Secretary BRANNAN. Well, we think the most difficult one, as we point out somewhat later on here, will be corn; that the possibility of achieving the corn goal we have set out is probably less likely than most of the other commodities. The CHAIRMAN. Let me put it this way: If it should turn out to be true as to other crops, have you any plan to offer whereby the goals can be reached? Secretary BRANNAN. Well, of course, Mr. Chairman, we are doing all we can to encourage farmers to meet the goals. And, concurrently with that

The CHAIRMAN. Well, now, you say you are encouraging them. What are you doing to encourage them?

Secretary BRANNAN. Outside of the price field now, outside of maintaining prices at 90 percent of parity for those commodities, we are first of all trying to get all of the supplies they need, the fertilizer, the insecticides, the machinery, and all of the other elements of production.

The CHAIRMAN. Are you able to control the sale price of those necessary supplies being purchased by the farmers?

Secretary BRANNAN. No; we are not. But by maintaining, by keeping the volume of production of those things up, maybe we can influence price.

The CHAIRMAN. As I understand from every source, and I can speak with a little authority, because I bought some fertilizer recently and it is quite a bit higher than it was last year

Secretary BRANNAN. That is right, sir.

The CHAIRMAN. And labor is going up, and there is no question in my mind but that labor, insecticides, farm machinery, and everything else are going to keep on this march of rising prices-with that staring the farmer in the face, you still feel that he is going to try to reach the goals that you have set?

Secretary BRANNAN. Well, Senator, I can only answer that by saying we hope so. Of course, those increases in the cost of production will be reflected in his parity level, too.

The CHAIRMAN. Merely a pious hope will not produce a pound of cotton.

It strikes me that we ought at least to try to offer the farmer the same form of security that our benevolent Government is offering to those who produce the sinews of war; that is, the cannon and things of that kind.

Secretary BRANNAN. I certainly would not argue with the chairman about that.

The CHAIRMAN. Mr. Secretary, a moment ago you stated that you hoped that these goals would be reached because you are assisting the farmer in providing more fertilizer and more insecticides and pesticides and more machinery, and things like that. I happen to know that the Department has been most active in that direction. I have gotten in touch with your Department quite often on that score, as you know.

Another item that we have to contend with is labor. What has the Department been doing in order to assure the farmer that he will get sufficient labor at the time he needs it?

Secretary BRANNAN. Well, Senator, of course the labor problem in terms of the large quantities of labor that are needed for short operations in such things as vegetables and sugar and a few other things is under discussion, of course, up here right now. And the Labor Department is taking the lead for the administration on that in that work.

The CHAIRMAN. I am personally familiar with that. I simply wanted that for the record.

Secretary BRANNAN. The other thing, of course, is our effort to retain on the farm the qualified farm-trained youth who is subject to being drafted into the Army. And on that score I must confess we are having increasing difficulty, but probably no more difficulty than is being experienced by other segments of the economy, as the demand for people in the armed services increases.

Mr. THATCHER. I thank you very much.

The CHAIRMAN. Thank you, Mr. Thatcher.

The committee will stand in recess until 1: 30 o'clock.

(Whereupon the committee recessed at 12:25 o'clock, to reconvene at 1:30 p.m.)

AFTERNOON SESSION

The CHAIRMAN. The meeting will be in order.

The first witness this afternoon is Mr. Alan Patteson.

Will you step forward, Mr. Patteson? Will you give us your name in full, please, and your occupation?

STATEMENT OF ALAN G. PATTESON, PRESIDENT, AMERICAN

COTTON PRODUCER ASSOCIATES, JONESBORO, ARK.

Mr. PATTESON. My name is Alan G. Patteson. I am a cotton farmer from Poinsett County, Ark., and president of the American Cotton Producer Associates. This association is a federation of cotton producer organizations dedicated to the improvement of every phase of farming in cotton-growing areas. Affiliated organizations include the Missouri Cotton Producers Association, Delta Council of Mississippi, Tennessee Agricultural Council, Louisiana Delta Council, Agricultural Council of Arkansas, and the North Carolina Cotton Development Committee. We also work closely with groups in South Carolina and other parts of the Cotton Belt.

We are indeed grateful for the opportunity to review the several major policy proposals now before this committee.

A CLOUDY FARM PICTURE

As you know, farmers are not sharing equitably in the high-level prosperity that pervades these United States today. Consumers are not benefiting in a substantial way from the lower prices paid to farmers. Consequently, lower farm prices have not meant much insofar as overall increases in consumption are concerned.

As cottongrowers, we are cultivating fewer acres, hiring fewer people, and showing lower profits. Along with other farmers we are caught in a price-cost vise that is slowly closing in on us. Cotton acreage has been cut from 28,333,355 acres in 1953 to 17,391,304 acres in 1956. Foreign production has increased as we attempt to adjust world supplies.

DILEMMA IN COTTON

The Commodity Credit Corporation is now selling or has sold some 19 or 20 commodities competitively in world markets. All of the surplus cottonseed stocks have moved into use. All Governmentowned protein meals have been sold. Surplus soybeans have been moved into world trade on a competitive basis. This has been done with a minimum of disruption to normal trading. Nothing, however, has been done to deal effectively with cotton exports.

Here is the current picture. As things now stand, cottongrowers in the United States bear the brunt of the adjustments in cotton production and consumption for the entire world. While we have reduced acreage about 40 percent, production outside has increased roughly to the same extent.

In 1950 less than 10 million bales were produced in the United States on more than 21.5 million acres.

The Korean war came. Cotton reserves were low. Cotton export quotas were imposed in August 1950. Cotton prices abroad ranged above 80 cents per pound. Ceilings kept our prices at about one-half of the world levels.

Obviously there were great profit opportunities in cotton production abroad. Capital exports were encouraged by both the economic setting and by foreign aid programs such as point 4.

During 1951 and 1952, United States growers were urged to produce 16 million bale cotton crops. They received no underwriting except access to CCC loans. They received no tax concessions except for a few gins and warehouses in western areas.

By law, domestic disposal of cotton by the CCC is hinged to 105 percent of existing support levels plus carrying charges. Policies of the administration dictate the same price pattern for CCC cotton offerings abroad, except for the 1 million bale short-staple limited bid basis program started this month. Other commodities are sold abroad by the CCC at less than support levels. These policies have provided a price umbrella--market protection-for cotton expansion not only in friendly countries but in the Communist bloc as well.

The CHAIRMAN. Can you tell us what effect the announcement of this sale of 1 million bales that you have just mentioned has had on the market?

Mr. PATTESON. Senator, before we even started taking bids on this 1 million bales, the world market went down from 6 to 8 cents a pound. The CHAIRMAN. It went down?

Mr. PATTESON. Yes.

The CHAIRMAN. What did you attribute that to?

Mr. PATTESON. I attributed that to the fact that these foreign spinners and traders realized that at the end of this year we are going to have 14 million bales of cotton on hand over here. And so they are just buying from hand to mouth.

In other words, if you were a millman in England and you saw 14 million bales of cotton over here in the United States, you would certainly be afraid to stock up for from 6 months to 9 months or a year in advance.

The CHAIRMAN. How much of that 1 million bales has been sold so far this year? Do you know?

Mr. PATTESON. No. I think they have had three sales. The first sale was 18,000 bales, and then I believe the second sale was approximately 100,000 bales. Now, I understand they have had another sale in the last 2 or 3 days, and I have not heard the results of that. Senator EASTLAND. There have been over 300,000 bales. Mr. PATTESON. Over 300,000 bales? I did not know.

The CHAIRMAN. Is it going according to the way you thought and expected?

Mr. PATTESON. Yes. In fact, if they have sold over 300,000 bales, that is more than I expected them to sell all together.

The CHAIRMAN. You do not think they should sell it quicker than that?

Mr. PATTESON. I do not believe they are going to be able to sell 1 million bales of the grades and staple specified in this program. The CHAIRMAN. All right.

Senator EASTLAND. Now, this is short cotton, is it not?

Mr. PATTESON. Yes, this is short cotton. It is 1516-inch and shorter. Senator EASTLAND. It is produced competitively by just the other country, and that is Pakistan, is it not?

Mr. PATTESON. Yes.

Senator EASTLAND. All right.

Now, you mentioned the increase in foreign acreage. That increase has largely come in Mexico and Central America, has it not? Mr. PATTESON. Yes.

Senator EASTLAND. Now, is it not true that that increase is largely due to 4 or 5 giant international corporations owned by Americans! Mr. PATTESON. We understand that they have invested millions of dollars in Mexico and Central America.

Senator EASTLAND. Now, is it not true that that industry down there is not a Mexican cotton industry, not a Central American cotton industry, but an American cotton industry of 4 or 5 firms?

Mr. PATTESON. To a great extent, yes.

Senator EASTLAND. Yes.

And the State Department now has drawn a program that makes it impossible for the American farmer to compete with those 4 or 5 big corporations; is that correct?

Mr. PATTESON. That is true, yes.

The CHAIRMAN. Proceed.

Mr. PATTESON. Continuation of our current policies and the GATT textile agreements will liquidate the cotton industry of these United States, an industry in which approximately 15 million people are actively involved. Will our assistance and cotton-market protection for free-world countries, encouraged to expand cotton production, really help their economies in the long pull? Would it not be more realistic to stay in world markets on a "fair-share basis" than to set the stage for dogged price wars among our free-world friends? This has already been exemplified by a drop in the world price of up to 8 cents per pound without the United States offering a single bale of CCC cotton at competitive prices.

It would appear that the big gainers from current policies are the cotton enterprisers with global operations. So long as they can keep the United States policies relating to cotton tied to cutbacks in production, and an unwillingness to meet competition in world markets, then the global cotton operators have well marked paths indeed.

The same high signs for cotton expansion abroad can be read with meaning in Communist-dominated countries.

Senator EASTLAND. Who are those global operators?

Mr. PATTESON. Senator, I

Senator EASTLAND. Would you care to state, now?

Mr. PATTESON. I just don't know exactly who they are.

Senator EASTLAND. Well, yes; you do.

Mr. PATTESON. Well, they are all friends of mine, and I do not blame them. I would probably be doing the same thing.

Senator EASTLAND. All right. What are the facts? Who are they? Mr. PATTESON. I would think they would be headed by AndersonClayton.

Senator EASTLAND. Who else?

Mr. PATTESON. (No response.)

Senator EASTLAND. McFadden?

Mr. PATTESON. McFadden. And I don't know exactly who the rest of them are.

Senator EASTLAND. Oh, yes; you do, now. Come on. Let us get down to Memphis. Who is it in Memphis?

Mr. PATTESON. Well, Hohenberg Cotton Co., I think, would be another one.

Senator EASTLAND. All right. Now, who is the other one?

Mr. PATTESON. Well, Cook & Co., probably. I believe they have expanded to a great extent down through there.

Senator AIKEN. Are any of these people interested in the warehouse business?

Mr. PATTESON. Oh, yes; the warehouse business, oil mills, cotton gins, and production of cotton.

Senator AIKEN. If we continue to run into these very large surpluses of cotton in this country and keep their warehouses well filled up with cotton to store, while at the same time they are down in Latin America producing cotton that they can make about eight times as much on as they can in available cotton, aren't they having their cake and eating it, too, and getting us going and coming?

Mr. PATTESON. Well, I really, had not looked at that angle of it before. The fact that I looked at was that we were holding the umbrella and they were making money on the cotton themselves.

Senator AIKEN. Aren't we not only holding the umbrella, but aren't we keeping their cotton at a very large storage price?

Mr. PATTESON. I know that one of them is building an $800,000 storage house in the Rio Grande Valley now.

Senator AIKEN. Which one is that?

Mr. PATTESON. Cook & Co.

Senator EASTLAND. Is that Mexican cotton?

Mr. PATTESON. Well, I do not know whether it is for Mexican cotton or not, Senator. I think not; no. I think it is for American cotton. I think it is in the Rio Grande Valley, probably at Harlingen, Tex.

Senator AIKEN. Is it not also true that some of these people not only own the terminal warehouse but have a smaller interest in some of the smaller inland warehouses?

Mr. PATTESON. I really do not know that.

Senator AIKEN. If you look back over some of the old hearings, you will find that they do have very substantial interests in them. Mr. PATTESON. You probably know more about that than I do. Senator EASTLAND. I understand they even own railroads, do they not?

Mr. PATTESON. Yes, I have heard that.

The CHAIRMAN. You are complaining now of a situation. Will you give us any idea as to how to correct it?

Mr. PATTESON. Yes. I will get to that in a minute.

The CHAIRMAN. No, no. I am talking about these people who use our money and go abroad to build competition for our farmers. They are the ones that I am talking about.

Mr. PATTESON. I think the thing to do is for the United States to sell their cotton in world markets to meet competition.

The CHAIRMAN. Do you think that the American growers can compete with labor from Mexico, from Brazil, and now from Pakistan?

Mr. PATTESON. They certainly cannot do it without the United States taking a loss. In other words, it would have to be handled through the Government, and the Government would assume that loss.

Senator AIKEN. Is it not also a fact that in some of these developments in Latin America, now, they do not depend on peon labor, but use very modern equipment?

Mr. PATTESON. I think it is sort of like the Japanese cotton mills, Senator, that have been built since the war. They have the most modern machinery in Mexico now that can be obtained anywhere,