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C. The impounding of 30 percent of the customs receipts as financial assistance to the Agricultural Adjustment Administration for the provident distribution of burdensome surpluses of agricultural commodities.
All farmers producing wheat for sale have a common interest in one or all aspects of the new and additional farm program here under consideration.
To protect the income of all wheat producers, we may contemplate the following important aspects:
1. Adjustment of production.
2. Ever-normal granary. Efficient warehousing of wheat premium reserves and the storage of wheat for deferred sale-awaiting demand at fair prices.
3. Reasonable loans against stored wheat upon a collateral basis and made in relation to a fair price, rather than a speculative price.
4. Yield insurance upon a coinsurance basis.
6. Requirement of adherence (excepting special cases) to the Agricultural Conservation program and acceptance of yield insurance as part of the qualifications for eligibility to the benefit of the ever-normal granary fair loan program.
7. The administrative expenses and warehousing costs with a very substantial portion of yield insurance costs to be borne by the Federal Government until such time as a system of production and distribution of wheat has been effectuated which will permit the producer to manage and conduct his business and enjoy the degree of social security indicated by the President in his letter to the Crop Insurance Committee and his repeated statements to the electorate.
The temporary committee for this Wheat Conservation Conference has attempted to outline a most general five-point program in an effort to meet wbat we believe to be the needs of wheat growers and within the general views expressed by the President as a further step towards social security for the wheat farmer and a fair deal to consumers, as follows:
1. Assumption of responsibility by the Federal Government to provide adequate capital to establish the program.
2. Appropriation for acquisition and maintenance of warehousing facilities. 3. The program to be administered by a corporation. 4. Voluntary but capable of integration with other farm programs. 5. Cover all unavoidable hazards.
M. W. THATCHER, Chairman.
(Whereupon, at 12 noon, the subcommittee adjourned until 10 a. m., Friday, Feb. 26, 1937.)
FEDERAL CROP INSURANCE
FRIDAY, FEBRUARY 26, 1937
UNITED STATES SENATE,
Washington, D. C. The subcommittee met, pursuant to adjournment, in the committee room, 324 Senate Office Building, at 10 a. m., Senator James P. Pope presiding.
Present also: Senator McGill, Senator Schwellenbach, and Senator Frazier.
Senator POPE. The committee will be in order. I think it would be well to proceed with the witnesses we had yesterday and develop the method, the calculations and the data used in arriving at what seemed to be a reasonable premium and arriving at the average yields of wheat in the various sections of the country.
Now, Mr. Black, who in your group will be best able to handle that matter?
STATEMENT OF A. G. BLACK, CHIEF, BUREAU OF AGRICULTURAL
ECONOMICS, DEPARTMENT OF AGRICULTURE
Mr. BLACK. Mr. Green would be best in our group, and I don't believe that I could add a great deal to that discussion. I wonder however, if it might be possible for me to discuss one or two general matters before the committee and then perhaps the committee won't need to have me here after today, in case Mr. Green does not finish.
Senator POPE. Very well, Mr. Black, you go ahead and discuss the general matters that you have in mind, and then we can proceed with the data, tables and charts and the like, with Mr. Green and other witnesses, although we would be glad to have you here as long as you can stay.
Mr. BLACK. Senator McGill asked yesterday about the inclusion of other crops in this measure. If one looks back into the legislative history of crop insurance over 10 or 15 years he will find that the Department on various occasions has made a noncommittal report on the matter. They have approved the crop-insurance proposal in principle but have said that they did not feel that they had sufficient background data to base a crop insurance program on and were unable to state whether the specific bill on which they were reporting was practical administratively or not. · Now for the first time we feel that we have accumulated enough data on which to base a practical crop-insurance program for wheat. Our investigations so far indicate that the data on other crops are too fragmentary yet to be sure that we have a satisfactory basis, and
it would take a period of time, a year or two, of continuing work with respect to these other crops before we would like to assure a legislative committee that we felt that the law could be administered practically.
Senator MCGILL. Pardon me right there. With reference to corn and cotton, those two, you do not feel that you have sufficient data or information at hand that you could recommend a program for crop insurance on, either of those two crops, that would be economically sound at this time?
Mr. BLACK. We would not like to have to put into effect a cropinsurance program on either of those crops in 1938, as is proposed in this bill on wheat. It might be possible by 1939, if we were to have the facilities available to do the necessary actuarial work.
Senator McGILL. You think you have not sufficient information now from an actuarial standpoint to devise a program for either of those crops that would be economically sound? Mr. BLACK. That is correct.
Senator MCGILL. The reason I injected that thought yesterday was not to find fault with the proposal before the committee, but the experience we had on some previous legislation wherein we undertook to only incorporate two crops, wheat and cotton, and we found that other commodities and those representing States producing largely other commodities, sought to come in under the program, and we must have sufficient argument to show that it would not be sound for us to bring them in at this time.
Mr. BLACK. It is quite natural that producers of other commodities would want to be included in the program. We sympathize with that point of view and we would hope that they would be brought in; that the program would be expanded to include those as rapidly as can be. But we ought to make our position perfectly clear. If the Department is called on to administer this bill, in our judgment it is impractical to extend it to these other commodities at this time, but we would want to have facilities made available to us so that progress could be made in establishing satisfactory actuarial bases for these other commodities, just as rapidly as we could.
We have made some progress with respect to both corn and cotton, but there are many other commodities that I think would lend themselves to this kind of a program, tobacco, for example, and a good many other special crops produced in smaller localities.
Senator POPE. With reference to cotton, there is a practical difficulty too, isn't there, Mr. Black, in paying premiums in kind, since cotton is baled?
Mr. BLACK. I think that the provision established here could also be established there, of making the premium payable in kind or in cash equivalent, where cash could be pooled and then converted into cotton by the corporation.
Senator POPE. There are, of course, a great many two-bale farmers who would not be able individually to pay their premiums in cotton.
Mr. BLACK. Yes, and as a matter of fact, in the case of wheat, many of these premiums on smaller farms would be so small that it would be impractical to try to handle the physical wheat. It would be much cheaper to handle the cash equivalent and have the corporation convert it into wheat.
Senator POPE. And you are familiar with the provision in the bill to authorize the Department to go ahead and obtain this data and to
cole problem panies, I'mize now thehey did not to us, that
make their surveys and calculations continuously until sufficient information is obtained to include other commodities.
Mr. BLACK. Yes, I think that is very important, and we feel that it would be very difficult to administer a law of this kind on other crops without having a better background than we have now.
We do know, or rather, other companies have told us, that many of the private attempts failed because they did not have the actuarial background that they realize now they should have had.
And the companies, I might say, with whom we have discussed this whole problem, are very favorably impressed with the actuarial background that we have developed on wheat. They have gone through our data and our method of calculating and figuring premiums and questions of that kind, and were very much pleased from the standpoint of the actuarial work in developing a sound insurance program. They admit very frankly that they were on a very unsubstantial basis when they attempted similar experiments in years gone by.
Senator POPE. And this matter of obtaining a sound actuarial basis is a most important matter for the success of the program?
Mr. BLACK. We feel so, because unless the program is put on a sound actuarial basis-well, it may be relief or something else, but it ceases to be insurance, and I think that a proposal of this sort should be considered from the standpoint of its value as insurance, rather than from the standpoint of its value as something else.
Senator POPE. Have you given any thought to insurance for perishable products, such as fruit and even vegetables?
Mr. BLACK. No, we have not; but we have reasons to believe that crop insurance could be extended to some of those commodities. One or two of the private agencies are now engaged in insurance on some of these perishable commodities, with a reasonable degree of success; that is, some of the companies that try to write all-risk crop insurance on some of the staple products in years gone by had to abandon those efforts but have still continued working in the field and have gone into the insurance of some of these special crops.
Senator POPE. Now, the private companies have never undertaken, of course, to store grain or to operate on this new principle of paying in kind?
Mr. Black. No. Their operations were vulnerable for one reason because they were insuring with respect to a certain number of dollars per acre, and that meant, in effect, that they were guaranteeing both price and production.
Senator Pope. Is it your opinion that the whole field of crop insurance is too large an undertaking for private concerns?
Mr. BLACK. That was a very definite statement made to us by the private companies. We had a conference with them, and I suppose that nine-tenths of the companies that might be interested in this type of activity were represented either by company representatives or by representatives from their associations. Their report was that they felt that crop insurance of this type, so widely extended, was not something that they as private companies could engage in.
Senator POPE. What has been their attitude toward this effort of the Government to establish a crop-insurance program?
Mr. BLACK. Very friendly.