Senator EASTLAND. Nothing; no sir.

The CHAIRMAN. All right, then we will proceed with our program of hearing witnesses.

The first witness this morning is Mr. Wilmer Smith, of Wilson.

Mr. Smith, will you be seated, please, and give us your full name and your occupation?

STATEMENT OF WILMER SMITH, PRESIDENT, NEW HOME COOPERATIVE GIN AND PLAINS COOPERATIVE OIL MILL, WILSON, TEX.

Mr. SMITH. Mr. Chairman and members of the committee, I am at farmer of Route 1, Wilson, Tex. I receive all of my income from farming, but am president of the New Home Cooperative Gin and Plains Cooperative Oil Mill.

As you have probably been told many times over, we consider the cotton surplus the No. 1 problem of the cotton farmer. It seems to us cotton farmers that the United States is carrying the world surplus. We have attempted to reduce that surplus through acreage control, but the farmer is finding, through improved methods of farming, ways of producing more cotton per acre, and is thus maintaining the same production in the face of reduced acreage.

I understand that CCC has the authority to sell Government-owned cotton at world prices in the foreign market, but so far, we believe that none has been sold in that manner. I think our surplus cotton should be sold at a competitive world price on the foreign markets.

I believe this can be done in an orderly manner without being "dumped," so to speak, and depressing the market. By doing this, we will be able to slow down the loss of our foreign markets that west Texas cotton farmers depend upon so much.

For example of such systematic sales, you can look at the last year's sales of cottonseed oil where an inventory of over a billion pounds was moved without depressing either the domestic or world markets..

If cottonseed oil can be moved in that manner, I believe cotton can be moved in the same way. And I would like to add that the Government suffered very small losses in this transaction when compared to added storage costs, and deterioration of quality.

If legislation is needed for orderly competitive sales of our surpluses, I believe that Congress, very early in the next session, should pass legislation making it mandatory that cotton be offered at competitive world markets. I believe, further, that it will take a minimum of 5 million bales per year sold competitively in the world markets to maintain the American cotton farmer's position in the world use of cotton, and reduce the surplus to a manageable size.

In order to protect our domestic production and domestic market, I would favor placing import quotas, or any other controls, on textile imports that would be necessary to protect other segments of our domestic cotton economy.

I am strongly opposed to changing the present cotton loan program in any way that would lower the support price, unless the cotton farmer can be guaranteed by law that in making the change he will be permitted to increase his acreage and that this increased production can and will be moved into consumption.

Without dealing in personalities or being critical of the present Secretary of Agriculture, I would like to state that the present farm program or any farm program must have the sympathetic interest and the active support of the top administrators in the Department of Agriculture if it is to succeed.

I believe that a large part of the present criticism of the farm program is due to the fact that the Department never misses an opportunity to put it in the most unfavorable light.

I would like to add to this statement one other statement dealing with the type of cotton we raise in west Texa, in the Lone Valley, and

so on.

We hear that we cotton farmers of west Texas are producing for CCC instead of to sell.

Yet when we try to sell cotton, the buyer will only buy our low grades and short staples.

Last week sales and loan records from our gin of 197 bales, 34 bales were sold, and 164 placed in the loan.

Of these 34 bales there were no bales longer than fifteen-sixteenths that were sold, and of the bales that went in the loan there was one bale shorter than fifteen-sixteenths.

This is a small sample, I know, yet records from a larger sampling show that from 533 bales sold there was no cotton longer than fifteensixteenths in the sale.

Now, the reports from our marketing association show 3,307 bales. There were 2,064 which were fifteen-sixteenths or shorter. Actually there were 1,073 of these 2,00 that were fifteen-sixteenths.

Of this group, 1,067 of the lower grades are the only ones that can be marketed at or above a loan value.

Therefore, Mr. Chairman, we hope that the Congress, when deliberating on changes, will check some of our records.

We find we just cannot sell the longer cotton, Mr. Chairman, that we raise in west Texas. It is the shorter, low-grade.

I know that that is not the type of testimony that you have heard from other places.

The CHAIRMAN. We have just come from California where we were told that of all the cotton that is produced in California, not one bale went into CCC loans, and the reason for it was that the cotton there was a salable quality that the mills wanted.

Whether that is true or not, and whether the length has anything to do with it, don't you think it would be advisable for us to restrict our price supports, if we should decide to do so, on that quality of cotton that is readily salable?

Mr. SMITH. You might have a point there.

The CHAIRMAN. Forget about yourself now. Let us talk about the country generally, because you are talking right now about a national program. We have got to consider the matter in the light of the country as a whole.

Mr. SMITH. I recognize that, sir.

The CHAIRMAN. I am informed that of the vast amount of cotton that is now on storage, as much as 42 percent of it is under an inch, and that the reason why a good deal of this cannot move, and will not move out of our domestic markets is that the mills do not like it. They want a longer staple.

If that is true, don't you think that something ought to be done to change the price supports. If we should decide to place some premium on quality, the issue might be rigid or flexible, but don't you think it would encourage the production of cotton that the mills will accept and take over?

Mr. SMITH. Certainly so, sir.

That is the main reason that the first part of my testimony, I devoted it to the sale, moving surpluses, which keep our west Texas cotton from moving readily into market.

The CHAIRMAN. Can you tell us why it is that the buyers prefer this lower-grade cotton?

Mr. SMITH. I wish I were able to answer that question.

The CHAIRMAN. Did they have a better sale for that?

Mr. SMITH. It is the only cotton that has a sale, so far as price will justify it.

The CHAIRMAN. As far as price is concerned; in other words, the cotton that they purchase was cheaper than what went into the loan; am I to understand that?

Mr. SMITH. No, the loan value on the cotton is cheaper than the price that they can get, and so they bid up above the loan value for our low grades, particularly our low grades and our short staples.

The CHAIRMAN. As I understand you, you agreed that nationwide we ought to promote or encourage the production that is readily salable?

Mr. SMITH. It must be so.

The CHAIRMAN. Well now, in order to discourage the production of low-grade cotton, what do you think would be the lowest support price that should be made for that?

Mr. SMITH. Well, I am not sure that I could answer that question in percentage- or cent-wise. I know that with us everywhere we go we say, we are criticized for producing cotton for the loan rather than market, and yet when we go to market-I have my sales of my cotton last week, and I had some inch and one thirty-second cotton. The CHAIRMAN. Well, that is not peculiar to Texas, you know; we have got a lot of other people doing the same thing in wheat, particularly in wheat.

Mr. SMITH. It could be that California has something in their onevariety cotton that makes their cotton more readily salable because the spinners know the characteristics of the cotton.

The CHAIRMAN. We might learn from California then.

Mr. SMITH. It is possible; yes.

The CHAIRMAN. Yes.

Mr. SMITH. However, a Texan does not like to admit that anything anywhere else is better.

The CHAIRMAN. Texas quality. [Laughter.]

The CHAIRMAN. Have you any preference between the present progrom and the old program we had of 90 percent rigid price supports? Mr. SMITH. Well, for my personal operation I would much prefer 90 percent support price, but I think that geared with that must be the moving of our surplus. I fell that is the big problem.

The CHAIRMAN. I am in agreement with you that irrespective of whether you have flexible price-support programs or whether you reinstate the old program, that neither or both of them can of themselves do the job.

Mr. SMITH. That is right.

The CHAIRMAN. We are going to have to have something to add to that.

Now, have you any suggestions along that line or maybe some other witnesses will presently have suggestions?

Mr. SMITH. I know that some of the witnesses I have talked with before the hearing started have some suggestions, and I would not infringe on their time.

The CHAIRMAN. We might leave other witnesses testify.

Senator Eastland, have you any questions?

Senator EASTLAND. Yes.

Mr. Smith, you have made a very fine statement, and I would like to ask you a few questions, please, sir.

Cotton, the cotton problem, is in two parts, is it not: First, cotton must compete domestically with synthetic fibers; that is one phase of it, is it not?

Mr. SMITH. That is right.

Senator EASTLAND. Second, it has got to compete with the world markets?

Mr. SMITH. That is right.

Senator EASTLAND. Now, at one time foreign countries had no place to look but to the United States for cotton; is that true?

Mr. SMITH. That is right.

Senator EASTLAND. In the past 10 years we have seen a tremendous increase in foreign production that has about closed the gap where foreign production about equals foreign consumption; is that true? Mr. SMITH. I think you are right, sir.

Senator EASTLAND. On one of those two phases, the domestic phase, where it must be competitive with rayon, and the export phase, you say that we must sell at competitive world prices. I am going to agree with you, sir. But I think that your assumption is faulty.

You state that if we sell at competitive world prices we will be able to liquidate the surplus and we will be able to recapture an export market of 5 million bales by competitive sales. Was that your testimony?

Mr. SMITH. Not exactly. I said that I felt we should attempt to capture that 5 million bales.

Senator EASTLAND. Well, certainly we have got to have a minimum of 5 million bales in exports.

Mr. SMITH. That is right.

Senator EASTLAND. Now the question I am asking you is, by merely competitive sales can we recapture 5 million bales of exports and can we liquidate this 13-million-bale surplus?

Mr. SMITH. Well, that I am not qualified to answer. I know that the billion pounds of cottonseed oil were moved.

Senator EASTLAND. But there is a much greater demand for fats and oils in the world than there is for cotton.

Mr. SMITH. That is right. There is a difference.

Senator EASTLAND. Now, the world price of cotton has slumped about 7 cents a pound below the American price?

Mr. SMITH. That is right.

Senator EASTLAND. I am speaking of cotton an inch and a thirtysecond and an inch and a sixteenth. If we reduce our price 7 cents a

64440-56-pt. 4-19

pound, it would be competitive with Mexican cotton. Then do you think that German, British, and Japanese mills would buy American cotton in preference to Mexican cotton?

Mr. SMITH. If our surplus is made up largely of the short cottonSenator EASTLAND. Well now, that hypothesis was true before 1955-before the 1955 cotton crop. With the tremendous production that we have got this year, there is a tremendous surplus of the cottons, the inch and one-thirtysecond and the inch and one-sixteenth, and three-thirty seconds that were in short supply.

Mr. SMITH. I think it is going to take a tremendous sales program, besides price.

Senator EASTLAND. Don't you think we have got to do this: We have got to resort to some unorthodox economics, that we have got to have terms that Mexico and Brazil and Central America cannot meet?

Mr. SMITH. We are going to have to offer the buyer something to encourage him to buy our cotton. It may be price, it may be terms. Senator EASTLAND. Have you considered Public Law 480? Do you know Public Law 480?

Mr. SMITH. Not by number, sir.

Senator EASTLAND. Where we sold commodities for the currency of the country?

Mr. SMITH. Rather than American money?
Senator EASTLAND. Yes.

Mr. SMITH. Well, certainly that

Senator EASTLAND. In other words, there are instances where, you take rice, now, the State Department objected, but the Japanese sent a delegation to this country a year ago to buy farm products. They did not want any rice, stating that the State Department had requested them not to buy American rice.

It wound up that we sold them 200 tons of rice for dollars, and a hundred thousand tons for yen, and then loaned them part of that yen for economic development in Japan.

Don't you think that we have got to resort to deals like that to get back this 5 million bale exports?

Mr. SMITH. Certainly, sir.

Senator EASTLAND. Yes, sir.

Now, I think we are in agreement, entire agreement, on what must be done to liquidate the surplus. Domestically you state two things: You state that we should have a 90 percent support price and, of course, we all want the highest support price we could have, and I am a farmer, make my living from it, and at the same time you say that commodities should move; is that correct?

Mr. SMITH. Yes, sir.

Senator EASTLAND. Well, suppose they pile up at 90 percent, and suppose rayon moves in on the market at 90 percent. Do you think that we should retain 90 percent in that condition?

Mr. SMITH. I think that such organizations as the National Cotton Council and other types of research should do everything possible to promote new techniques of manufacturing, new techniques in production of quality product, and sales promotion that will sell that, so we can keep that very thing from happening; but it may happen.

Senator EASTLAND. If that very thing would happen, to keep it from happening.