Senator FLETCHER. I do not know how long what they have will last. I did not imagine that this bill was aimed at providing a means for disposing of the cotton that has been gathered together by the Department of Agriculture.

Senator GORE. I supposed that was the sole purpose.

Mr. WILLIAMS. The practical effect of this bill

Senator WAGNER. You mean that provision?

Mr. WILLIAMS. That provision. The practical effect of that provision would be to provide the Farm Board and/or its subsidiaries with the means of getting rid of a white elephant, at the expense of the cotton farmers of the South.

The CHAIRMAN. But you suggest, as a remedy, that we rewrite the section in such a way as to make that disposal mandatory, and cover it over a period of years?

Mr. WILLIAMS. If you wish to restore the buying power of the South, I can only tell you how you can add $60,000,000 this year on a 12,000,000-bale crop. Do those things I have suggested, and I think cotton will go up measurably in a little while, sir.

The CHAIRMAN. I just want to be sure I understand you. You recognize that this cotton in storage must be disposed of?

Mr. WILLIAMS. Yes.

The CHAIRMAN. Instead of having it disposed of in a haphazard or uncertain way, and being a threat on the market, you simply suggest that it be done in an orderly way, covering what period of time?

Mr. WILLIAMS. I should say it would probably take four or five years.

The CHAIRMAN. You said something about 2,000 bales a day. How long would it take at that rate?

Mr. WILLIAMS. About five years.

Senator GORE. That was the substance of my bill.

The CHAIRMAN. In the meantime, that which we sell the fifth year will have eaten itself up in carrying charges?

Mr. WILLIAMS. If you sell it on a 5-year liquidating basis-I am not positive of these figures, but I would be very glad to address a letter to you on it after I have checked the figures-I think, if you hold 3,500,000 bales five years, the carrying charges will be approximately the value of the commodity; and if you sell it out over a period of five years, approximately on the basis contained in Senator Gore's bill, the carrying charges will be cut in half, because you will be achieving an average.

The CHAIRMAN. You will save one-half the value.

Senator GORE. The bill I introduced provided for the sale at so much a month, provided that when it went above a certain price per pound, more could be sold.

STATEMENT OF EDWARD A. O'NEAL, PRESIDENT AMERICAN FARM BUREAU FEDERATION, FLORENCE, ALA.

Mr. O'NEAL. Mr. Chairman and gentlemen of the committee, my name is Edward A. O'Neal. I am president of the American Farm Bureau Federation. My home is in Florence, Ala. I am a cotton farmer.

Mr. Chairman, you have given me a very brief time.

The CHAIRMAN. I am afraid the other witnesses have taken some of your time.

Mr. O'NEAL. Our organization is very vitally interested in this bill. I wish to address myself particularly to paragraph (b) of

section 2.

The CHAIRMAN. Previously referred to by the preceding witness! Mr. O'NEAL. Yes, sir. We feel that while many things have been done by the Congress, all that you do will be of no avail unless you restore commodity prices. I address myself primarily to agricultural commodity prices, because that represents new wealth, primarily new wealth.

With at least 40 per cent of the people of the country on the farms, and in small towns, not able to buy, with no purchasing power, there is nothing that can be done that will bring back general prosperity until they do get confidence in commodity prices.

With this interest in the bill, primarily the disposition of these surpluses that are hanging over us in wheat and cotton, we went to Senator Wagner, the coauthor of this bill, with a suggestion in regard to the language in the bill as to the disposition of the surpluses, and he was very kind indeed. He said, "Would you give me a memorandum of the change that you might suggest? So we have worded here a change that we would like to substitute for this paragraph (b) of section 2. It reads as follows:

(b) In order that the surpluses of wheat, cotton, tobacco, wool, mohair, and other agricultural products which have accumulated in public and private warehouses and elevators may not have a depressing effect upon current prices of such products, the corporation is authorized and directed to make loans under this section, in such amounts as may in its judgment be necessary, for the purpose of financing sales of such surpluses in the markets of foreign countries in which such sales can not be financed in the normal course of commerce; but no such sales shall be financed by the corporation if, in its judgment, such sales will affect adversely the world markets for such products. The corporation is further authorized and directed to advance such sums as may in its judgment be necessary to secure the distribution of surpluses of wheat to the destitute and unemployed through such channels as it may select and in such manner as will not adversely affect the domestic market.

With the exception of loans made for the purpose of financing sales of such surpluses all loans made under this section shall be fully and adequately secured.

Where the reference is to "the corporation," that is the Reconstruction Finance Corporation.

Mr. Chairman and Senators, we feel that these surpluses of wheat, cotton, and other staple crops, must be disposed of. In the past, we have financed projects of various kinds, necessary at the time and very helpful, as you said a moment ago. There are places in the world where people need these commodities and they can be used. With the removal of the overhanging surpluses, commodity prices will be restored and then, and not until then, will we see a change in the confidence of this Nation.

I want to say to you, sir, as the owner of a big cotton plantation, which I have inherited in part, and my family worked for generations, that there is black despair in my heart to-day. I do not know what to do, with cotton at the price that was just mentioned a while ago. I have sold cotton at 3 cents. However, that was "dog-tail" cotton, and we did not have any Farm Board at that time.

Mr. Chairman, there is no hope for the cotton farmer of the South

The CHAIRMAN. Does it lie mainly in your higher production cost, than what you used to pay, say, 20 years ago?

Mr. O'NEAL. I do not think so, Senator, because, as a matter of fact, the fundamental costs are fixed. The freight on a bale of cotton to a mill in New England, we will say, is fixed.

The CHAIRMAN. It is much higher now than it was 20 years ago? Mr. O'NEAL. It is higher, but it is fixed.

The CHAIRMAN. It is one of the factors that tends to make cotton unprofitable?

Mr. O'NEAL. Yes. With hogs at 212 cents, lard at 3 cents, eggs at 5 cents-did you ever think about it?-there is not enough value in the commodity to pay the transportation charges to other sections of our own country, much less the world. There is not enough value in the commodity to pay the freight on that commodity. That is a very grave situation. You saw the report

The CHAIRMAN. Is not the price of machinery and the price of fertilizers, and so forth, much higher than they were, say, 20 years ago?

Mr. O'NEAL. Oh, yes. I do not know about the price of fertilizer. I will make that exception. I see they have put it up this year. Why, I do not know. But the basic price of fertilizer is cheaper, I believe. However, the cost of farm machinery is much higher.

The CHAIRMAN. What about the cost of labor as compared to 20 years ago?

Mr. O'NEAL. The cost of labor is higher, of course.

The CHAIRMAN. In other words, if it were not for your higher production costs and higher transportation, the situation would not be so serious?

Mr. O'NEAL. That is true.

The CHAIRMAN. The same situation obtains in the Northwest.

Mr. O'NEAL. So far as the disposition of cotton is concerned, let me say this. I have heard it said that in the Boxer Rebellion, we sent our soldiers over there to help China. It cost us a good deal of money. We never got any money for it, yet it was the greatest piece of advertising we have ever done.

The CHAIRMAN. It made friends for us and gave us markets. Mr. O'NEAL. It made friends for us.

We cotton farmers have been dependent upon our export market, because the bulk of cotton goes abroad. There is a demand in certain sections. Cotton is sold by cotton merchants to a large extent on the credit basis. They wait until their customers spin the cotton into goods, sell the goods, and then pay for a certain proportion of the raw material. I have known men of very high standing in the cotton business.

abroad, too, is it not?

Senator FLETCHER. That is done Mr. O'NEAL. It is done abroad. They have told me from time to time that they proceeded along that line in selling their raw materials

Senator GORE. You do not need any money to sell cotton on credit, do you?

Mr. O'NEAL. Yes; Senator, if you caught what I said. You have to pay the freight, and that is a large part of the cotton.

Senator GORE. You would have the shipper, when he sells the stuff to the European consumers on credit, pay the freight, and credit the buyer for the freight as well as the price of the cotton?

Mr. O'NEAL. He might take it at the ports. We would want him to pay a reasonable amount, if we could get it from him.

Senator GORE. Then, the point in this bill is to pay the freight on the cotton we are selling on credit.

Mr. O'NEAL. Not necessarily. I would want to help the movement of this cotton out of the way. I would say this, Senator Gore, that in your State of Oklahoma-you have not been back since the price of cotton has been reduced recently, have you?

if

Senator GORE. No.

Mr. O'NEAL. You will get a very delightful reception out there you do not do something for the cotton farmer.

Senator GORE. I would be willing to do anything I could for the cotton farmer.

Mr. O'NEAL. That is fine. I am sure you would.

Senator GORE. I introduced a bill which I thought would help. Mr. O'NEAL. The trouble about your bill-and I hated to have to oppose it was simply this. Senator Norbeck brought this point out. When you begin to carry a commodity and store it, instead of being five years at $21,000,000 a year, if that figure is right, 3,000,000 bales of cotton to-day are worth only about $75,000,000, and you will eat it up with storage and insurance, and ruin yourself.

Senator GORE. The point was that, holding off the market, even at a cost of $20,000,000 a year, you might save the cotton farmers $200,000,000 or $300,000,000 a year.

Mr. O'NEAL. That is fine, if it would have that effect.

Senator GORE. I notice your amendment or suggestion here includes wool.

Mr. O'NEAL. Yes.

Senator GORF. We do not export wool. That was designed to facilitate the domestic marketing of wool?

Mr. O'NEAL. Yes.

Senator GORE. Here in our own country?

Mr. O'NEAL. Yes.

Senator FLETCHER. Let me ask you this as a practical question. You are a cotton planter. You and your neighbors might get together. Let us say this bill authorized the Secretary of Agriculture to find a market for your cotton abroad, in European countries. There are countries over there which need the cotton and want the cotton.

Mr. O'NEAL. Surely.

Senator FLETCHER. They simply have not the money to pay for it. Mr. O'NEAL. Assuredly.

Senator FLETCHER. There are mills over there that would be glad to work it up into goods. They have not the money to operate on. Suppose the Secretary of Agriculture should find a market for 1,000,000 bales of cotton, or 500,000 bales of cotton, but the people over there can not buy that cotton, because they have not got the money. Suppose the Secretary says, "I will sell this cotton to you on four months' time," and the cotton is shipped. The purchasers over there buy it-the manufacturers, we will say-and they will

give paper for it, with certain guarantees by certain of their financial institutions, cooperative associations, or whatnot. The Secretary would reasonably be justified in taking that paper, giving them the time which they can not get now from the banks. Banks do not want to loan for more than 30, 60, or 90 days. But here is paper which runs, say, for four months, and it will give this factory time to manufacture that cotton into goods and put the goods on the market and sell the goods. Out of the proceeds the paper can be taken up. That is a financial transaction which banks can not undertake now, and individuals can not undertake, but the Government could undertake it, and be perfectly safe in it. Would not that open up to you new markets, markets which, without these facilities, you would not have at all? That is the purpose, as I see it, in this provision of the bill, and it seems to me, a purpose which would not harm the grower. It would help the grower, because it finds him a place to put his goods which is not available to him now, and provides facilities for financing the operation which are not available to him now, not taking the place of other cotton which he may have in the fields or elsewhere, because that other cotton would not go there, anyhow. That is the idea I have.

Mr. O'NEAL. Senator, I agree with you entirely. I might recall when I was the head of the cooperative cotton association in my own State of Alabama, there was a representative who came to Montgomery, who wanted the cooperatives, three or four years ago, to supply the Soviet Government with several million bales of cotton. If we had removed that 2,000,000 or 3,000,000 bales of cotton, or perhaps 1,000,000, we might say, to the Soviet Government at that time, Russia never would have produced, two years ago, 1,800,000 bales of cotton that she is now producing.

The CHAIRMAN. They just had to have the cotton?

Mr. O'NEAL. They had to have the cotton. I might say, Senator Fletcher, along the line you are talking about, that the Germans to-day are short of wheat. They do not have the money to buy that wheat. They are going to use potato flour. It would not substitute for any wheat. Under Senator Wagner's bill, we could sell all the individual merchants of Germany this wheat, and finance it through the Government of Germany, if you please. We have not any great surplus of wheat in the oncoming crop, according to the reports. Suppose you could raise the price of wheat in this country to 80 cents. Bread would not cost the consumers one penny more to raise the price of wheat from 55 cents, as it is to-day, to 80 cents. If you please, any economist would tell you that if you take that 30 cents the farmer gets out there, it is multiplied from the consumer to the farmer, as Doctor Warren so ably testified in the hearings on your bill. You multiply that eight or ten times.

I think that Senator Wagner and his associates in this bill have done a very splendid piece of work, and I wish Senator Glass was here. Senator Gore is here, and may I plead with you, for God's sake, Senator, to see the heart of the trouble.

Senator GORE. Colonel

Mr. O'NEAL. Just a minute, Senator, if you please, sir. Let me make a little statement.

Senator GORE. I will be glad to.