Mr. BOWDEN. I think there are many answers to that, Senator Tunnell. May I give you one or two which I think probably will direct you toward an answer?

In the last 15 years, especially, the grain-producing area has become very well covered with hard-surfaced roads, so that now where farmers used to drive in with a team and wagon for 4 and 5 miles, and start after the chores were done in the morning, it is literally possible for a farmer to start today very early in the morning and get to town and do some business and get back to the farm, 10, 15, or 20 miles off in time to start his morning's work.

Quite frequently, they have come in for a piece of machinery, when the hardware store opens, that they need for their binder or that they need for some piece of equipment; and they come in early to get that. When they come in, they will sometimes bring a load of grain, and they will come to the country elevator to buy binder twine, or some of the things they need.

Now, during the harvest season, it is obvious, if you leave grain in the field, it starts to shatter and fall to the ground; and when it is ripe, it must be gathered and gathered quickly, and the farmers literally work around the clock during those seasons. And the elevator man must work around the clock to receive the grain as it comes from the field, because the farmers have very little place to put it, no equipment to handle it on the farm and it must be rushed into this primary assembling point, in the nearby country station.

Senator TUNNELL. Are there any further questions, gentlemen? Senator ELLENDER. I have none.

Senator SMIth. No.

Senator TUNNELL. All right. Thank you, Mr. Bowden.
Mr. BOWDEN. Thank you.

Senator TUNNELL. Mr. Nichols, I believe, is the next witness on our list.

TESTIMONY OF S. R. NICHOLS, NATIONAL COTTON COMPRESS & COTTON WAREHOUSE ASSOCIATION; ACCOMPANIED BY A. L. REED, SECRETARY-COUNSEL, SOUTHWESTERN COMPRESS & WAREHOUSE ASSOCIATION

Senator TUNNELL. Give your name and position to the stenographer.

Mr. NICHOLS. My name is S. R. Nichols. My home is Des Arc, Ark.

Senator TUNNELL. I didn't hear.

Mr. NICHOLS. My home is Des Arc, Ark. I am a compress operator in Arkansas.

I am speaking for the National Cotton Compress & Cotton Warehouse Association, with headquarters at Memphis, Tenn. It is an organization of the cotton compresses and cotton warehouses located in the cotton-producing States. For the season of 1944-45 the Commodity Credit Corporation listed as approved cotton warehouses for the handling of Government cotton 1,274 separate operating companies. The membership of our national association embraces approximately 600 of those companies.

The cotton-warehouse industry is a service institution; it is a labor turn-over organization performing services for the cotton producers

and cotton trade which could be performed by labor on the farm or by labor employed by the owner of the bale of cotton. The industry does not buy cotton, neither does it sell cotton. It is not engaged in the manufacturing business of any character. It has no control over the volume of business tendered to it annually for this is determined by the annual production and market demand for cotton and not by any sales effort or any other activity of the industry. In appendix Å we reproduce a historical statement of the production of cotton by the United States and throughout the world.

In addition, we have shown the consumption for the same period of years and the stocks on hand in the United States as of July 31 each year. From 80 to 90 percent of the carry-over will be in storage in public warehouses; the rest in the consuming establishments.

The factors which control production and consumption control the volume of business which this industry may expect annually to receive from the cotton producers of the Nation.

At the outset we desire to say that we are opposed to the provisions of S. 1349. We wish it distinctly understood that our opposition stems not only from thoughts concerning our industry, but also from our thoughts as to what is best for the vast number of individuals engaged in the production of cotton on the farms who are our

customers.

While we are only engaged in the handling, storing, and compressing of cotton, the way you are treating our industry necessitates our also discussing the producers and ginners of cotton and thus referring to two other segments of our economy, namely, the cotton farmer and the cotton ginner.

In order that you may have in mind all through our presentation the effect of the proposed law on this industry, we wish to point out that insofar as we are concerned you are not merely considering the question of raising the minimum wage, but are passing on the question of whether this industry will be subject to the Fair Labor Standards Act at all. Heretofore section 13 (a) (10) has exempted all employees engaged in the handling, storing, ginning, or compressing of cotton in the area of production from both the minimum wage and overtime provisions of the act.

In addition, section 7 (c) has granted immunity from the overtime provisions for all employers wherever located engaged in the ginning or compressing of cotton. Thus, up until the present time. no operator of a cotton gin or a cotton compress has been required to pay overtime, and those gins, warehouses, and compresses located in the area where cotton is produced have not been required to pay either the minimum wage or overtime. As all gins, all except one compress, and the vast bulk of the cotton warehouses are located in the area of production, it can be truthfully said that none of the employees in these occupations have been subject to the act. S. 1349 abruptly changes this; both section 13 (a) (10) and section 7 (c) are repealed; upon passage of this bill these employers are exposed to the full rigors of the overtime and minimum-wage provisions now proposed.

In all of our discussions here the following fundamentals should be kept in mind:

1. Every cotton compress stores cotton, and, is therefore, a cotton. warehouse, but every cotton warehouse does not own a compress machine and is not, therefore, a cotton compress. When we speak

of warehousemen we are referring to both compress and noncompress facilities unless the contrary is expressly stated ΟΙ indicated.

2. The compression of cotton is neither a manufacturing process nor procedure, but merely consists of reducing the size of the bale of cotton without any change in the state of the cotton itself. See appendix B.

3. We will, from time to time, quote from or paraphrase source material. When this is done we will, in the interest of time, usually refer to the base material by footnotes rather than stating the referWith the committee's permission, a copy of this statement will be filed so that these references will be readily available.

Cotton is a peculiar commodity. As it is produced on the farm it is not suitable for consumption by the spinning mills for two very definite reasons. First, the lint must be separated from the seed. This is performed at the cotton gin and it is known as cotton ginning. Second, cotton consists of a large variety of staples and grades. The Department of Agriculture recognizes some 700 different combinations of grades and staples of cotton. The spinning mills consume this cotton in uniform lots of even running grades and staples. See appendix C. The average production per American farm is approximately 5 bales. It frequently happens that these 5 bales will all be of different grades and different staple lengths, although there has been some effort on the part of the Government to promote uniformity in the production of grades and staples. The grade is determined by the type of soil, weather conditions, conditions and factors beyond the control of man. The staple length can be governed to some extent by the type of seeds planted.

Thus, it will be seen from the average production that the cotton gin performs in volume a service essential to the production and marketing of cotton and that the cotton warehousemen perform the next essential step in making the commodity marketable and available for consumption, namely, the gathering of large stocks of different varieties of grades and staples and the assorting of these stocks into uniform lots of even running grades and staples to meet the consuming mills requirements of 100 bale lots of the same grade and staple. Thus, the warehouse and cotton gin are essential to the production of cotton and are, therefore, a part of the general agricultural economy necessary for the production and marketing of cotton. See appendix D.1

It is obvious from the foregoing that in order to serve the producer and to provide these essential services the warehouse as well as the cotton gin must be located with peculiar reference to the farms that produce the cotton. It is not only a fact that the facilities of the warehouse industry are located close to the farms, but it is true that the warehousemen utilize farm labor in the performance of these services. The same labor that plants, cultivates, and gathers the cotton crop on the farm in between times performs the handling services involved in the warehousing, assorting, and distribution of the cotton into consumable lots for the cotton mills. An authoritative study made of the source of warehouse labor in one State found: The labor employed by Tennessee compresses for handling and compressing cotton usually comes from the farms or area about the compress.2

The Compression of Cotton and Related Problems, U. S. Department of Agriculture, November 1940 p. 2. Cotton Compressing in Tennessee and United States, Agricultural Experiment Station, University of Tennessee, April 1, 1938.

This is particularly significant as most of the compress-warehouse facilities in Tennessee are located in cities such as Memphis, which is one of the largest cities in the South. While it is true that in the larger communities, such as Atlanta, Ga., New Orleans, La., Memphis, Tenn., and other cities of that character, the competition between the warehouses and the farmer is not as great as it is in the smaller communities, the competition is nevertheless present to a greater extent than most people would normally suppose. But even considering the facilities located in the larger cities, 99 percent of the warehouses are located in close proximity to the cotton fields and the farms that produce the cotton.

The Secretary of Agriculture, in his statement before this committee, testified that in his opinion the proposed bill would not increase the cost of farm products to the consumer. We concur in

that statement, but it should be noted that the Secretary did not deal with the other phase of the effect of this bill, namely, who pays for the increased labor costs of warehousing and handling the cotton and the ginning of it-the consumer or the farmer.

It is a well-known fact that cotton has been, is now, and apparently will continue to be a commodity subject to a buyer's market where the seller is forced to absorb all cost of delivery. It is a known fact in this industry that the cotton merchants and the consuming mills purchasing cotton do so under fixed limits which result in the farmers of cotton absorbing transportation costs, warehousing costs, handling costs, insurance costs, and all of the other incidental items involved in the distribution of this commodity. When the export market predominates these factors are predicated upon freight rates to the ports of exportation; when the domestic market predominates, as has been the situation for several years, the freight rates to Columbia, S. C. determine the delivered cost and the amount of freight charge deducted from the price received by the farmer for the cotton.

This committee will find that the Department of Agriculture in fixing loan values deducts from the value allowed to the farmer under a loan the freight charges to Columbia, S. C., at the present time. Several years back freight charges to the ports were considered in connection with the production of cotton in certain States, but generally it is a fact that the farmer pays the costs whatever they may be.

Senator SMITH. That is because there seems to be an oversupply? Mr. NICHOLS. Yes, sir. The oversupply has made it a buyers' market; and the costs have been passed back to the producer because of that fact.

Senator SMITH. The ordinary economic law seems to work very clearly.

Mr. NICHOLS. Yes, sir. Your committee will find that the Department of Agriculture, in fixing the values on cotton farms in the South will have to take that into consideration.

This industry cannot stand or bear the increased costs that would be imposed by S. 1349 and, therefore, they would have to be passed on to the farmer.

Senator TUNNELL. There is a subsidy on cotton, isn't there?

Mr. NICHOLS. Senator, there is an export subsidy on the cotton that is sold to foreign countries right at this time.

Senator TUNNELL. How much is that?

Mr. NICHOLS. I believe it is approximately 4 cents a pound, or $20 a bale at the present time. That is necessary in order to try to get American cotton into world channels at something near competitive prices. But you still don't get American cotton as cheap as foreign

cotton.

Senator TUNNELL. The quality is about the same, is it, or is our cotton better?

of very We cerBut the

Mr. NICHOLS. Generally speaking, American cotton is highest quality, possibly with the exception of Egyptian. tainly produce better cotton than South America or India. difference in quality is not as great as the difference in price, as is reflected by the willingness of the farm spenders to use other ropes when there is a saving.

Senator ELLENDER. Now, that is assuming that you would have to absorb the labor costs.

Mr. NICHOLS. Yes, sir.

Senator ELLENDER. But you say the farmers will.

Mr. NICHOLS. I point out that our earnings are not sufficient to absorb it.

I would like to comment further that that earning of $2,400,000, roughly, $2,000,000 of that is nonoperating income that has accrued in the form of rental and other nonoperating items during the war. Many compress and warehouse facilities have been taken over by the Government in the storage of war materials; and there is only about $600,000 of operating income in that figure.

Senator ELLENDER. The point that I desire to make now is this: As you stated awhile ago, any additional costs would have to come out of the farmer's pocket.

Mr. NICHOLS. Yes, sir.

Senator ELLENDER. Now, can you tell us how much more would that increase the farmer's costs for storage?

Mr. NICHOLS. We figure, Senator, that that will increase the farmer's costs on an average of $1 a bale. There are, roughly, 12,000,000 bales produced.

During 1945 auditors employed by the Office of Price Administration checked the accounts of selected companies engaged in the cotton warehouse business for the purpose of determining ceiling prices for the industry. The companies were selected as representative of the industry. They, in fact, covered the most profitable and the largest operating companies engaged in the cotton warehouse business.

In appendix E, attached hereto, we have shown the results of this audit for 54 companies which are the only ones for which we have the segregated expenses of plant wages and labor costs. Also in this statement we have shown the results of the audit of the base period figures-1937 to 1942-for the same 54 companies. These 54 companies had on hand on May 31 approximately 50 percent of the cotton. in storage. Therefore, they are representative of the largest and most profitably operated companies.

There is no definite information showing precisely what the minimum wage is in this industry at the present time. Prior to the war the minimum wage was approximately 20 cents per hour for unskilled labor. It is known from surveys conducted under the auspices of the War Labor Board that there are no companies that do not have some employees that receive no more than 50 cents per hour. The industry,