Senator YOUNG. Is that true this year over last year? This is the first year you were a noncommercial area. The last 3 years it has been downward trend. We reached our peak 2 or 3 years ago. Mr. WOMACK. I know a number of farmers planting wheat that have backed up from it. Getting back to soybeans, there was an intimation that production should be around 50 bushels to the acre, I say that is far from an average. The average is between 20 and 25 and I base that on production credit association figures which I was able to get access to. We have many, many parishes, which normally you call counties, in Louisiana, that production on soybeans would run from none to some. That would give a good example. They are primarily planted for soil building and for rotation and in a few cases for forage crop. Senator SCHOEPPEL. Do you raise sorghum grains? Mr. WOMACK. There is some trend being focused to sorghum grains, more so in a two-crop system interplanted with oats. Senator SCHOEPPEL. What is the average yield on some? Mr. WOMACK. I couldn't tell you. Senator SCHOEPPEL. Do you have the figures on that? Senator EASTLAND. The trend is very small? Mr. WOMACK. Yes. The reason for that is we have so much of our highly productive land of a nature that it takes rainfall almost perfectly to get certain of those seeds up following oats. Senator SCHOEPPEL. What I am thinking-and again I go back to Kansas-you understand, I have to start from there. Mr. WOMACK. Yes. Senator SCHOEPPEL. On our upland areas it is wheat and if we don't grow wheat or if we are cut back on wheat our other historical crop is the sorghum grains, the dwarf milos. That is in an upland semiarid region of my State. Some years we have had people who raised as much as 95 bushels to the acre without irrigation. That is the exception, yes; but it runs from 25 to 40 and 50 bushels to the acre. Now when we miss out on both of those we can't grow alfalfa, we can't grow soybeans, can't grow corn, barley, et cetera. We have our capital outlays, and there we are. We are sensitive about who goes into wheat and sorghum grains in other areas. The corn people say "Wait a minute. You are competing with corn." So that is why some of us are making inquiry as we go about the country, so we can learn just what this thing is developing into, because obviously, we could not have legislation just to protect us on wheat and milo. Then we have to have consideration for you fellows in cotton. That is why I am sensitive in protecting the historical areas, whether it is cotton or wheat-and question some Johnny-comelately boys jumping in and disrupting these normal patterns-at least so long as we have the surplus and the Government is paying money to support these prices. Mr. WOMACK. Senator, maybe fortunately or unfortunately our lending agencies, banks, et cetera, are just about as sensitive about some of these other crops in Louisiana as you are. I don't think it is possible today to borrow through a normal trade channel to produce commercially wheat or milo, either one. That is not one of the recognized commercial crops that is approved under your strict bank ing regulations. Question was asked earlier in the day about who would go out of business first under a sliding scale. The question of whether the large operator or the small operator. I don't think either would be the answer, because the man with the least reserve is the man who is going to be out first. Senator THYE. That was the reason for the question. I just wanted to pinpoint the fact that if you put an economic factor in that brings about a reduction, you are oftentimes going to put the young chap out of business and you don't want him put out of business. Mr. WOMACK. Here is another angle from that standpoint. The type of individual farmer who is a 5-, 6-, or 7-acre farmer and who has none of your modern appliances, who isn't contributing anything to trade or to advance business of the United States can stay under a very low production almost infinitely and you can hardly put him out because he has no expense. But if the entire country was built around that type of trade you would have no industry either because you would not have anywhere to go. Unfortunately part of our market has been lost and I would say in proportion or historically within the last 15 years we have lost a 3-million-bale domestic market and much has been lost to synthetics. We must back up and take this view, that in the advertising and proportional field synthetics or placements of cotton have been advertised and promoted and added into the price. Unfortunately our Government agency cannot advertise cotton because it is being advertised with tax money in competition with something else and any program we go into for American expansion must carry American producer advertising. I think that can be borne out in the dairy setup, what advertisement has done and you Senators from the dairy section realize that. There is one other phase I think that we have fallen down on and that is to make a study of the tax income from a prosperous agricultural condition compared to the cost of maintaining this prosperous agriculture. I think too many times our consumers haven't been told of this. Mr. Sayre? STATEMENT OF C. R. SAYRE, CHAIRMAN, COTTON ECONOMICS COMMITTEE, DELTA COUNCIL, SCOTT, MISS. Mr. SAYRE. I am C. R. Sayre, cotton grower from Scott, Miss. I have a statement here from Delta Council of Mississippi which I would like to present for the record, if possible, and then comment on some of the points. The CHAIRMAN. Yes, you may do so. (Mr. Sayre's prepared statement follows:) My name is C. R. Sayre, a cotton grower, from Scott, Miss. I am chairman of the Delta Council Cotton Economics Committee. Delta Council is an organization representing the interests of the 650,000 people of the 18 delta and part-delta counties in Mississippi. Mississippi Delta cotton producers are keenly interested in the problem being considered by this committee at these hearings. In fact, the economic future of Mississippi and a large part of the South hinges upon the course of action to be determined by this group. We want to emphasize the probable loss of our reasonable and fair share of the world cotton export trade. Had we continued to export at reasonable levels, we would not now be faced with accumulated supplies of cotton. COTTON MARKET LOSSES CRITICAL FOR MISSISSIPPI In spite of advances in industry 61 percent of the people in Mississippi depend upon agriculture for a livelihood. Even with great progress in crop diversification, income from lint and cottonseed accounts for approximately two-thirds of the cash income from farm marketing in Mississippi. Severe cuts in cotton acreage have created new problems-diverted acres, displaced labor, reduction in gross farm incomes, high production costs, and insecurity for the future. Our State is made up primarily of small farms-averaging between 80 and 85 acres in size. Results of a survey made by the United States Department of Agriculture show that reductions of cotton acreage from 1954 to 1955 displaced 11,981 farm families in Mississippi. The 1956 cotton allotment will mean another reduction in acreage for Mississippi, as shown by the following table: What industry could reduce its output by 45.6 percent and stay reasonably efficient? RESIDUAL SUPPLIER If we continue to operate as we have in the recent past, United States producers will make the supply adjustments for the entire world. The United States will continue as a residual supplier in world markets. This means continued stepdowns in acreage allotments. At the same time, foreign production will continue to increase and become more firmly entrenched. Thus, the United States share of the world market will become smaller and smaller. This is confirmed by excerpts from the textile press throughout the world. Examples are attached to this statement. The October 1955 monthly review of the world cotton situation, published by the International Cotton Advisory Committee, Washington, D. C., summarizes the situation as follows: "As the season progresses, it becomes increasingly obvious that aggregate freeworld production outside the United States will set a new record high for the postwar period-indeed, an alltime record." Here are the International Committee's appraisal statements: "(a) Production has increased every year since 1947-48 and in the aggregate has almost doubled over this period. "(b) The upward trend in cotton production is apparent in virtually all countries. "(c) The rate of increase has accelerated in the last two seasons. "(d) Of late this increase has occurred despite the tendency to lower cotton values. "(e) Cotton production has now become entrenched as a major industry in many countries where cotton was relatively unimportant a few years ago. "(f) The continuous upward trend in cotton production has exploded the myth that the production potential for cotton outside the United States is limited. "(g) If present trends continue, in two more seasons cotton production outside the United States may be sufficient to meet all consumption requirements outside the United States without any imports from that country. "An increase in production expected this season is based on the following considerations: “(a) An increase in production in Mexico by some 300,000 bales. "(b) An overall increase in acreage in the Middle East and Pakistan. "(c) The fact that yields last season were less than normal in Brazil, Argentina, and Uganda. "(d) The continuing expansion of irrigation in Mexico, Pakistan, Turkey, and Syria and in some of the smaller countries. "(e) Indications that interest in cotton production will remain high in South America." Persistent efforts have been made by cotton growers and manufacturers to stimulate administrative use of tools provided by the Congress to reestablish and maintain a fair share of the world cotton market for this country. At the same time growers have requested action that would keep American mills in a competitive position, particularly in the domestic market. This could be done with existing authority to apply textile import quotas. Beyond this cotton growers have urged legislation which would provide supplies of cotton at export prices equivalent to the textile exports of our American mills. Apparently, action has not been taken for fear of upsetting the economies of other free-world countries. Foreign cotton producers have been advised more than 2 years ago that the United States could not stand by if they continued to expand cotton production while we reduced ours through controls. This advice went unheeded and cotton growing has now become entrenched as a major industry in countries where cotton was relatively unimportant. Proposals for action by the Department of Agriculture have been blocked. The world cotton situation is one approaching chaos. Producers in these United States must ask the question, do our planners and policymakers consider the cotton industry of the United States to be expendable? RAW COTTON EXPORTS AND IMPORT QUOTAS As an initial step we urge the Senate to pass Senate bill 2702, which directs that present authority be used to reestablish and maintain a fair share of the world's raw cotton market for the United States and, at the same time, provide protection for United States mills under section 22 of the Agricultural Adjustment Act. These same authorities have been used effectively for some several farm commodities. Why not for cotton? In addition to the above, the Delta Council of Mississippi endorses the statement presented by the American Cotton Producer Associates. Please accept our grateful appreciation for the opportunity to place our views before this committee of the Senate of the United States. Mr. SAYRE. One of the figures that has been referred to today several times is what it would take if 7 cents is the difference in world price and domestic price of cotton, what it would take to move 6 million bales at 7 cents, the 210 million figure that was brought out earlier. Other testimony that has been presented shows, as we switch to the new parity formula for the 1956 crop, that the change will mean a reduction in loan value of roughly a hundred points, $5 a bale, 1 cent per pound. The testimony that was presented by Mr. Cortright this morning for the American Cotton Producers Association, and essentially the thing I endorse, proposed we switch to 90 percent of average grade and staple which would reduce the loan level roughly 22 cents per pound. Coupling the 22 and 1 cent, 32 or a half of the 7 cents that we were talking about earlier. So if the Government on a 50-50 basis with the producer, each sharing one-half of the 7 cents, the 210 cost to the Government would be cut to $105 million. Then gentlemen, this cotton we are carrying, that the Government is carrying, is costing about $80 million a year in storage and insurance and other charges. Therefore, if you take the carrying charges out of this picture, another $80 million, you get down to 105 minus 80 or 25 net out-of-pocket cost for the participation of the Government if we were to attempt to move 6 million bales on a 7-cent difference. The CHAIRMAN. That is if you succeeded in selling all of it. Mr. SAYRE. Yes, granted one other point, you would have in mind The CHAIRMAN. Before that, I wonder if you could discuss for a few minutes the suggestion made by the preceding witness as to the acceptance of the 1 inch rather than the average. He said it might change, as I understood him, from year to year, whereas if you could write it in so that everybody would know what is what it might be more feasible. Mr. SAYRE. I think the preceding witness' point with reference to middling inch rather than average grade and staple was over a period of 4 or 5 years, your low would eventually be reduced or minimized and therefore your average would go up and your premium for higher grades and longer staples would not be in keeping with their real desirability in the market structure; whereas his thought with the minimum use of middling inch, that you would still maintain for a period of time the higher premiums for the most wanted grades and staples. The CHAIRMAN. Do you not think if you establish it at a certain length, say an inch, that you might make it easier for administration? Mr. SAYRE. Somewhat, although all of the other major commodities, as you perhaps recall, Senator, are on average qualities and loan differentials so it is administratively possible on averages. The CHAIRMAN. Yes, but I was thinking of simplifying it rather than complicating it. There is another advantage for middling inch and that is the futures markets. With the new October contract switched from middling fifteen-sixteenths to middling inch basis for all contract operations, it would simplify the relationship between spot value, loan value, and futures value to have them all on the same. One other point I want to make with reference to the out-of-pocket cost of moving some of this cotton if it was roughly on a 50-50 producer-Government basis, is that whatever we do in moving cotton the Government will take a temporary loss in inventory value, but that is in the cards no matter how we do it, whether the producer absorbs all price reduction or the Government, because the minute we cut the artificiality out of the markets and it seeks its own level we have piled up an inventory loss which I think businesswise is not sound. Senator EASTLAND. Is there not an inventory loss now because of the break in the world cotton market? Mr. SAYRE. Yes, in terms of true value. I would like to comment on the point raised as to whether we should eliminate the restriction of selling out of Commodity Credit storage at something less than 105 percent of support price plus reasonable carrying charges or out of the setaside as you recall, I believe, it is 105 percent of parity plus reasonable carrying charges. In my personal view those are both artificialities that complicate this matter and if it is under the guidance of good administration those restrictions should be eliminated and there should be one further step taken and that is that any cotton taken out of the Commodity Credit stocks or out of the setaside should in a sense be sterilized with refer |