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TABLE 5.Changes in acreage, yield, and total production for basic commodities

in North Carolina, 194055

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TABLE 6.—Changes in acreage, yield, and total production for basic commodities

in North Carolina, 194055

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During the past 5 years farmers' sales of grade A milk have increased slightly more than 50 percent (426 million pounds in 1950 ; 665 million pounds in 1954). Milk for manufacturing purposes has declined as sales of grade A have increased and amounted to only 149 million pounds in 1954.

The 1953 North Carolina General Assembly established the North Carolina Milk Commission which fixes prices paid by dealers for grade A milk. Blend prices under this arrangement averaged $6.08 per hundredweight in 1953 and $5.79 in 1954.

Livestock.Livestock and poultry production has increased rapidly in the State during the last 15 years. Cattle and calves (beef and dairy) on farms January 1, 1940, amounted to 595,000 head. By 1955 this number was 933,000 head. Hog numbers changed very little during this same period. From 1940 to 1954 egg production doubled, turkey production quadrupled, and broiler production increased about 12 times.

Total cash receipts for livestock in North Carolina in 1940 amounted to about $34 million; in 1954, $222 million. This represents an increase of about 554 percent in cash receipts from livestock.

The major problem facing North Carolina farmers is low net incomes. As indicated earlier, the price-cost squeeze has tended to reduce net incomes in recent years. Our ratio of prices received to prices paid as shown in the statistics is much better than it would have been had the tobacco program been unable to stabilize prices. We must remember that we had income problems before the current situation developed, and keep in mind both the immediate and longrange goals. This suggests that several courses of action may deserve our careful study. 1. Increasing the price of farm products through price supports and production

adjustments Possibilities of increasing farm incomes through pricing programs vary from commodity to commodity.

In the case of a commodity with a low elasticity of demand (i. e., the amount used does not change in proportion to the change in price) an increase in price does increase net income of farmers. Tobacco consumed domestically is a classic example of a commodity with a inelastic demand. If the price to farmers was reduced sharply it is doubtful whether any significant increase in consumption would result. As pointed out earlier, the tobacco program has meant much to North Carolina farmers.

In the case of a commodity with a high elasticity of demand, raising prices ipay decrease net income, as the quantity consumed tends to decrease more than prices increase. The demand of no agricultural commodity is very elastic, but beef and poultry are examples of commodities which enjoy increased consumption when prices are reduced. Thus an increase in the prices of these commodities would not have the same effect on net income as is the case for tobacco. Income is determined by volume of product, price, and cost.

While the price of tobacco has little effect on domestic consumption, the same is not true for exports. Within the last month I have received a communication from Australia advising of their efforts to expand tobacco production. Southern Rhodesia is growing more and more good-quality leaf and and apparently has the potential for greater production. The price is a very important factor in moving tobacco in foreign trade in competition with such countries.

Some years ago the demand for cotton was quite inelastic. The coming of substitutes plus an increase in quantity and quality of foreign-produced cotton have made cotton demand more responsive to price changes.

This leads to the general conclusion that price policy may be quite effective in improving net incomes to farmers on some commodities. With a commodity such as tobacco, which is storable and has a relatively inelastic demand, the results would be very different from what might be expected with a perishable commodity having a relatively elastic demand such as beef. There is clear evidence that production can be adjusted on a crop such as tobacco and that the pricing program has worked. 2. Adjustments on individual farms

Research has indicated that there are adjustments which can be made on individual farms which can substantially increase net incomes. While the adjustments must be made by the individual farmer, public policy can be of help. Before discussing how public policy can help, let us identify the type of adjustments that are possible.

Much labor on North Carolina farms is not fully employed. Much of the labor that is used yields a low return. There is nothing inherently wrong with our labor. The labor simply needs to be associated with larger amounts of capital. We have often attributed the low return to labor to the small amount of land per person. This has a bearing on the problem, but research at our institution shows that incomes cannot be increased greatly by increasing the amount of land per worker unless the amount of capital is increased sufficiently to make effective use of the land.

In many instances it is profitable to greatly increase the investment. This increase in investment would make it possible to change the kinds of commodities produced and the production methods. For example, on a typical small southern Piedmont farm, it would pay farmers to increase their investment threefold if capital could be obtained at 5 percent. Based on recommended production practices and expected farm prices, it is estimated that an additional investment of $4,500 would yield an annual increase of 52 cents per dollar of additional investment if farms were organized in an optimum manner. In the range of $7,500 to $8,400 increase in investment above current levels, the increase in annual income per additional dollar of investment would be 24 cents.

The Government can help bring about the adjustments that will increase labor productivity in several ways. One way is to encourage lending institutions to make more capital available at reasonable interest rates for farmers having the managerial ability to handle modern technology and carry on the business of modern farming. Creating a favorable atmosphere through stabilizing prices will also encourage investment of additional capital by farmers. Expanding domestic and foreign markets will also be of material assistance in encouraging farmers to invest capital and adjust their farm business and in encouraging lending agencies to make capital available. 3. Marketing-domestic and foreign

No more serious problem faces farmers than the large surpluses. These depress prices and present a barrier for many farmers making adjustments which will increase net income.

Increased attention should be given to expanding markets for agricultural commodities. Some of the more promising avenues for consideration include further shifts to the consumption of fruits, vegetables, milk, eggs, and meats. Shifts in this direction would improve diets and would use more agricultural resources.

New uses for agricultural commodities should receive additional attention. The expansion of use of farm products in secondary uses deserves more consideration. Stable prices and constant supply are necessary for farm products to compete for many secondary uses.

Continued attention and study should be given to ways and means of expanding exports of American farm products. The incomes of North Carolina farmers are particularly vulnerable to changes in exports due to the fact that a large percentage of gross receipts come from export commodities, especially tobacco and

cotton.

While marketing is a very fruitful field, we must recognize that improvements are likely to come slowly. New uses will be developed only through laborious research and promotion. Consumption patterns must be changed, and this is a slow process. Building permanent foreign markets is also a lengthy process with many problems. These comments are given for one purpose. We do not want to lead ourselves into believing that the promising field of marketing is likely to immediately dispose of the surpluses and make it possible for farmers to produce as much as they like of any and every commodity. In the short run, and particularly for some commodities, production must be controlled. Getting production in line with demand is a real problem that the farm people and the Congress must decide. The problem is particularly difficult in view of the need for increasing net incomes. 4. Reducing costs per unit through research and education

All are aware of the contribution of research and education in increasing production and incomes of farm people. Research and education have also made great contributions in the areas of marketing and reducing the costs of production. An industry faced with a price-cost squeeze and serious competition turns to research to develop new products, improve quality, and reduce costs. Agriculture should follow the same pattern. In the case of agriculture, educational efforts must go with the research, because the people who use research findings are not those who do the research. Education is necessary to get the research findings to all the farmers in an understandable way and to encourage the rapid adoption of the technology.

The research and educational programs have been adjusted to place less emphasis on increasing production and more emphasis on reducing costs, particularly unit cost of production, and on marketin'. We should not, however, let short-run problems completely dominate our thinking. The projected doubling of the world's population in the next 30 or 40 years provides a real challenge to those engaged in research and educational work to expand the productive potential of agriculture in order to insure that the supply of food and fiber will be adequate to meet our future needs. 5. Promoting industry in agricultural areas

In the final analysis, it appears that the low-income problem of many farmers can best be solved by either moving into industry on a full-time basis or by combining farming with nonfarm employment. It appears to us that a rather desirable pattern has been developing in Piedmont and western North Carolina. Industry has moved into these areas, often locating in a rural area. This has given the farm people an opportunity to continue to live on their farms and yet enjoy the income from industrial work. They enjoy the advantages of rural living and many substantially supplement the industrial income by raising food for the family and some for market. A trip through the area is convincing evidence that it is a good system.

Perhaps the Government can do much to encourage the development of industry in rural areas.

SUMMARY

1. From the point of view of service to the Nation, agriculture is strong. Consumers are buying more high-quality foods for a smaller percentage of their earnings than at any time in history.

2. Farmers are not sharing proportionately the increase in net incomes characteristic throughout most other segments of the economy.

3. The number of people engaged in farming is declining while demand for farm products by a rapidly growing population is expanding.

4. North Carolina has inore farm people than any State and less cropland per male farmworker (18.9 acres) than any State.

5. Major crops grown in North Carolina provide a high return per acre and a low return per hour of labor.

6. Livestock production has increased in North Carolina. This has provided a fuller employment of labor, a better soil-conservation program, and greater stability. Cash income from livestock and livestock products increased 554 percent from 1940 to 1954.

7. Farmers have sustained heavy losses from droughts, hurricanes and other natural hazards in recent years.

8. More than 64 percent of the farms in North Carolina sold less than $2,500 worth of farm products in 1954.

9. Cash sales of farm products in North Carolina in 1955 are expected to equal or exceed the highest previous record. This is due largely to the heavy influence of tobacco which has increased in production and for which prices have been relatively stable.

10. From 1940 to 1955 : Tobacco acreage increased 32 percent while production doubled ; cotton acreage decreased 44 percent and production by a like amount; peanuts acreage and production declined; corn acreage declined 16 percent while production increased 55 percent.

11. The major problem in North Carolina is low net income of farmers. 12. Courses of action to be considered for increasing net income: (a) Higher prices through price supports and production adjustment. Each commodity presents a specific type of problem; (b) Adjustments in land, capital, labor, and technology on individual farms; (c) Expanding domestic and foreign markets; (d) Reducing costs per unit through research and education; (e) Developing more industry in agricultural areas.

Mr. COLVARD. Senator Scott asked me if I would make a general statement and I will file for the record the statement that I have prepared and will spend just a very few minutes outlining in brief some of the highights of the agricultural situation as I see it.

I would say, Senator Ellender, that we understand that this is a hearing of farm people and not of professional people like myself. We do have some of our colleagues here who can provide statistical information if desired. Some are in the audience.

I would like first to make two brief comments concerning agriculture in general which I am sure you are very familiar with..

It seems to me it is clear that from the point of view of service to the Nation that agriculture has done a fine job. Our consumers are eating more good-quality foods for a lower percentage of their income than at any time in history. I could elaborate that into the way in which the war needs were taken care of and many other reasons I think to support that, but suffice to say that from the point of view of service to the Nation it seems to me that agriculure is very strong. We feed our people well.

From the point of view of reward to its agriculture in the Nation, as well as in our State, is not doing so well. This resolves itself down in our State to a number of international problems but expressed in a broad way the problem of net farm income is the crux of it.

I might make 1 or 2 comments on some shifts that have taken place in our State which might be more pointed for our particular area than you would have on a national scale..

We have more farm people here in North Carolina than any State. About 28 percent at the present time, a little more, of our people are on the farms actually farming, as contrasted to 14 percent for the Nation.

The CHAIRMAN. Is that due to the fact that you have a lot engaged in tobacco production where it requires more hand labor ? Mr. COLVARD. That is one of the factors.

The CHAIRMAN. What are the other factors? Mr. COLVARD. That is the major factor. We have less farmland per farmworker than any State in the United States. We have from 18 to 19 acres of farmland for each person 14 years of age and over. Our pattern involves a limited number of acres. To increase per capita income has been the problem of farming with relatively little land compared to the rest of the country.

Our farmers tried to increase their incomes by producing crops which involve large amounts of labor on limited areas of land. Tobacco is the one crop. I have in the record the hours of labor required for a crop. In tobacco it is considered 482.

The CHAIRMAN. That is an average ? Mr. COLVARD. Yes. Some more and some less. That can be contrasted to 9 hours for wheat-these are national figures—with cotton our next crop which requires a lot of labor, which amounts to about 118 hours.

The CHAIRMAN. That is where it is done by hand ? Mr. COLVARD. Yes, under prevailing combinations that exist in the State. It would be influenced by mechanization.

The CHAIRMAN. In the average you gave is that a farm, such as a cotton farm, that is worked by tractor or by the old method of horses and mules?

Mr. COLVARD. This is an average figure that would be blended between the situations that prevail in North Carolina. We have some of all. I do not have them separated in the record.

The CHAIRMAN. Have you got them separated anywhere?
Mr. COLVARD. I think that data could be made available.

The CHAIRMAN. I wonder if you could do it for the record, not for today, but if you can get that data for us it might be very valuable to us to show this trend as to how many hours are necessary under the old and under the new method. Mr. COLVARD. We can provide that information for you.

The CHAIRMAN. Particularly in a State like North Carolina where you have these crops that require a good deal of hand labor, it may be of value to us.

Mr. COLVARD. We will be glad to provide that.

The CHAIRMAN. If you can supply that within the next 2 weeks, we will see to it that it is put in the record in connection with your testimony in the permanent record.

Mr. COLVARD. That is just a brief comment on the land and labor relationships. I have a much fuller statement.

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