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From the point of view of income, I would like to make just a few comments here. We had cash receipts from sales of all commodities in North Carolina last year of $928 million. This year we will equal or exceed that amount. The principal reason why the cash-this is cash sales—the tobacco sales will be up substantially and tobacco weighting our total economy as it does, we are anticipating from 60 to 70 million dollars more from tobacco this year than last.

The CHAIRMAN. Is that because of the bigger crop!
Mr. COLVARD. Yes, with fairly stable prices.

The CHAIRMAN. Is it a different variety that resulted in greater production per acre ?

Mr. COLVARD. There are new varieties in the picture and weather conditions had a great deal to do with it. It is a combination of weather and new technology, including new varieties. Cash sales I believe this year will be as high as they have ever been. We have studied the latest records available but it will be weighted largely by tobacco.

Now, at the same time while we will have a big cash income we have an estimated $91-million damage from hurricanes and weather hazards and we have some counties and some areas that are very greatly distressed because of this almost complete destruction of many of their crops. I might say since 1940 the shifts in income have taken place largely as shifts between crops and livestock. We have gained about 550 percent since 1940 in livestock.

However, the crops constitute a very large percentage of our total income, some 75 percent of the total comes from crops with about 53 or 54 percent coming from tobacco. Cotton and peanuts would follow in that order.

Now, the average cash receipts per farm are quite low. We have only an average of $3,460 in 1954, and I am filing for the record here a classification of farms by income levels for 1949 and 1954 compared. And about 64 percent of our farms actually have cash sales of less than $2,500. But that includes the part-time farms.

Now, while I have said that cash sales were up there is no doubt that the price-cost squeeze is bringing down the net incomes and that is the important thing, the net income of farmers. I am sure you have the statistics on prices paid and prices received. We view it as the sharp problem.

The CHAIRMAN. Does your statement incorporate any suggestions as to how to solve the situation in North Carolina and over the Nation.

Mr. COLVARD. Let me make this comment to that point. Our tobacco program has been successful. I think that the parity ratio on tobacco is probably in as good a shape with respect to the prices as any commodity and so to that point I would say that the tobacco program has been a very successful program.

The CHAIRMAN. You are not suggesting any changes?

Mr. Colvard. Except as the tobacco people who are here who are more familiar with these problems than I, they will have suggestions I am sure as to the production controls, but it seems to us that with appropriate adjustments the program has been highly successful and can be successful.

I won't elaborate on the other crops.

I would like to make a few comments concerning these specific crops and I am filing for the record here the acreage, yields, per acre and total production. In the case of tobacco, as an example, our acreage has increased slightly from the 1940 period from somewhere between five and six hundred thousand acres up to about 665,000 in 1955. Our yields per acre have increased very sharply. Flue-cured tobacco yields have about doubled since 1940 and one of the reasons we have a real surplus problem this year in tobacco is the fact that in this 1 year we have an increase in yield per acre of a little more than 200 pounds per acre which is a greater increase in a given year than has been recorded. It seems to me that here is an increase in yields per acre which is good in terms of unit costs but which does create a problem of making adjustment in the present program which I am sure the tobacco folks will comment on later.

The CHAIRMAN. I am glad to say that although my State doesn't produce tobacco except perique, strong tobacco, I introduced the title to that law, which is now in the law, I put it in the hopper and it formed a part of our present agricultural act with very little change except that a few amendments were made to make it work better. The foundation of it was introduced by me back in November 1937.

Mr. COLVARD. It seems from the statistics we have a lead on programing because from the statistics that Commissioner Ballantine's group puts out we will see that the index price of tobacco has held better than for other commodities. I won't go through these

The CHAIRMAN. I would rather you give us the prescription: We don't want statistics. If you give us the prescription as to how to cope with the situation that is what we are here for.

Mr. COLVARD. I am not going to give you a prescription to solve all the problems.

The CHAIRMAN. As far as you know in North Carolina, that might give us a clue as to what to do with other sections.

Mr. COLVARD. I would make these comments and then I will conclude such comments as I have for any questions that you may have.

It seems to me as we have studied the matter that we come back in summary to the basic problem which is low net income, price-cost squeeze and all of the things inside. To approach that, we have the problem first of the price program and controlled production and that we have here in some of our crops and especially using tobacco, as an illustration, an instance in which this has been successful and an instance in which the base of the program which has been developed over a period of years provides a working point for further adjustments of production with the price program having held.

I think it should be pointed out we would be the first to say that every commodity does not perform in the same manner. All the studies we have indicate that the price of tobacco has relatively little to do with the total volume of consumption.

It is what they call a fairly inelastic demand.

The CHAIRMAN. This is Harold Cooley, chairman of the Committee on Agriculture and Forestry in the House of Representatives.

Mr. COLVARD. It seems this leads to the general conclusion that price policies can be effective in improving net income, especially on commodity such as tobacco. I think in the case of a commodity such as beef that we do have a very definite difference, where we have a consumer response to price that is very different from what it is in the case of a commodity like tobacco.

But it seems we have clear evidence here that a price policy program can be effective and that the tobacco program is one of the best examples in the Nation of a program which has been effective.

Now, some other approaches which I would mention for appraisal and discussion and as background here would be this matter of adjustment on the individual farm. I would point up one item here, especially. We have pretty clear evidence that especially in our certain parts of our State that the capital available on these small farms is one of the very limiting factors to income.

The CHAIRMAN. You mean to enlarge it and mechanize it?

Mr. Colvard. To use in various ways, including mechanization, that there is a definite limitation on the use of capital and that an increase in the capital available and any Government policy which could encourage availability of capital would make a contribution toward net income of the small farmers. We have studied small farms in the Piedmont, some of which are part-time farms and the evidence is that some of those farms have an investment of $4,500. If the money could be available at, say, 5 percent, would return very substantially if the farm program was set up under optimum conditions.

Of course the third approach, which I am sure is one that a lot of people in this room have worked hard on and you have, and I know Congressman Cooley and Senator Scott have, is this matter of the markets, the expansion of the markets and the various ways they can be expanded. I think my own appraisal is we should not expect the marketing situation to take care of the immediate problem, that this is a little bit slower than some of these other things. At the same time I think we would state very firmly that it is an area that needs all the strength from Government policy and from other sources that it can be given,

A fourth area

The CHAIRMAN. In that regard I believe that is one of the most fertile fields to work in. When you are trying to sell agricultural products-only 4 or 5 years ago the farmer was receiving about 52 cents out of the consumer dollar. He is now down to 40 cents. There is something wrong somewhere. Somebody in between is getting a little too much in my humble judgment. How to get around that, to me, poses a very serious problem and if you have any ideas on that we would like to have them.

Mr. COLVARD. I would make these two comments on that : One is that a part of these added costs of marketing do have to expand market. That is, they may add value, they do have to expand the market. I think one of the things we have been working for in some of our commodities is a better grading, better packaging, better selling, better advertising to expand the market for our commodities. To the extent that is effective I think there is some added wealth involved so long as our consumers will take those things and they seem to demand them.

The CHAIRMAN. The great difficulty I find throughout these hearings it that the price of what the farmers produces has been going down and down and the consumer has not received the benefits of the downward prices.

Mr. Colvard. That is right.

The CHAIRMAN. That is where the shoe pinches. Mr. Colvard. I don't want to leave the impression that this is one of the major areas. I think we should work hard but not expect to solve all of the immediate problems. I think that alone will not take care of the agricultural situation, is my point.

The CHAIRMAN. I am sure of that.

Mr. COLVARD. A fourth major area and one in which a great deal of work has been done is the matter of reducing costs per unit and we have been able to do that. We have a pretty good figure here, we grow about 2 million acres of corn in this State. We have a very low yield. We have pretty clear figures that led us to believe if our yield in corn were doubled, which is not impossible, it is impracticable over a short period of time but it is moving up very fast, if we grew the same amount of corn on 800,000 acres that we are growing on 2 million acres, the net income to farmers would increase.

I am using that as an illustration simply to say that the reducing of unit costs is an area that provides a great opportunity.

The CHAIRMAN. You would hear a lot from Iowa where they are in trouble from corn production. How much of these 2 million acres would you say are from diverted acres, not planted to cotton or tobacco under the present program.

Mr. COLVARD. I would say very little because as the data I filed here will show, the acreage on corn has been coming down in a constant curve. We are about 2 million acres less than we were 15 years ago. If we said much of this was on diverted acres we would see some increases. That would be my estimate. Some farm people might have a better estimate but my estimate would be very little. The point I make is even if we held the same volume and did it on fewer acres, there is an opportunity for improvement and we are making progress.

The CHAIRMAN. I am glad to hear that because from the evidence that we have been able to gather on this trip the solution of the problem of cross-compliance and use of diverted acres may spell the difference as to whether we will have a bill. It is just that serious among quite a few members in the Senate as well as in Congress. To be specific, while in Louisiana and other States, but Louisiana in particular, we had some evidence produced that on diverted cotton acres wheat was planted, say, in Arkansas where the production was 53 bushels per acre. Now with Senators from Kansas and North Dakota sitting next to me you should have seen how their eyes opened up. Out their way they produce 14 to 16 bushels of wheat per acre; Arkansas, 53. The same thing goes for rice production. As was pointed out by our Louisiana growers, in the rice growing section in my own State many farmers were asked to curtail production as much as 30 percent, while across the river in Mississippi cotton land, that was formerly planted to cotton, now diverted because of the decrease in acres for cotton, was growing rice.

So you can readily see that something will have to be done. What that something is, it is my hope to find an answer to it and the reason I am mentioning it now, if any of the witnesses who are going to testify here today can give us an inkling as to how to solve that problem I would appreciate it.

While I am on the subject, as soon as I get to Washington when these hearings are over I am going to ask the heads of all farming organizations, particularly the Farm Bureau, the Grange, Farmers Union and all other organizations, to try and get together and get their membership together, get their committees together so as to formulate plans to devise ways and means of solving the problems of cross compliance and what to do with these diverted acres and also on ways and means of establishing the so-called fertility bank of which we have heard so much.

If any of you folks in this audience have any evidence or any ideas on the subject this committee would certainly appreciate it. You may proceed, sir.

Mr. COLVARD. One further comment on that point. It is very difficult to ascertain within the total statistics just what shifts take place individually but on corn, for example, in 1940 we were producing about 2,441.000 acres. In 1955 we had 2,053,000 acres. So that I think it would be safe to say while there may have been shifts in given areas, we have increased slightly in soybeans but very small acreage, some. thing like a hundred thousand acres, but I think one other point should be made on the diverted acres in North Carolina and that is that the crops to which these diverted acre programs apply most widely occupy very small acres and in that respect it may differ somewhat from other States. Our tobacco, for example, 53 percent of our income, occupies this year only 665,000 acres against over 2 million for corn. We have only a few counties in corn.

One other point that I would leave open for you is this matter of promoting industry in agricultural areas. That gets close to the heart of the thing that could be controversial.

The CHAIRMAN. You mean promoting industrial plants?
Mr. COLVARD. Let me develop that.

The CHAIRMAN. That is more or less left to the local people to encourage industry to come here.

Mr. COLVARD. In our Piedmont area where a lot of our smaller farmers are on a part-time basis, they have been able to supplement their income very substantially and in the area that prevails their living standards are better.

The CHAIRMAN. I would like to see the farmer go back to the farm and not depend on industry: We want to make farming attractive enough so he can get all his income on the farm. We have a bill before us now to provide ways and means of aiding individuals engaged in part-time farming. That may be all right. I am for it to a certain extent but let's devote our time to making it profitable for a farmer to produce all his income on a farm and let's make it attractive enough for him, so that he will not have to depend on industry. That is my own personal view.

Mr. COLVARD. What I have attempted to do, and have done much more fully in the statement, is to give a little background of the general agricultural pattern and I would defer the discussion to others.

The CHAIRMAN. All States are not as fortunate as the State of North Carolina to have these diversified industries, cotton mills and tobacco factories, processing plants, and so forth. It may work well here but in North Dakota, South Dakota, Minnesota, you may hare difficulty in assisting them in that regard.

Mr. COLVARD. We do have a different problem in that we have so little farmland per farm person.

The CHAIRMAN. Any questions?

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