farmer has to buy his supplies, tools and equipment and hire his labor in a very well protected market and it stands to good reason he should be allowed to sell his products used in this country with some protection, such as would be afforded under this proposed plan.

Item 3. All CCC stocks of cotton held at the time such a new program would be put into effect should be frozen, except to allow some trading and/or limited sales by CCC to private merchandising firms covering grades and staples which are in short supply during the transition period of changing from the present program to the new crop under this proposed plan.

Then, a restricted sales program of about 400,000 bales of CCC cotton should be sold each year for about 15 years to allow the gradual disposal of CCC stocks down to a level of an "emergency stockpile" of approximately 4 million bales, which would be held. Sales of CCC stocks should be limited to a period of time which would not interfere with the marketing of the current crop-say from March through August of each year.

Comment: The large stocks of cotton held by CCC would necessarily have to be immobilized and removed from the market to prevent the total collapse of prices. By having a set number of bales which would be marketed in any one year, the trade would know just what to expect and the marketings could be taken into account along with the production of any current crop year to determine total supply for that year.

Comment in general: There is always a "viewing with alarm" any proposal to allow unrestricted production of agricultural commodities, but we have tried a number of schemes that have only heightened the troubles of agriculture and it seems it is now time to get back to the basic economic law of "supply and demand and value." Prices will pretty well determine the amount of cotton that will be grown and will govern the distribution of the acreage throughout different sections of the country as farmers will divert from crop to crop, depending on the financial returns offered by each. Manufacturing concerns plan their production along these lines and there is no sound reason why farmers cannot and will not do the same.

The CHAIRMAN. You would not put on a tariff?

Mr. LOVELACE. Well, you can call it whatever you want.

The CHAIRMAN. You better call it something.

Mr. LOVELACE. Excise or tariff.

The CHAIRMAN. You would let them come in, so long as they paid the excise tax?

Mr. LOVELACE. Yes, sir.

The CHAIRMAN. That is the point. If you put them on an equal footing that way, the cost of labor in Japan, let's say, is much cheaper than ours, they probably could outsell ours.

The markets would no doubt be clogged, because our spinners now are producing all we can possibly consume. We are looking for foreign markets and cannot find them.

Mr. LOVELACE. We are still importing a lot of goods. As a matter of fact, that is one thing that the spinners are raising so much Cain about now, since the tariff was cut this last time, that it has really put them at a great disadvantage, because they are buying their cotton in a protected market, and they are manufacturing it, of course, in a protected market.

The CHAIRMAN. What you would really do is to put both on the same basis, and you would forget about the cost as you would put any material produced in Japan, produced from cheap labor on the market in competition with our own materials.

Mr. LOVELACE. That is right.

The CHAIRMAN. They pay for that cotton the same as we pay, and all they would pay on those goods would be the same tax as our own people pay. How would you take care of the labor differential?

64440-56-pt. 4—16

Mr. LOVELACE. I think that you would have probably to have a little extra tariff on there to take care of your domestic mills.

The CHAIRMAN. You would get them two ways, with the tariff and the excise tax?

Mr. LOVELACE. Yes, sir.

The CHAIRMAN. The same as we do for sugar?

Mr. LOVELACE. Yes.

The CHAIRMAN. Sugar you can handle very easily, because you do not produce enough here, but the trouble we have had

Mr. LOVELACE. The sugar beet boys want to produce more. The CHAIRMAN. Exactly. I think that they are entitled to, so far as I am concerned. I will see to it that they get it, if it is possible. You can see the difference there. In a program following your line of reasoning, you would have in some measure to protect the domestic textile operators from this foreign low, cheap labor. Mr. LOVELACE. We would.

The CHAIRMAN. I have just come from there. I saw it in action. Mr. LOVELACE. That is right. We would have to do that if we wanted to protect our industry. However, I understand that in the Northeast, where most of the textile industry used to be located, that a good big percent of it has moved to the South, and that those up there have got jobs in higher paying industries, and they really figure that they are better off than they were at the time when most of the cotton was milled up in that area.

The CHAIRMAN. But you ought to hear them squeal, that is, the owners of the mills.

Mr. LOVELACE. We have heard the mills squeal. Of course, a lot of them moved to the South to take advantage of better labor conditions down there. However, you could use a certificate form to finance this deal. Let your importers and cotton mills buy the cerificates, in place of the excise tax, retain the present tariff setup, which should give your domestic mills the protection that they need.

There are several different devices by which that can be accomplished: either by an excise tax, an additional import tax, or you could issue these certificates, that is, sell these certificates, which would have to be bought by the spinners and by the importers, and retain the present tariff setup.

The CHAIRMAN. That is something you are adding to what you have written here.

Mr. LOVELACE. No, sir; it is in here. I just have not gotten to it. This plan will also finance the incentive and relieve the taxpayer. Under the present system of price supports, the taxpayer pays for it twice, once in his taxes, that goes into the supporting of the price of the product, and the second time when he goes to a local store to buy himself a shirt or goes to the grocery store and buys a loaf of bread. He pays again for high price support in the higher-priced product that he buys.

The proposed plan would be supported entirely by the consumer, the same as is the case in relation to automobiles or tires or radios, all of which carry an excise tax down at the manufacturer's level. Of course, he pays for it through the higher labor costs brought about by our minimum wage laws, and by the guaranteed annual wage contracts that labor has been able to negotiate with some of the larger manufacturers in the United States.

The farmer has to buy his supplies, his tools, and equipment, and hire his labor in a very well protected market, and it stands to good reason that he should be allowed to sell his products used in this. country, with some protection, such as would be afforded under this plan.

Item No. 3 has to do with the taking care of the stocks of cotton which are now held and being accumulated in this crop year by the Commodity Credit Corporation. All Commodity Credit Corporation stocks of cotton held at the time such new program would be put into effect should be frozen, except to allow some trading and/or limited sales by the Commodity Credit Corporation to private merchandising firms covering grades and staples which are in short supply during the transition period of changing from the present program to the new crop under the proposed plan.

It is estimated that the Commodity Credit Corporation is going to own something like 10 or 11 million bales of cotton after this A restricted sales program of approximately 400,000 bales of Commodity Credit Corporation cotton should be sold each year, for about 15 years, to allow the gradual disposal of Commodity Credit Corporation stocks down to a level of an emergency stockpile of approximately 4 million bales. I think that has been mentioned here before this morning, that some of these agricultural products should be stockpiled, just the same as nickel and tin and copper, and so forth.

The sales of Commodity Credit Corporation stocks should be lim-ited to a period of time which would not interfere with the marketing of each current crop; we will say a period from March through August of each year. This cotton could be marketed during that period.

Under this general program, I know that there would be a lot of crying out and talking about unrestricted production and that the market would not stand it, but I think that it is time that we get back to our basic economic laws of supply and demand, and the value of goods.

Prices are going to pretty well determine the amount of cotton that will be grown, or any other agricultural commodity, and will govern the distribution of the acreage throughout the different sections of the country as farmers will divert from crop to crop, depending on the financial returns offered by each one.

Manufacturing concerns plan their production along these lines, and there is no sound reason why a farmer cannot do the same. It is rather unsound to think that a farmer would continually produce crops that he could not sell at a price that would at least return him his expenses.

It was said once here this morning, Senator, that the policy of the present administration is responsible for a lot of this, but I beg to submit to you that the basic troubles with the surplus agricultural products we have has been brought about by high support prices.

The CHAIRMAN. Just a minute. Let us apply that to cotton. In 1950-1951, you had marketing quotas for cotton and harvested 17,843,000 acres. We produced just slightly over 10 million bales. We had a quota system.

We cut it down to 10 million. All right. The next year, when the war was on, 1951-52, unrestricted production went into effect because of the war. That made it go up to 15,149,000 bales.

In 1952-53 the same condition occurred because of the war. You had no trouble with the planting of cotton or the sale of it. Everything was satisfactory, nobody suffered, the weather was good, in fact everything was most favorable. During that period of unrestricted production we produced 15,139,000 bales.

You remember that, because of the fact that we grew a very small crop in 1950-51, prices shot up, and in order to save some cotton for ourselves an export embargo was placed on cotton.

Mr. LOVELACE. It was not exported.

The CHAIRMAN. Yes, an export restriction was imposed.

Mr. LOVELACE. Yes; that is when the Korean war started.

The CHAIRMAN. We had a shortage of cotton and, of course, with the unlimited production, not because of the 90 percent of parity price supports, but because the country thought that we would need it, the Government said: "Plant all you can, boys, and we will take care of it."

Well, they did. They produced 15 million-plus.
Mr. LOVELACE. On how many acres?

The CHAIRMAN. 25 million, almost 26 million.

Mr. LOVELACE. I think that is an important thing there. Go ahead

now.

The CHAIRMAN. That is right.

In 1953-54 again with unrestricted production, but with the farmers voluntarily reducing their acreage from 25,921,000 to 24,341,000, harvested acres, lo and behold, instead of producing 15 million they produced 16,465,000. Weather did it, and not the 90 percent. You will agree to that, will you not?

Mr. LOVELACE. No, sir.

May I make a remark right there?

The CHAIRMAN. Yes, I wish you would. I wish you would try and straighten this record, because I have just given you the facts. Mr. LOVELACE. I know. I am not arguing with the figures.

The CHAIRMAN. All right. Now, you remember there was no limitation?

Mr. LOVELACE. There was no limitation.

The CHAIRMAN. The Government---our great Government saidthe President said the Secretary of Agriculture said "We need cotton. We have got to have it. Produce it." So the farmers did. Mr. LOVELACE. With high support price under it. We did not start accumulating this big surplus. It started in 1950. That is when we started, really, accumulating this surplus, what we call a surplus.

The CHAIRMAN. But we had a marketing quota in 1950. We produced only 10 million bales.

Mr. LOVELACE. All right.

But there is a lot of it went in

The CHAIRMAN. Suppose, on the other hand, marketing quotas had been put, as was the case in 1950-51, can you not see that we would have produced less and less?

Mr. LOVELACE. The last 2 years we have cut our acreage right down to the bone, and we keep producing more cotton.

The CHAIRMAN. It was not the 90 percent that did that. We obtained full production without restrictions, and if we had imposed a law-in other words, if we had made use of the tools we then had in 1951-52, as we did in 1950-51, we would not have the total we have today. Now, let me just finish the record.

We had a marketing quota on the 1954-55 crop, and we harvested only 19,251,000, a drop over 5 million acres, and on that 19 million, we produced 13,696,000.

This year, on this crop year of 1955-56, we again have a marketing quota, and the acreage harvested is down to 16,636,000 acres. The estimated production according to this report, will be 12,728,000. You may have to jack that up a little bit not because of the 90 percent but because of good weather conditions and everything else again favorable.

Mr. LOVELACE. Good weather conditions, and the high use of fertilizer, better farming practices, yes; the weather has been in our favor, but it has not all been the weather.

The CHAIRMAN. Of course not; of course not.

Mr. LOVELACE. You can take over here on the plains of Texas, where there is a lot of this land that is irrigated, they do not depend on the weather any more.

You can take it in the irrigated valleys of New Mexico and check and see how much fertilizer they have been buying.

The CHAIRMAN. You will agree, then, that good weather conditions, better seed, better mechanization, better farming practices, and good weather has really mounted the crops?

Mr. LOVELACE. That has done it. The reason that the farmer has made that investment in fertilizer has made that investment in land leveling and better farming practices is because that price has been away up there where he could make darn good money by increasing his production in order to do it.

The CHAIRMAN. The same thing has occurred, and the same argument has been made by the producers of dairy products. And what does the record show? You have had flexible price supports for the last 2 years, and this year will be a banner year in production. You have produced more dairy products, more milk this year, than you ever did in your life, and yet you have the flexible price supports. So argue that one for me, if you please.

Mr. LOVELACE. I do not know anything about milk.

The CHAIRMAN. I happen to know a little bit about it. When somebody tells me that the 90-percent price support has caused all of this, many of them, with all due respect to them, are not being logical, in my humble judgment, without looking at the figures. Because, I repeat, if it had not been for the fact that production in 1951 was down and the prices were up, and we needed the cotton, we might have been able to impose quota restrictions, and in that way we might have made this law operate to the point where our surpluses would not be as great as they are. You can see that, can you not?

Mr. LOVELACE. We did have marketing quotas for 1950-51-restricted acreage.

The CHAIRMAN. In other words, in 1950-51 you curtailed acreage 10 million from the year before.

Mr. LOVELACE. That is right.

The CHAIRMAN. Ten million acres.