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House that it might be best to await the hearings that we are now conducting, in order to possibly find something new to put in the bill. Then too, we might have a better chance of having a price-support program improved by getting the views of the farmers all over the Nation. I would like to have your views as to flexible as against rigid. Mr. KENNEDY. I would not presume to speak for the farmers of our organization, because they have their own ideas on that.

The CHAIRMAN. What do you think?

Mr. KENNEDY. My own idea is that we have over a period of time to get the price of cotton down somewhat by increasing efficiency and promoting yields, because present costs are such that we cannot take very much of a decrease at this time. Under our present law, we do come down next year unless new legislation is provided, because of our supply problem.

The CHAIRMAN. Would you advocate the 90 percent?

Mr. KENNEDY. I am not advocating any certain percentage, Senator. I merely brought out in this that price did not affect the use of cotton to a very great extent, and that we must use some other means for getting cotton consumed.

The CHAIRMAN. As I understand it, the effect of this so-called flexible price-support program, it is to bring 100 percent of parity at the market place. You have heard that expression oftentimes?

Mr. KENNEDY. We will never do it in the case of cotton.

The CHAIRMAN. I realize that, but the point I wish to ask you is this, if at 90 percent you cannot produce cotton to sell on foreign markets, how would you expect to sell the cotton if the price received by the farmer were 100 percent of parity?

Mr. KENNEDY. I would not expect to be able to do so at all. With the production under way, that is already under way all over the world, we cannot compete with their labor.

The CHAIRMAN. In other words, it would be more difficult to sell cotton if the farmers were getting 100 percent of parity than if they got 90 percent, is that not true?

Mr. KENNEDY. It would just intensify it by 2 or 3 or 4 cents a pound, that is correct. We have letters in our association from all over the world, commenting on this sale of Commodity Credit Corporation cotton, they tell us that they can buy foreign cotton cheaper than at any price we will offer and they buy it in their own currency, so they are not interested.

The CHAIRMAN. As I tried to point out last night to an audience in this very room, we have been spending quite a lot of money abroad assisting people to grow better cotton, more cotton, more rice, more of everything. I pointed out that has had some effect on our own markets, has it not?

Mr. KENNEDY. It has had a great effect. And I agree with you 100 percent. Let us start taking care of our own people at home.

The CHAIRMAN. I agree with you thoroughly. Senator Kuchel desires to ask a question.

Senator KUCHEL. What percentage of the cotton which is raised in California would you estimate is sold in the market place?

Mr. KENNEDY. Practically all of it. There is actually a shortage of the kind of cotton that we produce in California. I think the Commodity Credit stocks of California cotton at the end of last season from the 1954 crop was about 27,000 bales.

Senator KUCHEL. You have mentioned here the effect on the world market of an announcement by the Commodity Credit Corporation and the Department of Agriculture of certain qualities of cotton to be sold at world prices. Is there any way specifically that the Government by legislation could assist in disposing of the American cotton surplus on the world market at a world price?

Mr. KENNEDY. That is very difficult. It could not be accomplished over night, because it would merely shift the inventory of cotton from Commodity Credit Corporation stocks to our foreign people, and then, in turn, the foreign producers. They have no way to finance large volumes of cotton, so they would take whatever price they could get and fill up that gap, and we would not sell any more then until we took another one of those plunges to give cotton away, we will say.

Senator KUCHEL. Is it not true that a great portion of the answer to the farm problem and here specifically the cotton supply, lies in a recap of a reasonable portion of the world trade, so far as cotton is concerned?

Mr. KENNEDY. We much have a portion of the world trade to exist, but cotton, Senator, has done something for itself, beginning in 1939, when the National Cotton Council was established. We have increased the consumption of cotton 50 percent. We have done it in particular uses. We have actually lost ground in industrial uses. Those are the ones that we expect to apply chemistry and many other things to in an attempt to regain some of that. We have almost doubled our consumption of cotton in certain areas.

Senator KUCHEL. Has there been, in your opinion, any effect on cotton production outside of the United States by reason of our support legislation here in this country?

Mr. KENNEDY. That is a question that is very easy to answer and a very difficult one to see through. The greatest impetus to our production of cotton came following our cutting down acreage in 1950, with the bad crop we produced less than 10 million bales. Then the Korean War came along. We were short of cotton. Our cotton was fixed at a ceiling of 45 cents a pound, which is extremely high. It is too high. But cotton in Mexico went to 90 cents a pound at that time. When we have a shortage of cotton in this country, foreign cottons go much above ours in price. When we have a general oversupply of cotton in the world, then the foreign people stay just enough below our price to take the market from us. Whatever price we offer to sell at, they will come in a little bit lower and take the market. That cotton must get into consumption before we can sell any.

The CHAIRMAN. Well then, Mr. Kennedy, you do not see any hope for the cotton farmers here unless we can produce cotton cheaper than they can in foreign fields, or unless we use the same gadget that they use in subsidizing cotton for foreign sales?

Mr. KENNEDY. Exactly, Senator. The figures that are now collected show that we cannot compete pricewise with 10 cents-an-hour labor.

The CHAIRMAN. Mr. Kennedy, there was one question that I would like to ask you in the light of the question asked by Senator Kuchel. We have a bill before Congress today of which I am the sponsor. Mr. KENNEDY. I am familiar with it.

The CHAIRMAN. That bill suggests that whatever price supports be provided we ought to encourage the production of salable staple.

The way that some of us think that could be would be instead of making the support price applicable to seven-eighths cotton, to make it applicable to inch cotton. What do you think of such a plan?

Mr. KENNEDY. If the discounts below inch were severe enough, it would have some bearing, but with total agriculture in the south in a precarious condition for markets, it has been traditional that cotton, regardless of its price, has either made them more or lost them less than any other crop. So you do not actually reduce the production of cotton by lowering the price, that is, immediately.

The CHAIRMAN. Of course, when I suggested that we encourage the production of salable cotton, that is cotton that you have a market for, as we have in good cotton of California, would it not be possible to make your price support pattern such as to encourage cotton, such as Senator Kuchel has spoken of here, that is readily salable and make the price of the lower-grade cotton so cheap that it would discourage the production? If it were produced, then the cheap cotton could possibly find a price in foreign markets to compete with the cottons abroad?

Mr. KENNEDY. I have thought from the beginning that that was an excellent idea. To tell you how it is reacting today, our highgrade cotton that has been ginned up to this point has brought from $15 a bale over the support price. You know very well it is selling below the support price in many other parts of the country, and the idea is excellent.

The CHAIRMAN. The manner and method of doing it is up to us. Mr. KENNEDY. Yes, up to the Congress.

The CHAIRMAN. Are there any further thoughts that you would like to add?

Mr. KENNEDY. No, sir.

The CHAIRMAN. Thank you so much.

Mr. HAGEN. I would like to ask a question.

The CHAIRMAN. Very well.

Mr. HAGEN. When these foreign producers of upland cotton produce it, can they produce a quality cotton?

Mr. KENNEDY. We have sent our technicians abroad and our seed, until they are producing the same kinds of cottons we are today.

Mr. HAGEN. One more question. Could cotton be handled on the basis of some international agreement, such as wheat is handled-has any thought be given to that?

Mr. KENNEDY. They have attempted to work that out, but they cannot get the other countries in on it.

The CHAIRMAN. Thank you very much, Congressmen and Mr. Kennedy.

Is Mr. Smith available now?

STATEMENT OF W. L. SMITH, BUTTONWILLOW, CALIF.

Mr. SMITH. Mr. Chairman and gentlemen, my name is W. L. Smith, and I own and operate a 600-acre range along with one of my sons and my son-in-law.

My statement will not be very long, because I think when I asked Mr. Kennedy be heard first, he has stated a lot of the things we have to say.

In the interest of saving time, I just want to make a few remarks on what I feel should be done or how I think we should be supported until something better than we have got has been worked out.

I might be quite a rugged individualist, but I can remember when we did not have any farm program, we did not have any price supports or any surplus. I can recall all of that. But things have changed since that day and have made it necessary for us to do things that we did not do at that time.

What I want to say here now is that I am particularly interestedI am speaking for myself now-and, I think, too, knowing my farm people the way I do, in the cooperative we are in-very close to themthat probably there are a great many will express the same thing— we are very much interested to see this cotton-we are speaking of it principally now-is moved on the world market, so that we do not accumulate these big stocks under the Government.

I also am very much interested in trying to help ourselves just as much as possible.

A man said to me the other day on the shoeshine stand, "What is the Government going to do for the farmers next year?"

I said, "You mean, you and I?"

And this shoeshine man, is that what you mean, each one has a vote. He said, "Well then, what are we going to do for ourselves?"

That kind of appealed to me, because he did not mean it that way exactly, nevertheless that is my felling that we try to do something to help ourselves.

The CHAIRMAN. Can you give us some idea what those things are? We are all in favor of moving as much as we can abroad. What is your plan to do that?

Mr. SMITH. Well, I think Mr. Kennedy gave you the plan we talked of before as one plan. I cannot tell you exactly the plan, but there has been the two-price system talked up for years. It might be one. It will come up again this year. Maybe that will do it.

The CHAIRMAN. Do you favor the two-price system?

Mr. SMITH. Well, I do not know that I understand it well enough to favor it. The way I understand the deal, it is meant to move some of our cotton from surplus and sell it on the world market.

If we do that

The CHAIRMAN. Of course, that is the problem. You know, there is a lot of cotton on hand. We can move it, but the question is, Do you want to give it away or further depress prices on world markets? As one witness said, if you sell it to foreigners it would certainly depress the markets, so that it would have an effect on our own domestic prices; would it not?

Mr. SMITH. That is why I do not want to say for sure that is the thing to do. Those things have to be studied.

The CHAIRMAN. I suppose that you want to let the Members of Congress do that; is that your idea?

Mr. SMITH. Well, I guess, perhaps, if you get all of the information you have, we do leave it to you to work it out the best you can'. You are our representatives back here.

On the self-help deal, as I say, I am very much for that, and we grow several crops at home on our ranch, the same as others, and only 1 or 2 of them that is making any money on it this year. For instance, I grow cotton at home, and I grow beets and alfalfa seed, sudan

grass seed. I can say truthfully, that there is practically 1 or 2 of them that you can do all right, but you have to have a big production, and be a very pretty efficient operator in your operation to make both ends meet right now.

The CHAIRMAN. I think it was brought out that the California cotton moved in channels of trade without too much difficulty.

Mr. SMITH. That is right.

The CHAIRMAN. How much do you think the California cotton would have sold for except for the support prices?

Mr. SMITH. How much do I think it would have sold for?

The CHAIRMAN. How much do you think the California cotton would have sold for except that we had a support price?

Mr. SMITH. Well, the only way I could answer that is that it is a cotton which seems to be what the trade requires. It would drop more than the other cotton would; I do not know how much more.

The CHAIRMAN. Yes, it would have brought more. I understand that because of the better quality of cotton, but the question I am asking you here is if we would have no support price whatever on cotton, with the maraket as filled as it is, how much do you think the California cotton would have sold for?

Mr. SMITH. I might say this, Senator, I do not know how much, but I think it probably would have been so low that there would have been a lot of it killed off.

The CHAIRMAN. I agree with you.

Mr. SMITH. That is for sure.

The CHAIRMAN. All right.

Mr. SMITH. Now, the thing I am interested in, too, is this change we have that is not too drastic and not too quick, and not done too suddenly, because we have been a number of years working out this kind of a program, and we cannot get out in 1 or 2 years; so while this thing is being adjusted, and we try to get on a self-supporting basis and bring our prices down where we can sell it on the world market, we have to have some protection so that we will not at least lose our farms and everything like that, because there are too many other people in on the farm. They call it a subsidy, and those things have a technical name and do not sound right.

So we just simply have got to be careful that we do not get things down too low during this change so that we cannot make it.

Now, there are things we know that are not going to come down. Labor is not coming down, taxes are not coming down, they are going the other way, and there are a lot of us in our operations now who have done almost everything we can mechanically. I will give you an example of something. Some of the boys know it is true.

The other day we picked 35 bales of cotton with 2 cotton-picking machines. It would have taken 175 men that day to have picked that cotton by hand.

Just to give you a little idea about the mechanization, this mechanization deal, the 2 men, 1 handling the trailer-3 men picking—and the son hauled it to the gin.

Now, we have gone to other things, too, in the same way in the course of operation. In every way we have gone pretty near as low as we can go. But there are some of those things we cannot get around when it comes down to two blades or anything of that kind.

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