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Mr. CORTRIGHT. No, sir; I can't tell you exactly. My best information is that this most recent cut was necessitated by foreign rayon producers cutting prices so that foreign rayon was coming in in abnormal quantities not directly aimed at cotton.
Senator EASTLAND. Domestic cotton consumption leveled off between 842 and 9 million bales; is that right?
Mr. CORTRIGHT. Yes.
Senator EASTLAND. And it stays there although the population is increasing? Mr. CORTRIGHT. Right.
Senator EASTLAND. That means per capita consumption of cotton is declining; is it not?
Mr. CORTRIGHT. That is right, in relation to the total textiles consumption, we are getting a smaller share.
Senator EASTLAND. If per capita consumption of cotton held its own the domestic market would increase around a million bales every 5 or 6 years, would it not? Mr. CORTRIGHT. In relation to the population growth, yes.
Senator EASTLAND. Domestic consumption of rayon is increasing; is it not? Mr. CORTRIGHT. Certainly.
Senator EASTLAND. You believe that the reduction that you advocate would place cotton in a better position to compete with rayon and to stop the per capita decline in cotton consumption in the United States?
Mr. CORTRIGHT. Certainly in certain situations it would help alleviate that problem.
Senator EASTLAND. What you want is for the cotton farmer to have the highest support price he can get in this country that will stay competitive with rayon and move cotton into consumption?
Mr. CORTRIGHT. That will let us have a healthy cotton industry. We have to produce cotton in volume to have a healthy industry.
The CHAIRMAN. Thank you, Mr. Cortright. (Mr. Cortright's prepared paper follows:) My name is G. C. Cortright, Jr. I am a cotton farmer from Sharkey County, Miss., and a vice president of the American Cotton Producer Associates. This association is a federation of cotton producer organizations dedicated to the improvement of every phase of cotton and cottonseed.
We are grateful for the privilege of appearing before this committee and for the opportunity to discuss the critical problems that confront producers of cotton in this country.
The business outlook for the United States today presents a picture of continuing prosperity. As a Nation, we are hiring more people, selling more goods, and making more profit than any nation has ever done before.
FARM SHARE DOWN
Farmers, however, are not sharing equitably in the great prosperity of the Nation. In 1954, per capita incomes of farmers totaled $918, as compared with $1,836 per capita for nonfarmers. As cotton farmers we are hiring fewer people. We are being forced to produce less goods and showing lower profits than we have since 1941. From 1951 through 1954, farm income dropped 20 percent." Gross farm income will have declined 11 percent from 1952 through 1955, according to the United States Department of Agriculture. The total debt of farmers is $18 billion, up $2 billion from 1953, and the total value of all farm assets is down $3 billion from the peak. The farmer's share of the consumer's dollar has dropped from 52 cents in 1946 to 42 cents in 1955.
1 Agricultural Outlook Charts, 1954, U. S. Department of Agriculture. 2 Farm Costs and Returns, 1954, U. 9. Department of Agriculture. 3 Facts Important to Farmers, ÚSDA, Office of the Secretary.
COST INCREASES The high level of prosperity in the American economy is not being shared on the farm. As farm prices have been going down, equipment costs have been going through another series of rises. For example, B. F. Goodrich, on August 2, 1955, announced that it was raising its farm-equipment tire prices 374 percent. Other major tire firms, according to the Wall Street Journal, also raised their prices. On October 24 Goodyear announced an additional 112 to 5 percent increase. On August 15, 1955, John Deere Plow Co. raised its prices 7 percent on all farm equipment in current production. This John Deere price rise was announced in the wake of wage concessions granted to the UAW-CIO. J. I. Case & Co. did the same, and other farm equipment manufacturers were forced to follow suit.
These price increases by major implement firms came on the heels of a new Federal wage and hour law increasing the minimum wage to $1 per hour. Thus, the farmer is caught with price rises from another direction. These wage increases cannot fail to affect the farmer's payroll through more competition for labor resources in addition to increasing the retail price of manufactured goods.
In the face of the closing of this price-cost scissors, the cotton farmer is confronted with still another dilemma. Income is being cut through drastic acreage controls and, at the same time, export markets are being taken over by other producing countries.
Cotton farmers have demonstrated their willingness to do their share in adjusting supply with demand; however, it is now obvious that low level acreage controls are not accomplishing the desired objectives. Cotton acreage has been stepped down from 28,195,000 acres in 1951 to 18,113,208 in 1955, or about 35.7 percent. The acreage cut was 25 percent in 1954 compared with 1953; the cut was 15 percent in 1955 compared with 1954. Acreage reductions have been reflected in lower incomes for the entire cotton community but have forced extreme hardships on those families that can stand it least. Surveys conducted by the USDA showed that more than 55,000 farm families were forced off the farm because of the reduction in cotton acreage for 1955. Additional thousands suffered sharp cutbacks in income and will be asked to vote in December on quotas, with a further reduction of 721,904 acres.
I would like to point out that we believe production has to be reduced when capacity to produce outruns current demands. Acreage allotment provisions were designed, however, to deal with domestic problems and not with a worldwide situation. Through lack of consideration for the domestic scene in our foreign-aid programs, the purpose for which our acreage control program was designed has been defeated. By reducing our domestic acreage, we have tried to adjust world supplies, but, at the same time, we have stimulated foreign cot. ton production with foreign agricultural aids and the encouragement of venture capital, some of which has come from United States sources. The result has been an increase in foreign cotton acreage totaling almost exactly that of our reduction at home. The American cotton farmer has had to bear the brunt of an unsuccessful attempt to adjust world supply. He is now facing a permanent loss of historical export markets. (See attached tables showing world cotton production, 1949 through 1954–55, and cotton exports.)
FOREIGN COMPETITION While we are suffering through a restricted acreage program, our supplies of cotton are being held off the world market through refusals of our Government to compete and sell its stocks at competitive prices. Foreign cotton-producing countries have been able to find ready markets for their cotton through various aid and subsidy programs and the fact that our domestic program, coupled with our no-sell policy, guarantees them a market at prices just under our price levels.
It is common knowledge that nearly all foreign countries resort to artificial measures to stimulate exports when such are needed. These devices vary from direct subsidies to manipulation of currency exchange rates. International competition promises to become even tighter this year, as, at the end of July, Pakistan announced that its rupee was being devalued about 30 percent to stimulate exports of cotton and jute. Pakistan cotton was reported by the International Cotton Advisory Committee in September to be significantly cheaper than before. India announced that it was lowering its export tax about 4 cents per
pound for the same reason, and on September 3, Egypt announced a reduction in its cotton export tax. As cotton farmers, we see no hope of channeling our cotton into world commerce and regaining a fair share of the world market unless we use some of the methods of competition that other countries consider standard operating procedures.
The Agricultural Trades Mission in its report to the Secretary of Agriculture in June 1954 stated their views as follows: "It is basically important to recognize that in order to sell our products in export markets, we must offer them for sale at competitive prices and on competitive terms. We must also realize what is required to meet both the present short-range situation and the longrange situation.
"For the short range, it must be recognized that we have laws which establish price supports for some commodities at levels higher than the prices of competing commodities in export markets are at the present time or are likely to be in the immediate future.
“If we are to be competitive pricewise in export markets, under these conditions, it will be necessary to resort to some type of governmental export-pricing program.
"It is common practice for many governments to carry out similar types of programs. I'nder such circumstances, it is unrealistic for us to expect to maintain a fair share of export markets unless we are prepared to compete.”
The drying up of our foreign markets has already shown how severe the results of inaction can be. From 1949–50 through 195455, total world consumption increased 5,700,000 bales while domestic production dropped 242 million bales.5 In the 1920's the United States handled nearly 60 percent of the world cotton exports. Now, despite a 20-percent increase in world trade since 1948, the United States position has fallen to less than 30 percent of the total.
This gap in the world market has been filled by foreign countries who have rapidly and knowingly increased production in the face of our attempts to adjust supplies. Their plans call for still greater increases in the future. It is therefore evident that we are being unrealistic in continuing to cut domestic acreage and refusing to compete in the world market when foreign production and consumption have shown such great expansion. Unless action is taken immediately, markets which are historically ours will be permanently lost. In its October 1955 report, the International Cotton Advisory Committee said that if the present trend is continued, in two more seasons, foreign free world production may be sufficient to meet all consumption requirements without imports from the United States.
DOMESTIC MILLS THREATENED
The cotton industry is threatened on still another front. On September 10, United States custom collectors put into effect sharply lowered tariff rates on cotton textile imports. These new rates were agreed to by the State Department at Geneva in June 1955 for the purpose of building up the Japanese economy. Japan already enjoys a competitive cost advantage over our domestic mills because of accessibility of lower priced foreign cottons and cheap labor. According to the International Cotton Advisory Committee, Japan now has one-fourth of the total world trade in cotton goods. At the same time, Japan is buying 3 out of every 5 bales of their cotton requirements from suppliers other than the United States.
Imports of cotton textiles have been increasing rapidly and the lower tariff
ing this country. The implications are easily seen. As cotton farmers, our domestic mills are our best customers. The importation of large quantities of foreign textiles into the United States will not only displace goods produced in this country, thereby jeopardizing the position of our domestic mills, but will have a double-barrel effect on cotton producers. Domestic consumption of United States cotton will be lowered at the same time that our export markets are shrinking. If we continue to follow the present policy, this will necessitate still greater cuts in cotton acreage. Cotton production and manufacturing in this country would drop to a new low, thereby affecting the incomes of millions of farmers, millworkers and middlemen.
• International Cotton Advisory Committee, Monthly Review of the World Situation, September 1955.
% International Cotton Advisory Committee, Quarterly Statistical Bulletin, vol. 8, No. 3, April 1955.
EFFECT ON NATIONAL ECONOMY
This situation of depressed farm income must be solved not only to strengthen the economic position of farming people of the United States, but also to halt the eventual spread of this recession to industry and business. Historically proven relationships show that dips in agricultural receipts forecast impending drops in industrial income. This relationship has been basic to American economic thinking. Some economists, however, have recently put forth the theory that these relationship are now dead, mainly because agriculture accounts for a smaller percent of the total national income. This line of reasoning ignores the high investment in agricultural facilities and the fact that it takes more investment to get the same dollar return in agriculture than it does in business. In 1953, agricultural plants in the United States were valued at $166 billion. The average investment per farm worker in the same year was $14,500. According to a 1955 report of the Machine and Allied Products Institute, the average investment per industrial worker is $11,400. Obviously, this heavy investment in agriculture is an important factor in the domestic economy.
The importance of agriculture can be further shown by the value of industrial sales in the farming community. In 1953, there was $1,553,931,000 worth of farm machinery and equipment sold in the United States. In the same year, farmers used 6,775 million gallons of liquid motor fuels exclusive of lubricating oils. They used 19,465 million kilowatt-hours of electricity, for which they paid $434 million. Furthermore, 21,890,000 people lived on farms in 1954. In many areas of the Nation, and particularly in parts of the South, almost the whole population depends on agriculture for its income or on income derived from farming people. Certainly, it remains as one of the most important segments of the American economy.
The facts are that a highly important segment of our economy faces a grave crisis. The relationships that caused recessions in the past are still present and they will react again if action is not taken to prevent it.
WHAT SHOULD BE DONE Changes should contribute to the following: an increase of cotton exports: place cotton in a stronger position to compete with synthetic fibers; guard against an influx of foreign textiles; discourage production of staple lengths and grades for which modern cotton manufacturing offers little demand; increase farm income through an increase in volumes of production accompanying any downward adjustment in price; and conserve the productive resources of the United States. We therefore offer the following specific recommendations :
1. Adequate cotton acreage is essential for a healthy agricultural America and vital to our cotton economy-mills and producers. If farmers are to have the opportunity to maintain their fair share of the world market without destroying their market at home, it is essential that there be established an overall dual purpose program. Such a program should assure cotton sales in the world market at competitive prices and provide a cotton textile import quota under section 22 which would permit foreign exporters of cotton textiles a fair share of the domestic market on a historical basis and, at the same time, prevent excessive textile imports. Our domestic mills should also be afforded the raw cotton equivalent of export textiles at the export price. The adoption of such a dual purpose program is necessary if we are to prevent complete disruption of the cotton economy of cotton producing and manufacturing areas.
We specifically endorse and urge adoption of Senate bill 2702 introduced on July 30, 1955, by 63 Members of the United States Senate. Briefly, this bill provides: (1) That the Commodity Credit Corporation is directed to use its existing powers and authorities to encourage sales for export of such quantities of cotton as will reestablish and maintain the fair historical share of the world market for United States cotton, said volume to be determined by the Secretary of Agriculture, and (2) in order to prevent material interference with the sales program authorized under section 1 or with the cotton price support program, or to prevent loss of domestic markets for cotton, or a reduction in the amount if cotton products produced in the United States from United States cotton, the
• Agricultural Statistics, USDA, 1954.
quantity of manufactured cotton products which may be imported into the United States shall not exceed by more than 50 percentum the average annual quantity imported during a representative period of 2 consecutive years, as determined by the Secretary of Agriculture: Provided, That not to exceed 25 per centum of such quantity may be entered during any calendar quarter.
It is significant to note that our Government already has the authority to carry out both of these provisions. There is also ample precedent for administrative use of this authority in the export programs of 1939-40 and 1944-45. In addition, the Commodity Credit Corporation is now selling or has sold more than 20 other agricultural commodities in world trade at competitive prices.
All of the surplus cottonseed oil stocks have been moved into use. All Government-owned protein meals have been sold. Surplus soybeans have been moved into world trade on a competitive basis. This has been accomplished with a minimum of disruption to normal trading and illustrates what can be done when the authority already provided by Congress is used judiciously and effectively.
2. In addition, we recommend that the national cotton allotment for 1957 be set at a level commensurate with an off-take of 14 million bales, 5 million bales of which should be an export goal. The cotton community cannot continue to absorb the loss in employment opportunities and income made mandatory by minimum allotments. Continued reductions in acreage serve only to cut farm income and as a signal for foreign producers to increase their plantings. Acreage controls are effective only when dealing with the domestic situation or when coupled with a sales program to deal with the surplus in an effective manner.
3. We recommend one change in the provisions of the law applicable to cotton acreage allotments. With acreage allotments at present low levels, State and county reserves are wholly inadequate to deal effectively with small-farm hardship cases. We urge that a national cotton acreage reserve, over and above the national allotment, be authorized that would be earmarked specifically for small farms. Such a reserve would prevent displacement of many farm families if used to adjust allotments on small farms to four acres or the highest planted in the past three years, whichever is smaller.
4. Cotton growers are striving to attain levels of income comparable to those in the rest of agriculture and in other industries in these United States. If cotton farmers are forced to take a reduction in price support levels, adjustments should be made in a manner to correct existing marketing inequities and thereby accomplish long-term benefits for the entire industry. This could be done by using the average grade and staple of the crop as the basis for the loan rather than middling seven-eighth inch. Such a shift would discourage the production of unwanted staple lengths and grades. We recommend continuation of price supports at 90 percent of parity with changes in basic calculations as outlined above. It should be pointed out that the shift from the old to the new parity formula will lower price support levels substantially. The current difference in parity for cotton between the old and new formula is approximately 100 points or $5 per bale. We consider the change in the parity formula to be a desirable one to eventually attain a more current relationship between selling prices and costs. This change in itself could, however, decrease the loan value of the 1956 crop by $60 million, if 12 million bales were to be produced.
5. There is too little authentic information regarding the effects of price upon the consumption of cotton, both in the domestic and foreign markets. We urge that the Department of Agriculture initiate studies to determine the competitive positions of United States cotton and synthetics, the interrelations of price in principal end uses, and the competitive position of United States cotton and foreign growths. We recommend that such information, together with cost reductions accompanying research findings and technological advancements in cotton production, be used in formulating long-term adjustments in price support levels. These should serve as first steps toward development of price support levels, volumes of production and cost relationships that will mean a healthy competitive position and comparable incomes for cotton growers in the future.
6. We also recommend that our technical assistance program should emphasize health, sanitation, and the raising of nutritional levels. We do not believe that it benefits any foreign country, and certainly it does no good to the United States, for us to encourage the production abroad of crops of which there is already a world surplus and of which production is curtailed in the United States.
7. Under the extension of credit for agricultural development in foreign countries, we recommend that all loan applications should be screened carefully for possible adverse effects on United States producers. We propose that all such