Mr. HARDIE. It was devised 2 years ago.

The CHAIRMAN. Do you call that self-help? Let us go into that a little bit. We do not have time to go into it altogether, but how can you call a proposal self-help when you want the Government to put up half a billion dollars to promote the program?

Mr. HARDIE. Only in the initial stage.

The CHAIRMAN. I understand, but half a billion dollars is quite a chunk of money; is it not?

Mr. HARDIE. In order to get it rolling, to start it, we would have to have that first initial help.

The CHAIRMAN. The amount of one-half billion dollars is just a little under what we have lost so far in the dairy business.

When you say "self-help," I think that you are still relying on the Government. And in addition to that, do you know that this board that will be created by this act would have legislative powers? Mr. HARDIE. So far as the dairy farmer is concerned, it would have control of the milk; that is right.

The CHAIRMAN. Do you think that is fair-do you think it is fair, in other words, to transfer legislative powers from the Congress to a board to deal with milk?

Mr. HARDIE. They would still be by appointment of the Executive. The CHAIRMAN. I understand that, but still they would have legislative powers.

I want to say this to you this applies to all witnesses who will testify before this committee-that those who ask questions are not to be judged by the manner and method in which they ask them. I have always been of the belief that if one takes the affirmative and the other takes the negative, you might be able to draw out all of the facts. I am taking the negative on this, just to draw you out and to find out whether or not you think it would be in line with our tradition to have a board appointed by the President of, say, 15, who would have the power of legislating with respect to anything affecting the production, the marketing, and related matters concerning milk.

Mr. HARDIE. I think it is fair, since they are dominated by the dairy producers themselves and with appointment from time to time. as nominations will be made. It can be changed. If we are going to stand on our own feet, we are going to have to run our own business by our own people. That is the idea of the self-help program, to get out from under the administrative changes which depress our markets. The CHAIRMAN. As I told you a moment ago, you are not standing on your own feet when you come to the Government and ask for a half-billion dollars to finance you.

Mr. HARDIE. We have to overcome this tremendous depressing amount of stock which is now held. And we have to have aid enough to get started, I will grant you that.

The CHAIRMAN. This committee has heard from quite a few witnesses from other sections of the country in which it was stated that where the marketing agreements are in force-for instance, around Washington, D. C., and Maryland, and many other sections-the marketing agreements are working nicely.

Do you think that we ought to create a board that may have the power to change this or affect those who are already satisfied with the program as it is being operated?

Mr. HARDIE. For the good of the whole, I do; yes.

The CHAIRMAN. You have a right to your opinion, of course. Have you anything else that you would like to add on this so-called self-help program?

Mr. HARDIE. I think that we have, through the National Milk Producers Federation, entered it in Congress. You have it.

The CHAIRMAN. We have it before us. I just wanted to refer to it for the benefit of the other witnesses here present. We thank you very much, Mr. Hardie.

Mr. HARDIE. Thank you.

The CHAIRMAN. I will now skip down a few witnesses to hear from the cotton folks-Mr. W. L. Smith. Will you step forward, please, sir?

Mr. SMITH. Would it be permissible to hear Mr. Kennedy first?
The CHAIRMAN. Yes, all right.

Will you state your name in full for the record, and your occupation, please?

STATEMENT OF J. R. KENNEDY, MANAGER, CALIFORNIA COTTON COOPERATIVE ASSOCIATION, BAKERSFIELD, CALIF.

Mr. KENNEDY. Mr. Chairman and gentlemen of the Committee, my name is J. R. Kennedy. I am here as a cotton producer, but I am also manager of the California Cotton Cooperative Association. I would not presume to tell the chairman anything about cotton, because he has forgotten more about cotton, perhaps, than I shall ever know. The CHAIRMAN. That is very complimentary. You would be surprised how little I know about how it is marketed and how to draft a law that will be acceptable to all of the cotton people.

Mr. KENNEDY. That would be a herculean task, and you asked last night if we had come complaints about our commodities, that we offer some remedies, and, Senator, I have some proposals to offer.

The CHAIRMAN. Fine; we will be glad to hear from you, sir. Mr. KENNEDY. The American cotton farmer is faced with increasing competition from synthetic fibers in the domestic market and from synthetic fibers and lower prices of cotton in foreign markets.

The consumption of cotton does not respond as rapidly nor in the same degree to price changes as do some other agricultural products. While the effect of price on consumption of cotton for the long range and in the export market is extremely important, the whole subject has so many facets, and is so highly controversial, that it can best be dealt with by the Congress.

The effect of price on consumption of cotton has not been faced realistically until the board of directors of the National Cotton Council authorized and directed such a study be made.

We do not find any studies made on the effective price of this, or some of the other commodities bothering us. So we have been working in the dark, so far as what effect price has on consumption. We could not find it in the Department of Agriculture or any place.

The figures are now being rechecked and I am assured the results will be published before the end of the year. As a member of the industrywide committee on the future of the National Cotton Council, I was privileged to hear this report on September 16 and 17 in Memphis, Tenn. The results were truly amazing and confirmed my belief that

some method of approach other than price alone must be applied to our cotton problem if it is to be solved or even alleviated.

With production costs and yields of the recent past, only a small percentage of cotton farms show a good return, and less than one-half show returns commensurate with the capital invested and risks involved. The remaining half of the production shows very minor returns or actual losses. This is the situation at present prices. To reduce costs that would permit lower prices usually means, among other things, increased yields, which further intensifies the supply problem.

Some uses formerly held by cotton could not be regained regardless of price, but most of those we now hold could be retained and expanded and new uses could be found if we use sufficient imagination, research, and funds.

It is out of the question for the American cotton farmer to compete pricewise today in some markets-for example, those taken over and held by jute and paper-or with foreign-grown cottons that had a chance to become established during recent years when our own selfinduced shortage of cotton resulted in high world prices during the Korean conflict.

The American cotton farmer was exhorted, cajoled, and entreated by our Department of Agriculture and many Government and industry officials to increase cotton production during the Korean conflict because of the urgent need. Farmers responded to this appeal and to the price stimulus by taking out pastures and replacing other crops with cotton and by putting new land into cultivation, buying new machinery and irrigation equipment without the fast tax writeoff provisions afforded industry under similar circumstances. If the farmers had been able to obtain an accelerated tax writeoff on these expenditures for this increased production, they would be in better position to compete pricewise today. This is a very serious competitive disadvantage.

To compete directly with cotton grown in foreign countries would require a price so low that it would pauperize the cotton farmers. The mere announcement by our Department of Agriculture that certain qualities of cotton would be sold from CCC stocks at world prices had the effect of depressing world prices to a point that borders on the ridiculous. Foreign exporting countries have already retaliated with various types of subsidies, by cutting export taxes, devaluation of currencies, and other devices which have already made it practically impossible for us to move our CCC cotton at any price. Perhaps the end result has been attained already if lower prices is the answer, but without our having actually disposed of a single bale of cotton. Recent advices from the State of Sinaloa, Mexico, verify this because the price to growers-about 22 cents per pound-has sunk below cost of production.

The American cotton farmer has made significant progress in lowering cost of production during the past 10 years, but he has increased yields per acre almost 60 percent in the process. There is a point below which he cannot reduce costs because of fixed overhead, rent, minimum wage levels, and his necessity of buying most of the goods and services used in his production in a tariff-protected market. Tariffs eliminate price competition of the very kind that cotton farmers are asked to meet in selling their production abroad at world

prices. How can an individual cotton farmer with limited production capital, land, equipment, and organization be expected to complete pricewise with foreign-grown cotton, when great industries with adequate capital, the best possible management and direction, efficiency, and automation must have tariff protection? This is not to imply that tariff protection is not needed in the United States. It is absolutely necessary to protect our American workmen, business and industry, and cotton farmers against pitifully low wages and standards of living in certain foreign countries.

Cotton exports, both in the raw state and as yarn and finished goods, are absolutely essential to a prosperous and stable cotton industry. Implementing the export of raw cotton and manufactured cotton goods, then, is as surely an obligation of government as the imposition of tariffs.

It has been shown that the individual cotton farmer cannot be expected to compete pricewise for foreign markets even though he must have them to prosper.

What, then, can the American cotton farmers do about the domestic market that makes up about three-fourths of our total market? They can provide funds under appropriate legislation to intensify and expand research and promotion so that more cotton can be consumed at a price that is profitable to the farmer.

We must find every available means to increase cotton consumption and do so as rapidly as possible. The two great avenues open, that are in no way controversial, are through research and promotion as so ably demonstrated by the National Cotton Council.

Funds for extensive research and promotion must be adequate and quickly available. To raise such funds it is proposed that legislation be enacted that would permit each farmer, if he so chooses, to pay a moderately realistic penalty for acreage above his normal allotment and that such penalties be paid into a fund to be used by the National Cotton Council for research and promotion. Since this is a plan to raise funds for such purposes, penalties should be realistic and not punitive. It is proposed that the penalty be 5 cents per pound on the first 5-percent increase in acreage, assessed and collected in the same manner as is now done through the county ACS offices.

The CHAIRMAN. What would you do with the excess cotton that would be produced on which you would collect a penalty of 5 cents? Mr. KENNEDY. I have analyzed what the probable excess production would be. And I know of 2 or 3 uses that we could put the cotton to we think very quickly, that would take up that by using some of this money.

The CHAIRMAN. Would it not aggravate the situation by permitting the farmer to grow more and simply collect the penalty from him and let that cotton be marketed with other protected cotton?

Mr. KENNEDY. Well, I think that you would not have over onequarter of a million bales produced under this program, which add about $40 a bale, which this penalty would figure out, which would give a fund of $10 million.

The CHAIRMAN. Even a quarter of a million bales, you know, would probably affect the market in some way. It does not take much over and above the consumption requirement, you know, to lower the prices of any commodity.

Mr. KENNEDY. That is very true, but the Senator very well knows, and so do I, since I come from that part of the country, that you can get a shower at the right time, or kill an extra weed or two, and influence the production of half a million bales one way or another. This is minor compared to what weather can do.

The CHAIRMAN. You would have both in your case.

Mr. KENNEDY. Maybe you would chance the weather when it was bad.

The CHAIRMAN. All right, proceed.

Mr. KENNEDY. For each additional 5-percent increase the penalty would be increased by 2 cents per pound. This would make the production from the first 5-percent increase yield $25 per bale. The second 5-percent increase would yield $35 per bale, the third 5-percent increase $45 per bale, the fourth 5-percent increase $55 per bale, and the fifth 5-percent increase $65 per bale. So if a cottongrower increased his acreage by 25 percent, the average penalty on the increased production would be at the rate of $45 per bale. In order to prevent planting beyond a 25-percent increase for any individual the penalty could be increased to 50 or even 75 percent of the support price.

The penalty would apply only to the increase over the normal annual allotment, but no part of the production from such farms would be eligible for price supports. Further, no increase in acreage history would be earned by the individual, the county, or the State through such additional allotments.

The reason for suggesting limiting the increase to a maximum of 25 percent is to guarantee that the production from such increases be held to reasonable limits. At the same time, in order to create a sufficient fund there must be an opportunity to do so that fits each individual grower's farming and marketing situation. Most growers probably would not increase acreage because of the cost and the loss of price-support privileges. Other growers, and they will be found. in all parts of the Cotton Belt, may elect to pay the penalty on a small percentage increase for various reasons. This increase may run all the way from 1 percent up to the maximum of 25 percent.

While there is no way of predicting accurately what the increase would be under this plan, it may reasonably be assumed that 75 percent of the growers would not give up support prices and would not participate. The remaining 25 percent could then be figured at an average increase of 10 percent, which would produce about 250,000 bales. At an estimated average penalty of $40 per bale, this volume would produce a fund of around $10 million.

With such a fund, research and promotion could be stepped up somewhat commensurate with that of competing synthetic fibers and nothing else, including price, stands as much chance of accomplishing this and making for a prosperous cotton economy.

The CHAIRMAN. You spoke of a program, a price-support program. Could you be more specific and tell the committee whether or not your association desires the present price-support program or a return to the rigid price-support program as passed by the House of Representatives? As you know, and for the benefit of the people present, we have before our committee in the Senate today a House bill which would have the effect of restoring 90 percent of parity price supports. Some of us thought when this bill came to us from the