cotton, and more than 85 percent of it is what is known as desirable manufacturing quality of cotton. So that I think that if we ever can get to the point that America, that produces more than two thirds of all the world's cotton, can fix the price rather than Liverpool, we will fix the price of American cotton.
Now, to what extent the rise in that price would invite the use of other textiles as a substitute for cotton is a thing that has never yet
You must remember that during the war cotton rose to 45 cents a pound and long staple to a dollar and a quarter a pound, and that continued for a year or two, and then it brought a high price with only one drop from 1918, it was an average of 20 cents a pound. If you take the production of foreign cottons, there was no appreciable increase except in Russia where the increase was some
thing like approximately a million bales under her 5-year plan. So cotton bears a very peculiar and unique position in the agricultural economics of the world—that is, American cotton.
Senator Pope. Mr. Chairman, I wanted to ask one question: Mr. Blalock, you said a little while ago, the lower the price cotton is, the more they will produce. Then you said a little later, under the Clair plan if a price was fixed at 18 cents per pound for domestic consumption, that would cause them to raise more. I don't quite understand that.
Mr. BlaLOCK. What I meant, Senator, was this: Just for easy calculating, suppose we produce a 15,000,000-bale crop and we consume a third of that as domestic consumption at 18 cents a pound and you export on the present-day price the other two thirds at 6 cents a pound, that would give you an average of 10 cents a pound for all the cotton that you produced. Therefore, with no limitation on us as to how much we shall produce, especially in the cotton area where they do not have to use fertilizer and they can afford to produce it at a profit at 10 cents a po'und, they would go the limit.
Senator POPE. Would they raise more than at 5 or 6 cents a pound, the price that they now get? Mr. Blalock. Probably so. Senator Pope. Permanently or for 2 or 3 years?
Mr. BlaLOCK. As long as it remained profitable. They raise cotton for two purposes-one, to liquidate their indebtedness, which they must do, and they will raise that regardless of how cheap it is. Then if it is profitable, they will try to increase the production for the profit that is in it.
I have no desire to take up too much of your time, Senator, but if you had your Clair plan and you had some way of controlling production of cotton at the gin, if the cotton farmers would ask for that, something out of the ordinary, it should be given some consideration, because the cotton crop of this country is our largest export crop and it is what keeps the balance of trade in our favor if you have it that way. With control at the gin, you could limit the amount of cotton that could be ginned and exported, and therefore not let them run wild with it as we have done in the past. Working as individuals, the cotton farmers are absolutely helpless. The cotton farmer is a helpless mass of humanity and he has got to have something to help him control himself.
The CHAIRMAN. We are much obliged to you, Mr. Blalock.
We will next hear from Mr. Chris Jensen. Mr. Jensen, will you give your full name, address, and occupation?
STATEMENT OF CHRISTIAN JENSEN, FARMER, PUTNEY, S.DAK.
Mr. JENSEN. Christian Jensen, Putney, S.Dak. I am a farmer
a by trade and have no other occupation.
Mr. Chairman and gentlemen of the committee, I can make my remarks very short by endorsing the two speakers preceding the last one in principle entirely, and I also sympathize with the last witness, because how can we help but sympathize? It is enough to make a farmer cry, you know; but I guess we are yielding a little too much to our feelings. But it is perhaps a phantom fear, because the worst can't happen. I am here against my better judgment, but the people insisted that I should come down, and when I continued to deny that I could tell you anything that you had not already heard at least a million times, they said you wanted to hear from a dirt farmer. Of course I can qualify. I have always been a dirt farmer, ever since I was born. I was born on a farm in Denmark and spent my first 23 years in Denmark and the balance of the time I have been farming out in South Dakota, engaged in the business of raising grain,
So I have made a good deal of a study of the marketing, of grain. I think I may say that I am very familiar both with the raising of it and the marketing of it and the costs connected with marketing. The people I represent and myself, we feel alarmed about any plan that proposes to give one man or even a number of men the
power to hamstring or impair the marketing system that we have fought so hard to build up. I early became an organizer of farmers' elevators that cured the unfair practices prevailing in the primary market. Because of lack of competition, it was easy for 2 or 3 old-line elevators to go in collusion and not pay a competitive price. The farmers' elevator cured this in the primary market.
We feared that the same bad practices prevailed in the terminal market, but with the advent of the farmers' elevator came the independent commission merchant, and since then I am satisfied that the producer's interest is protected by every imaginable safeguard and the cost is so low that we can't afford to run the risk of having our market impaired by this legislation which has price-fixing features in it that has been disapproved of so often.
Of course the freight situation seems to be very incongruous. For example, when I began farming, I paid about 9 cents per bushel in round figures from my place to Minneapolis, about 300 miles. Now I pay 14 cents for the same distance. It is remarkable that from Minneapolis to Liverpool, the last time I checked up on it, the total cost, including cost of elevators and freight, was at that time 21% cents. That varies a little because of the ocean freight rates, they change. It is strange that I should pay almost as much for 300 miles as for about 4,000 miles. That seems strange. However, I am here to implore you not to impair our market.
We have a satisfactory and safe market that guarantees us at all times the highest market price, which is the only price, because, gentlemen, as I know from the war times, the moment you try to establish the principle that a price can be arranged arbitrarily, the price becomes unsatisfactory at once, because neither the seller nor buyer knows whether he is ge ting a fair price. How could he know? He couldn't know. You know, gentlemen, when wheat was still a dollar and a half, we hollored practically as loud for farm relief as we do now. [Laughter. If you look back at it, you can see that that is now ridiculous. If I could get half that, I would go home and buy a new car, which I can never do under present conditions. I have to run the old rattle-trap, and I don't know that I can keep on running it even. Whatever can be done about it? I really see nothing can be done about it. If the economic sense of the world refuses to believe that as long as you produce more than you can use, it is no use to holler you can't produceit, because it is being produced, and that is the only thing the econoinic law cares anything about. It doesn't care about our cries.