have anything to do with the Government of the country which produces the cotton. Senator EASTLAND. Go ahead. Mr. DIXON. But you know that, if we do that, we shall be accused of dumping and many other disagreeable practices by foreign countries, whose cooperation we must have. Besides this, unfortunately, there is little chance of selling these very large quantities of cotton abroad. It is true that we used to export 6 to 8 million bales a year. It is also true that at one time England used to buy 314 million bales of cotton from this country. Last year the total exports of United States cotton to England were 404,000 bales. If I can elaborate on that, that was because the whole cotton-spinning industry in Lancashire has declined ever since World War I. It has nothing to do with price, with the price of foreign growths. It is just a situation. The CHAIRMAN. I have a letter in my files that was sent by some cotton seller, I think, showing that some of the cotton spinners in England bought cotton from Russia because it was about half a cent cheaper than our cotton. Senator EASTLAND. That is right. Mr. DIXON. They have bought it. I know that. Senator EASTLAND. Their textile manufacturers told the American Farm Bureau Federation it was solely because of price. The CHAIRMAN. Yes. Mr. DIXON. Again, I think The CHAIRMAN. Do you, Mr. Dixon, go into your plan of increasing the sale of cotton in the domestic market? Mr. DIXON. Not any further. The CHAIRMAN. What would be your method there-by reducing the price? Mr. DIXON. Reduction of the price. The CHAIRMAN. Let the Government take the loss? Mr. DIXON. The only loss the Government would take in this system would be this $10 a bale compensation which would be paid to the farmer. Actually, that might not prove to be a loss, compared to the present expense of taking all of this cotton into the loan and carrying it at an expense of a dollar a bale per month from now on. The CHAIRMAN. If the cotton were sold on a free market, might it not be possible for the prices to be further depressed, and if they are, the Government or the farmer to take more losses? Mr. DIXON. Frankly, Senator Ellender, these are all matters of opinion. I think 29 cents would do a great deal to correct the situation. Whether it is enough, I wish I knew. I can't read the crystal ball. I think 28 cents would be better in our markets than 29, but I don't think the farmer should take the rap for the whole of it and that is why we suggest a compensatory payment to him. Senator EASTLAND. You think the farmers should share part of it and the Government part? Mr. DIXON. Yes. Senator EASTLAND. Why is it that the Government should share part of it in the domestic market but not in the export market? Mr. DIXON. If they paid $10 a bale on the whole crop they would be sharing in the export market as well. Senator EASTLAND. But that is not going to do the job? Mr. DIXON. It would help a great deal, I think. The CHAIRMAN. Proceed, Mr. Dixon. Mr. DIXON. In the same way, not so long ago, in 1946-47, we shipped 554,000 bales to China. One year, 1951, we shipped over 700,000 bales to Índia, but we cannot expect to do this again, and, of course, in the case of India and China it was all bought with loans from the United States Government. We used to supply cotton to Poland, Czechoslovakia, and other Iron Curtain countries. All of this is gone. I understand it is now estimated that Soviet Russia is shipping about 1,400,000 bales of cotton a year to satellite countries. I heard this yesterday and was surprised at the size of this figure. Certainly the American cotton shippers above all others want to sell cotton abroad. Selling cotton is our livelihood, our bread and butter. I am glad to have an opportunity to repeat that, Senator. We want to be in a position to offer cotton competitively in all markets in the world. But when we say this, we do not see why we should omit the largest market of all, which is the domestic market in these United States. Then we come to another point. We cannot stress sufficiently or emphasize it enough that we must have definite, fixed, long-range policies for cotton. This may not sound so important, but spinners make their plans many, many months ahead. Mills are probably deciding right now whether they are going to buy American cotton next fall or whether they will use synthetics. They can buy synthetics freely at certain fixed prices, which hardly vary for months on end. They know exactly what they will receive and what they will pay for it, but they do not know what to expect as far as American cotton is concerned. They cannot tell at what price they will be able to buy, and they are aggravated and annoyed by the uncertainties of the situation. What we must have for cotton is the knowledge that our cotton will continue to sell at competitive prices compared to foreign growths and compared to synthetics-not necessarily cheaper prices but competitive prices. Then we will really do business. But as soon as any uncertainty comes into the picture, then the business dries up. For instance, at the present time, there is some talk of increasing the scope of the present sales program of 1 million bales of short staple cotton. If there is the slightest idea abroad that other grades and staples will be offered or that this quantity will be increased, or the price reduced during the present season, the demand, which we have had during the past 2 weeks, will vanish overnight. Why should anyone buy cotton when they think that it will be offered cheaper or that other better qualities will be available at cutrate prices? We have two more suggestions. One, that sales of cotton should be permitted to Iron Curtain countries, including Communist China, insofar as this is compatible with our national policy. And the other that there should be no further additions to the setaside. Increasing the set-aside is merely beating the devil around the bush. These are our main suggestions. We think these recommendations have much merit and particularly the idea that a fixed compensation should be paid to the farmer for not putting his cotton in the loan. It is a simple plan, one that would not be so difficult to administer and it would not cost as much as other plans that have been suggested for cotton. We respectfully recommend it to you for your serious consideration. Now, if you will permit me, I should like to say something about the cotton trade. The cotton trade over the years has distributed the crop efficiently and economically, more economically, we think, than any other crop. It has provided a ready cash market for the farmer's cotton at highly competitive prices at every crossroads throughout the country for a return of under 1 percent, or possibly a dollar a bale net. You know that a bale of cotton costs about $175 and the average cotton shipper will settle for $1 at the present time, anyway. Senator EASTLAND. About what is the margin in Latin America? Mr. DIXON. It is considerably better than that. Senator EASTLAND. Well, about how much? Mr. DIXON. For this small remuneration the trade has bought, concentrated, classed, financed and shipped this cotton to spinners all over the world, guaranteeing the grade, staple, weights, tare, and taking the whole risk of the transaction. You may not know that both the New York and New Orleans Cotton Exchange were founded in 1871. Without their help and without the facilities they offer us for hedging and pricing, we could not possibly handle cotton on such a small margin. You must realize that if there is no spread between the prices at which the Government takes cotton into the loan and the price at which the Government sells, it would obviously mean the end of the cotton trade and the closing of the New York and New Orleans Exchanges. That is why we view with concern all suggestions that the Government should be authorized to sell cotton at the support price. In the past we have suggested that the CCC should sell cotton as cheap as 22 percent over support prices plus reasonable carrying charges. But recently, we changed this to 5 percent which would be about 134 cents per pound without carrying charges. We eliminated the carrying charges because we thought that in an era of declining prices it was a mistake to pile up carrying charges toward the end of each season and then to have an abrupt decline in price into the new crop. You know the carrying charges were accumulated, generally, from the end of December to the end of July so it amounted to 160 points that were added to the price. I trust you will take all this into consideration in your deliberations. Your decision as to the price at which these Government stocks will be sold may well be the decision as to whether there will be a cotton trade in existence capable of performing the services which are demanded of it. 64440-56-pt. 8- -28 We do not believe that the CCC was ever intended to take over the functions of the cotton trade. It is also contrary to those principles approved by Congress in section 407 of the Agricultural Adjustment Act of 1949, as amended, which provides that: the In determining sales policies for basic agricultural commodities * Corporation should give consideration to the establishing of such policies with respect to prices, terms and conditions as it determines will not discourage or deter manufacturers, processors and dealers from acquiring and carrying normal inventories of the commodity of the current crop. I greatly appreciate the kind attention which you have given me. The CHAIRMAN. Thank you, Mr. Dixon. Mr. DIXON. Thank you very much, Senator. The CHAIRMAN. All right. Is Mr. George Scroggins in here? If so, come forward, please? Give us your name in full for the record and your occupation, please? STATEMENT OF OLIVER 0. SCROGGIN, LITTLE ROCK COTTON EXCHANGE, LITTLE ROCK, ARK. Mr. SCROGGIN. My name is Oliver O. Scroggin. I represent the Little Rock Cotton Exchange, Little Rock, Ark. I am a cotton producer. Actually, I represent several hundred farmers who requested that I come up here. The CHAIRMAN. All right, proceed. Have you a written statement? Mr. SCROGGIN. Yes, sir. The proposal which I have here is embodied in a letter which I wrote to Senator Fulbright and circulated among the farmers in the State of Arkansas. The reaction to the letter has been highly favorable and they have requested that I come before you and present the proposal. The CHAIRMAN. Proceed, please. Mr. SCROGGIN (reading): Two results are essential for the success of any program: First, the liquidation of Government-held stocks; second, the natural flow of American cotton into the trade channels of the world at competitive prices. Any program that does not accomplish this is doomed to failure. Another factor that must be given considerable thought is that it is impossible for the American cotton farmer to remain solvent if he is forced to buy his needs in a protected market and sell his product in a free market. Eventually he will be squeezed dry. Yet, on the other hand, if he is unable to meet his competition of foreign growths and synthetics, he cannot continue long as a cotton producer. The only possible answer is a direct subsidy to the farmer or a large reduction in the prices of the things he must buy. There must be some offset for the high tariffs and high labor costs. Out of this crop of around 15 million bales, the Commodity Credit Corporation, through its 90 percent of parity loan, will be forced to add some 4 or 5 million bales to its already burdensome stock of more than 8 million bales. This surplus in Government hands is a threat to the entire cotton industry, and doubly so as it is politically controlled. A fixed-price loan, based on acreage instead of bales, can only add to this surplus from year to year. Cotton must be produced for consumption rather than storage. I suggest the following as a solution: 1. Eliminate all Government loans on cotton in the future, allowing American cotton to seek its own value in the markets of the world. Any loan, whether it be 75 percent or 90 percent of parity, notifies the world a year in advance the minimum price of American cotton for the coming year. This gives foreign producers and manufacturers of synthetics a big advantage. 2. Many farmers have been producing inferior cotton for the loan in preference to consumption. The Commodity Credit Corporation has several million 'bales of such cotton in their stocks. So, I would suggest, although it is not necessary for the success of my plan, that such cotton be stockpiled under a law to the effect that none of this cotton can be sold except in time of war or a national emergency. 3. Notify the world that none of the remaining stocks can be sold except at 105 percent of parity plus carrying charges. 4. Eliminate all acreage controls in the future and allow each individual farm the right to produce as it sees fit, taking its chances on world prices. 5. The Department of Agriculture has reduced the farmers' acreage allotment the past few years in the expectation of a production of 10 million bales of cotton. In every instance the farmer has increased his yield per acre, thereby producing crops of from 13 to 15 million bales. A control of production must be in allotted bales in preference to acres. Set up a figure of 10 million bales for the coming crop and prorate to each farm its share of this 10 million bales, based on its past history of production. Pay each farm a direct subsidy, basis Middling 15-16, for what it receives for its share on a free market and 90 percent of parity. However, until the surplus Government stocks are liquidated, make the payment in cotton or the rights to so many pounds of cotton, basis Middling 15-16. These rights could readily be converted into money through sales to the cotton trade. As an illustration: A farmer has 160 acres of good cotton land. Under the present program he is allotted 32 acres in cotton. He goes to considerable expense to increase the yield on these 32 acres, as in most instances this plot of land must carry the load for the entire farm. Due to the droughts and poor markets, his attempts at producing other crops have not been very successful. Through his increased expense he is able to produce 40 bales of cotton, of which 32 will go into American mill consumption, 2 bales are sent to the world markets on the giveaway porgram, and the balance goes into the Commodity Credit loans. The Department decreases his acreage allotment further the coming year, so his problem of making ends meet becomes greater from year to year. Under my plan it would be up to the farmer to decide how much cotton he wished to plant, knowing that he is guaranteed 90 percent parity on-say 32 bales-his share of the 10 million bale allotment. Any production over the 32 bales would be sold at world prices. If the world prices and demand were good, he would increase his production, but-if poor-he no doubt would stay within the range of his allotment. This, in itself, should act as a stabilizing influence on, not only American production, but foreign growths and synthetics as well. The subsidy payment in cotton could work as follows: A printed form could be given the farmer showing he is due 90 percent of parity on 32 bales of cotton— 16,000 pounds. When he sells this 16,000 pounds, the difference between what Middling 15-16 is quoted that day and 90 percent of parity on Middling 15-16, would be the amount due him. For instance, if Middling 15-16 is quoted at 27.35 and 90 percent of parity is 33.53, his subsidy would be 6.18 per pound, or $988.80. This right to purchase $988.80 worth of surplus stocks at the market price from the Commodity Credit Corporation could readily be converted into cash through a sale to the cotton trade. None of the surplus stock could be sold at market prices except through payment with subsidy rights, except as follows: 6. To further expedite the exportation of the surplus stock, allow the Commodity Credit Corporation to accept 10 percent of any sale, but not more than 10 percent, in approved foreign exchange. This will help the countries that cannot obtain dollars to pay for cotton. 7. If a farm reduced its yield below its allotted share, pay it a subsidy in cotton also, until such time as the surplus stocks disappear. As in the above instance, if the farmer raised only 14 bales, he would still be entitled to his subsidy of $988.80. Perhaps it would be helpful in keeping down production to pay an additional bonus for reduced production. Such a plan as this would improve the quality of the cotton crops. It would be very much to the advantage of the farmer to produce a higher type of cotton. As an illustration, the above-mentioned farmer plants good seed and is careful with his picking, so his crop is worth 30 cents on the market; he receives 30 cents for his crop and 6.18 subsidy, making the value of his crop 36.18. But on the other hand, if he planted a poor quality of cotton and his crop would only bring 20 cents on the open market, the net value of his crop would be 26.18. |