It is my opinion that this plan will restore the cotton economy of the South to an active expanding economy, instead of a stagnant mess. The CHAIRMAN. That is really a two-price system; is it not?

Mr. SCROGGINS. No; it is not.

The CHAIRMAN. How does it differ? What I mean is, he gets a premium.

Mr. SCROGGINS. He gets a direct subsidy from the Government. Well, it would be, technically.

The CHAIRMAN. It is the two-price system?

Mr. SCROGGINS. All of his cotton would sell at one price but he would be on a certain allotment of his crop-he would be allowed a subsidy. The CHAIRMAN. It would only be on that domestically used?

Mr. SCROGGINS. Whatever the figure the Department of Agriculture would set up.

The CAIRMAN. Would he get the subsidy also on the total?

Mr. SCROGGINS. No; just on so many pounds of cotton he would be allowed a subsidy.

The CHAIRMAN. That is just another form of the two-price system. Mr. SCROGGINS (reading):

In a few years we would have a complete liquidation of Government-held stock through normal trade channels. The cotton trade certainly is in a better position to market these stocks in an orderly manner than the Government.

The efficient American cotton farmer would regain his standings in the cotton markets of the world, and regain at least a portion of his lost markets.

There is little doubt but that consumption of American cotton would increase 5 million bales annually. The American cotton mill would be in a better position to meet the competition of synthetics and importation of finished goods.

The export giveaway program could be eliminated as there would be no need for it.

This plan would benefit all concerned-the American cotton farmer, the taxpayer, the consumer, and the entire cotton industry.

The CHAIRMAN. All right, thank you. Is there anything else?
Mr. SCROGGINS. No, sir; that is all.

The CHAIRMAN. At this point in the record, I desire to file a statement from A. L. Storey, Charleston, Mo., on behalf of the Missouri Cotton Producers Association.

And next is a statement by the Agricultural Council of Arkansas, dated this day, January the 20th.

And next, also, a statement by the Louisiana Delta Council, dated January 20.

(The documents are as follows:)

STATEMENT FILED BY A. L. STOREY, MISSOURI COTTON PRODUCERS ASSOCIATION, CHARLESTON, Mo.

Fairness demands that the cotton farmer, and the cotton belt economy which depends for existence on the cotton dollar, be considered as a segment of the national economic picture, and in this dimension appraised as a present and potential market for manufactured goods, a source of taxpayments, a contributor to the Nation's prosperity through production of commodities both for domestic consumption and for export.

An analysis of the major problems of the cotton industry indicates that no plan, nor any conceivable combination of plans, for the continuance of a solvent industry will stand a chance of success until stocks now held by the Commodity Credit Corporation are reduced to a level consistent with normal demand-and including a sensible reserve for national security.

It is also indicated that dispersal of current cotton stocks must be coupled with a short-term program for the correction of present contingencies and a long-term program for the maintenance of a healthy industry.

SURPLUS DISPOSAL

Three major proposals have been advanced as solutions of this problem. They are: (a) The soil bank; (b) expanded exports; and (c) domestic consumption program.

The soil-bank plan

Regardless of its possible value to the Nation as a source of future production, the soil-bank plan holds little promise of reducing present surpluses. Voluntary participation implies prohibitive price inducements. Mandatory compliance might reduce supply but presupposes the sacrifice of vital markets. In either case, advantage to farmers would be temporary and, we believe, doubtful. Loss of markets would almost certainly be permanent.

There is every reason to anticipate that withdrawal of domestic cotton acres would continue to be matched by increasing acreage abroad. Commodity purchase certificates would fix the market price of cotton at or near the face value of the certificate, channeling all current production into the Government loan. Administration of such a program would be complicated, expensive, and deleterious to many or most of the normal market outlets.

It is not contended that the soil bank as a conservation program is without merit. It is urgently suggested, however, that the entire cotton industry, and the entire cotton economy, have a big stake in any governmental cotton program. The dispersal of surplus cotton through the soil bank withdrawal plan would have the effect of reducing the flow of dollars and a corresponding reduction of income in the cotton economy. Any small temporary relief to the cotton producer would be overshadowed by market losses and a permanent economic blight on the cotton community.

Expanded exports

Exports are historically a part of the American cotton producing industry. The present laws governing farm commodities include provisions for regular disposal of agricultural surpluses abroad at competitive prices. The cotton economy of the United States is predicated upon a foreign market for at least 52 million bales of cotton per year. Steps looking toward the achievement of some such export total will provide a partial solution of both the present production problem and the present surplus problem.

It is vital that the policy of Government be made implicit in implementing a program based on cotton exports, and that the provisions of such enactment be definite and certain. Senate bill 2702 is a positive step in the right direction. We strongly recommend that this bill be given early and favorable consideration. Domestic consumption program

A plannned program of dispersal outside normal trade channels, and aimed at the utilization of surplus cotton for the relief of less fortunate citizens, is indicated as desirable under present conditions.

A stamp plan or some other plan is suggested so that cotton wearing apparel and household necessities, including mattresses and other articles of cotton, may be channeled directly to low-income families and eleemosynary institutions, either at a low cost or as a direct donation from the Government. Such a program would serve a twofold purpose and would tend to strengthen rather than complicate domestic markets.

IMPORT RESTRICTIONS

It is just as important to provide reasonable protection for the American cotton industry against cheap foreign labor and lower manufacturing costs as it is to expand export outlets. We urgently recommend the provisions in Senate bill 2702 advocating reasonable and equitable import restrictions against cheap foreign textiles.

QUALITY IMPROVEMENT

It is proposed that the loan base be shifted from Middling % inch to Middling 1 inch or the average grade and staple of the crop. This recommendation is made in recognition of, and as an incentive toward, production of higher quality cotton. This change would tend to reflect proper premiums and discounts for the various qualities. Senate bill 2125 provides for the recommended shift.

SMALL FARMS

One change in the law applicable to cotton acreage allotments is desirable and practical at this time. It is suggested that a national reserve shall be established and alloted to States on a basis of need for small farm adjustments. Such reserve might provide minimum allotments of 4 acres, or the highest planting in the 3-year period preceding the allotment year, whichever is smaller. Under such a provision small farms would be recognized as a national problem and provided for accordingly.

FOREIGN AID PROGRAMS

We strongly recommend drastic revision or outright suspension of all foreign aid programs tending to stimulate production abroad of commodities already in surplus supply in the world market, or on which production is curtailed within the United States, is also essential. Curtailment of foreign aid would take the Government out of dangerous, indirect competition with the American cotton producer to whom it owes protection.

PRICE SUPPORTS

In order to remove the uncertainty of governmental pricing as a threat to the cotton market, and to assure the bona fide cotton producer a chance of survival, 90 percent of parity price supports should be established for the 1956 crop and should be maintained until such time as present conditions have been corrected by a long-range program.

Introduction of the modernized parity formula, which became effective January 1, and adoption of the suggested change in the loan base, anticipates a cut of approximately 10 percent in the price of raw cotton. This price cut should be recognized as the maximum reduction which the cotton farmer can absorb in a period of 1 year. Particularly is this true in the light of an inflated national economy and rising production costs.

PRICE-SUPPORT DOLLAR LIMIT

Proposals to limit price support eligibility have the objectionable effect of classifying solution of the cotton producers' problems as a welfare project. In a national economy, developed by and dedicated to the proposition that efficient production methods and decreased per unit production costs are the foundation of prosperity, the proposals point to the withholding of support to the efficient producer in favor of the smaller and possibly less efficient producer.

We are convinced that pursuance of such a policy points to the dispersal of large, well founded farming units and their separation into smaller units, already a matter of major concern to the economists of the Nation through their inability to meet modern mass production competition.

It would appear that the small farmer, crowded to the brink of ruin by a depressed farm economy, is about to be joined by the larger farmer, brought to the same pass by adverse legislation.

Present cotton market prices are determined by loan values and depend upon eligibilty of every bale of cotton to Government loan. Withdrawal of the floor beneath any substantial part of the current crop will degrade market prices, and will react to the disadvantage of every farmer, large or small.

DOMESTIC PARITY

It is urged that the ultimate solution of cotton production and marketing will be found in a system of domestic parity (two-price system), under which cotton will be allowed to seek its own unsupported price level at home and abroad.

It is suggested, however, that the present disturbed state of the economy, and of both domestic and foreign markets, and the policies upon which they depend, precludes a fair appraisal necessary to the establishment of domestic parity on a practical and equitable basis.

Either the short-term or the long-term solution of cotton problems, however, must be based finally on the national rather than on individual interest. We believe that the survival of the cotton-producing industry, on a basis of production sufficient to supply future domestic and foreign demands for cotton, to be in the national interest.

STATEMENT FILED BY AGRICULTURAL COUNCIL OF ARKANSAS

This statement is made in behalf of the Agricultural Council of Arkansas, a nonprofit farmer organization affiliated with American Cotton Producer Associates. Our testimony is in support of and in addition to that of American Cotton Producer Associates.

We appreciate the opportunity to again appear before this committee to express the thinking of our members in the light of proposals recently submitted. We are gravely concerned that recommendations made to this committee by the Department of Agriculture and others deal principally with proposed legislation to place into effect what amounts to a social-security program for low income or family-size farmers and places little if any emphasis on a dynamic, effective, program to increase the sales of American agricultural products, both at home and abroad. While it may be desirable and necessary that some added assistance be given low income farm families in order for them to weather the present economic storm, we are not in agreement that the proposed soil-bank program will materially reduce surplus stocks or move a greater amount of food and fiber into the hands of consumers, either at home or abroad. With respect to cotton, we are of the opinion that a campaign to further cut the planted acres below those now allotted would merely act as a directive to foreign countries to increase their acreage planted to cotton. We feel that the cotton acreage goal set in the United States is a barometer for planting in foreign countries. According to the United States Department of Commerce there were 37,354 fewer farms in Arkansas in 1954 than there were in 1950. The greatest reduction occurred in farms having from 10 to 99 acres. The reduction in this size farms amounted to 30,884. As you know, any reduction of agriculture, especially cotton, has a serious impact on the rural communities in our State which is predominently agricultural. A small cash payment, or one in kind, to a few small farmers will not benefit the ginner, the oil mill, the cotton merchant, the compress, or loan agencies. The efficiency and profitable operation of our farms and their allied processing units are geared to a minimum production volume which must be maintained in order for the industry to survive. We will, therefore, support legislation which directs the Secretary of Agriculture to sell present surplus stocks of cotton now in the hands of the Commodity Credit Corporation on the world market at competitive prices.

DOLLAR LIMIT ON PRICE-SUPPORT LOANS

We are opposed to a dollar limit on price-support loans for cotton. It has been repeatedly stated that the purpose of commodity credit loans as applied to cotton were available in order to permit cotton to be marketed in an orderly manner. Farmers in the past have been urged to take advantage of the loan to avoid price-depressing dumping at harvest time. If there is a dollar limit placed on loans only those few falling into this class will have the advantage of price support and the remainder of the crop must be dumped at whatever price it will bring.

LEVEL OF SUPPORT FOR DIFFERENT GRADES

With respect to cotton, we would oppose any change in the present law which gives the Secretary of Agriculture authority to make adjustments for differences in grade, type, staple, and quality. We are agreeable to amending section 403 of the Agricultural Act of 1949 so that the standard for cotton will be the average grade and staple, providing the level of support price for the 1956 crop is based on 90 percent of parity.

TWO-PRICE SYSTEM

We are of the opinion that with respect to cotton and rice, any long-range program designed to recover and maintain an equitable share of the world market must be based on a two-price system. We feel that it is most desirable that studies be continued in this respect and that such a program become effective as soon as present surpluses are sufficiently reduced.

STATEMENT FILED BY M. P. GUTHRIE, PRESIDENT, LOUISIANA DELTA COUNCIL,

NEWELLTON, La.

Louisiana Delta Council is an economic federation of the people of the northeast Louisiana delta region. We represent the common interests of agriculture, industry, education, forestry, and research. The territory served consists of 11 parishes (counties) comprising an area bounded on the north by the State of Arkansas, situated between the Ouachita and Mississippi Rivers and extending southward to the parishes of Concordia and Catahoula.

The income of our area containing 279,000 people is primarily derived from agricultural sources, principally cotton. There are approximately 13,000 cotton farms in our section. They receive about 45 percent (272,491 acres) of the total 1956 State cotton acreage allotment.

As a member of the American Cotton Producer Associates, our organization endorses the recommendations and views previously presented to you by Mr. Alan Patteson for the group.

We deeply regret that the President's farm message to Congress on January 9 failed to mention any plan for increased agricultural sales abroad other than a request for permission to trade farm products behind the Iron Curtain.

We are positive that an unrestricted foreign sales program at competitive prices, coupled with reasonable restrictions protecting our domestic mills against foreign textile imports, is a paramount necessity if the United States cotton industry is to survive.

We are hopeful that the Congress will initiate legislative action aimed toward inclusion of the above essential principles in the agricultural program whose policy is now being formulated.

We urge that the Secretary of Agriculture clarify many of the yet unanswered questions concerning administration of the soil-bank plan.

We refer to the lack of a specific formula to inform farmers how they will be remunerated for underplanting their allotments of controlled crops under the acreage reserve phase of the plan.

We desire information regarding details of the long-range conservation reserve program. We do not know what amount will be paid for devoting land to soilbuilding practices; the duration of annual payments; or specific information dealing with determination of average yields and production costs.

Will there be a limitation on the maximum amount farmers might earn under the acreage reserv program and/or the conservation reserve program?

It is our considered opinion that farmers need to know the answers to these questions immediately if they are to be able to intelligently plan for the coming year's operations.

We are unalterably opposed to any plan to make participation in the soil-bank plan mandatory by requiring such participation as a condition of eligibility for receiving price-support assistance.

We commend the Secretary of Agriculture for his insistence that participation in the soil-bank plan must be voluntary. We agree with the Secretary that such an approach is the only workable method.

Ninety-three percent of the producers voted for quotas on December 13, 1955, in the marketing quota referendum for the 1956 crop of upland cotton. We feel that definite commitments were made to these cotton farmers regarding their eligibility for price support. Any additional stipulations at this late date can only be construed as a breach of faith.

We strongly oppose the recommendation that a dollar limitation be imposed upon the amount of price-support loans.

Our board of directors unanimously recommends that a farmer may continue to obtain price support aid on the full production of his price-supported crops, provided he complies with Government acreage restrictions.

Any limitations of Federal price-support assistance based upon the size of the farm can only be regarded as outright discrimination against the principles that made America great and flagrant disavowal of the precepts of free enterprise. I quote the following comments from Gerald Dearing, markets editor, Commercial Appeal, Memphis, Tenn.:

"The farm price-support program originally was designed as an orderly marketing program. It was intended to provide the farmer with funds at a time when he needed money without forcing him to dump his product on the market during the rush of the marketing season.