trade for needed materials they might have, and other below competitive prices.

We would like to see for the time being, and whatever necessary time it might be the continuation of the cotton-acreage allotments aimed as the law now is at producing 10 million bales of cotton per year based on a history of 5 years or more as the law now stands, but along with this cotton-acreage allotment we would give each producer a marketing quota in pounds based on his 5-year history and we would furnish each producer with marketing coupons covering the amount of pounds allowable under his quota.

I think, Senator, this was done some years ago where they used the coupon system, but this one we intend to work differently from that one.

His quota, his poundage quota, would be his average pounds per acre times his allotted acres. On this amount of cotton, this quota amount, we feel that this producer should be guaranteed at least a hundred percent of parity. That is strictly on this quota amount.

This guaranty would necessarily have to exist in the form of a Government loan, but we anticipate very little cotton would go into the loan if this entire plan were adopted.

If for whatever reason, weather, insects, or even if producer plants no cotton on the land at all he would still get his quota coupon and let's take an example of a man who will be allowed a hundred acres next year and his 5-year average is 1 bale per acre. He can produce and will receive coupons for 100 bales. Let's say he runs into trouble and he produces only 90 bales. He will still have 10 bales of coupons which he could take to the ACP office

The CHAIRMAN. Just a minute. Here is our junior Senator from Louisiana, Russell Long. We are glad to have you with us. Proceed, Mr. Connell.

Mr. CONNELL. We would have the ACP office redeem these unused quota coupons at a figure that would be fixed prior to the planting season each year. I would say that 6 cents a pound might be a sensible figure, about $30 per bale. In the case of a producer who plants within his acreage allotment who raises more than his quota he might have several alternatives. He could hold his surplus cotton above his quota and sell it the next year against next year's coupons. He could hold it on his premises or in a warehouse.

Now, if there were redeemed quota coupons available at the ACP office this producer could go there and purchase them at, say, 611⁄2 cents per pound, slightly over what the ACP office paid for them, so there would be no loss in transit anywhere and he would sell his cotton then, but this cotton perhaps should be sold without a price guaranty. An equitable and pro rata method of reselling these coupons at the ACP office would have to be worked out.

Now, if there were no coupons available if all 10 million bales and coupons for those bales had been used up, then we say this surplus cotton could be sold abroad only at whatever price could be obtained. The CHAIRMAN. Is your estimate of 10 million bales, upon which you are predicating your proposal, is that for domestic consumption? Mr. CONNELL. Yes.

The CHAIRMAN. What would you do with the bales in case you wouldn't reach that amount in domestic consumption?

Mr. CONNELL. In case we didn't produce 10 million bales?

The CHAIRMAN. In case you produce the 10 million, but didn't consume but 9.

Mr. CONNELL. You have a million bales over?

The CHAIRMAN. Yes.

Mr. CONNELL. You have got the Government loan to fall back on to carry out the guaranty of 100 percent of parity on the 10 million bales.

The CHAIRMAN. What would the Government do with that, sell it abroad?

Mr. CONNELL. I think with the stepped-up promotional and advertising ideas that the cotton council and others have that shortly we will be able to use 10 million bales.

Senator EASTLAND. What price would that fix American cotton domestically?

Mr. CONNELL. I imagine at about 38 cents a pound.

Senator EASTLAND. What would that do for rayon production? We have to compete with rayon. It would just roll away a good part of the domestic market wouldn't it?

Mr. CONNELL. Senator, if 10 million bales is not a fair figure in bales, we could set that at whatever you thought was right, such as 9 million. What I am mainly interested in is the cotton farmer himself receive in some way remuneration on a par more nearly with the rest of the committee.

Senator EASTLAND. I agree with you but he has a competitor there in rayon, synthetic fibers. Doesn't he have to compete?

Mr. CONNELL. Yes, sir.

Senator EASTLAND. Don't you give rayon a terrific price advantage. by raising the price of cotton?

Mr. CONNELL. I think that is probably true. Maybe if you hear the rest of this you will see the point.

Senator EASTLAND. All right.

Mr. CONNELL. All of this would have to be predicated on the willingness of Congress to build the necessary tariff walls to prevent raw cotton or the finished products therefrom from reentering this country in competition with domestic markets. That might be quite a hurdle but I think it is absolutely necessary for the rest of the program.

The CHAIRMAN. Both would have to be done simultaneously to make your program effective; is that right?

Mr. CONNELL. Yes; as I understand it, one of the Secretary's main concerns is getting more money into the pockets of the farmer and as far as cotton is concerned, it would seem this might be one way. In a roundabout way it might be part of the two-price plan where whatever we figure we can consume in the country we get 100 percent and whatever above that in allotments would be sold abroad at whatever the cotton would bring. There had been no thought about paying by the Government the difference when what he gets abroad as against consumption at home but it seems to be practical.

Senator ELLENDER. I want to see the farmer get everything he can but after all he has to compete with rayon in the United States and if 100 percent of parity won't move cotton in competition with rayon. what are we going to do?

Mr. CONNELL. My thought was that if all the cotton considered surplus is removed from this country and sold abroad over a period of

years, in other words none of that considered surplus now can be sold in this country, if we can produce only what we use in this countrySenator EASTLAND. You would use more, a lot more at a competitive price with rayon and a lot less if you turned the market over to rayon. Mr. CONNELL. If we produce just what we need it will produce more than 100 percent of parity on the market. If there is no surplus the price would be as much as 100 percent of parity or over.

Senator EASTLAND. Of course you know a mill is going to spin what it can make the most money spinning and if it can make more money spinning rayon instead of cotton, it will do that; will it not?

Mr. CONNELL. They are doing it now.

Senator EASTLAND. Yes, but what would happen if you put cotton prices higher than they are now?

Mr. CONNELL. I don't know.

The CHAIRMAN. We are just picking the bugs out of the program. As we told witnesses this morning, we take the opposite to what you take to bring out all the facts, to try to point out where the bugs might be in your plan.

Mr. CONNELL. I know you will, as you have in the past, run into opposition from the State Department when you move 2 or 3 million bales a year into foreign markets.

Senator LONG. Isn't it true you have had occasion where you get 100 percent of parity on cotton?

Mr. CONNELL. Yes; in the open market.

Senator LONG. Rayon might have made more headway than it made if you had a lower price for cotton. Nevertheless, the fact you were getting 100 percent didn't upset it too much; it might have given your competitors a better chance to compete.

Mr. CONNELL. Yes; about 51 for cotton, we got around 45 cents for some at the time when world cotton prices were 61 cents, and Mr. Brannan put an export embargo on us.

Thank you, gentlemen.

The CHAIRMAN. Is Mr. Otis Henderson here? Give us your name in full for the record, and your occupation, please, Mr. Henderson.

STATEMENT OF OTIS HENDERSON, RICHLAND PARISH, LA.

Mr. HENDERSON. I am Otis Henderson. I am a farmer in Richland Parish and raise principally cotton. I farm 160 acres. My three cash crops are cotton, hogs, and cattle.

The cost of my operation principally is based on cotton because it is the most dependable cash income that I have found in my parish from the standpoint of farming.

It is needless for me to point out to you what happened to prices in the past few years on all these commodities. You have heard plenty of statistics today.

I would like to point out to you the conditions that it does put a farmer in in my circumstances. I do not have other cash crops that I can switch to from those three. High price supports, flexible price supports or either, there are three major cash income sources and that is all I have.

From the production standpoint of cotton, I do not believe that we have reached nearly our peak in production. Cotton farmers can produce far more than we are producing now. Consequently, I be

lieve that more stress should be put on consumption rather than production. I believe we are, as the honorable Senator here said this morning, we are dissipating too much strength on controlling production.

I believe we should put more on some method of consumption. don't have the answers to that.

I

However, on the method of controlling production, I would like to see the control methods applied and kept on acreage controls rather than units of production for this reason: Under unit production in my estimation the farmer is faced with considerable risk and all of the risk. Under acreage controls he does not face that situation just so. It is necessary for us to control production and I am in accord with the plans that have been offered as far as the modified parity formula and the shift in the basis from the seven-eighths inch to 1 inch as the basis of lowering the price. We must be realistic in meeting competition. Competition from rayon and other synthetic fibers is real and we must face that competition. The only way I know of to face that competition is to put cotton down on a price level that will meet that synthetic competition. Probably 10 or 15 dollars a bale as the price reduction here would just about put us within that range.

On the foreign market I do not believe that we have been realistic in an attempt to dispose of the cotton through exports. I believe it is necessary for us to consider less the cost of what is going to take to move this cotton and consider more the condition that the small farmers, all farmers for that matter, all true farmers consider the condition that they are going to be in in a short time if some surplus is not gotten rid of.

It irritates me no end for part of my tax money to be taken and applied as help to some one else in technical assistance whenever it adversely affects my own economic status.

Senator LONG. Might I ask a question?

It didn't seem to upset us too much to spend $17 billion to help put these foreign countries on their feet. Do you think it would be too far out of line with your general thinking if we did spend some taxpayers' money to put the farmers on their feet?

The point I had in mind is, I have never seen why the surplus we had on hand should relate to the price at which the Government supports a commodity. When you buy cotton-when the Government buys it, corn, or wheat-why should the price necessarily relate to the quantities of surplus on hand?

The farmer selling to the Government would rather sell at 100 percent than at 90 percent.

Mr. HENDERSON. Probably we are following different lines of thought. I was talking about the disposition of cotton surplus in foreign markets and referring to the technical aid we have given and what appears to be action by the State Department which outweighed consideration of our own Department of Agriculture overseas in aiding the various sections in getting started in production of cotton. That was my thought.

The CHAIRMAN. What you are really saying is that the disposition of cotton for our foreign markets should be more or less left in the hands of the Department of Agriculture rather than the State Department.

Mr. HENDERSON. That is right, and even to instruct our Agriculture Department to be a little more realistic in their attempt to dispose of it.

The CHAIRMAN. If you recall, the Congress passed a law, I think 2 years ago, wherein it was provided to have agricultural attachés abroad who would owe their allegiance to the Department of Agriculture rather than the State Department, and in that way it was thought we might be able to develop a better market abroad directing export activities through the Agriculture Department rather than through the State Department. However, I believe we should devote

I think it was a wise move.

more effort to getting rid of the surpluses.

Senator LONG. Let me ask this: Are you one of those who subscribe to the view that as long as we have the surplus on hand you should get a smaller Government support price for cotton?

Mr. HENDERSON. I will come to that in a moment, Senator. I have my testimony more or less outlined and I have that under a separate point. It is the next point.

In our parish now there are some 1,900 farms. Around 1,450 of those farms get allotment of from 5 to 15 acres. A reduction to any great extent in the income from cotton to those farmers will almost put them out of business. The farmers that I am best acquainted with-and personally, I am not for a flexible price support because at the present time and applied now it means the philosophy of economic ruin. It does not cause me to shift but it means making cotton production so unprofitable that I will have to get out of it and when I do that I will have to quit farming.

That is what it means to me.

Senator EASTLAND. Acreage reduction can put you at the same place, too.

Mr. HENDERSON. Yes.

Senator EASTLAND. It has about put you there.

Mr. HENDERSON. Yes.

Senator EASTLAND. You face a further reduction in 1956, a bigger reduction in 1957 than in 1956, when this big crop goes into history. Mr. HENDERSON. I don't have any set plan or cure for the farm problem. Should I try to work one out, I know it could be picked to pieces because I don't know all sides as well as you men do.

The CHAIRMAN. We don't know it, sir. We simply ask you questions to try to find the faults that we can discover in your plan and maybe a little spark from you might give us the idea to solve this and that is why we are listening to you.

Mr. HENDERSON. As suggestion for aids I believe it is in the interest of American cotton farmers that the foreign aid technical know-how to foreign countries that are developing cotton be restricted. That production is in direct competition to that which I produce here. That is a more realistic attitude toward moving the surplus in the export markets, as well as on local markets.

The reduction in price support which the modified parity formula will give, and the change in the basis will give I believe sufficient in that line. However, a program, I believe, in the situation that we face at the present time in the United States, farmers are in a revolutionary stage. We are going from small production to large production, efficient production. I don't believe we have near reached