and get that from you. It may be a harsh cotton when I want soft. Can I then take that thousand bales and dispose of them to a mill over in North Carolina which wants that cotton and then pick up 1,000 bales of seven-eighths and send that abroad and comply with the requirements of this bill? Mr. RHODES. Yes. Mr. POAGE. It seems to me that this is the danger of this bill and the only danger that I see. I think that basically the bill is thoroughly good. Why should we pass any legislation that is going to enable a bunch of folks to milk the Commodity Credit stocks and export something else because there is going to be a substantial profit made in that sort of deal, as I see it. Mr. GATHINGS. Mr. West. Mr. WEST. You can answer if you want to, Mr. Rhodes. If I buy 1,000 bales of 12 inch from the Commodity Credit Corporation, I have to bid for that cotton, and I say I am going to export 1,000 bales of cotton. Then I find the sale abroad for some Middling seven-eighths. I cannot buy 1,000 bales of Middling seven-eighths from the Commodity Credit Corporation unless I am going to export 2,000 bales. Mr. POAGE. So you buy the thousand bales, we will say, from Mr. Gathings. Mr. WEST. If he has it. It is hard to say, but I would try. I would have to pay for that Middling seven-eighths cotton that I bought in the open market a price higher than I would have to pay for the Middling seven-eighths that I bought from the Commodity Credit Corporation if they are underselling. Mr. POAGE. You would at present practice, but you do not know how long this would last. Mr. WEST. The present practices are that I cannot buy it from them except at 105 percent of the support price plus carrying charges which makes it too high compared with foreign growths. Mr. POAGE. I thought that that was exactly what we were allowing is the exportation plus. Mr. WEST. That is what they plan. The fact that I bought from the Commodity Credit Corporation to make it a little plainer, a better quality than I sold abroad and sold that better quality to the Carolina mill and then went into open market and bought the poorer quality that I sold abroad, I would probably be paying more for that Middling seven-eighths in the open market than I had bought my Middling 11/32 for from the Commodity Credit Corporation at the export price, and I would be selling that Middling seven-eighths for export at less money than I paid for it in the open market and it would be a loss there. I would have a nice profit there on the Middling 12. In that way we would get into consumption somewhere in the world either in the Carolinas or abroad 2,000 bales of cotton. There is no way to make an inordinate profit out of this, as I see it. Mr. POAGE. I guess you are probably right. It would put 2,000 bales in use. Mr. WEST. I would make too much money on the 32 but I would take a loss on the other and my profit would, I hope, be a profit and not a loss. Mr. HEIMBURGER. May I see if I understand this, Mr. West? Assuming that the Commodity Credit Corporation prices are right, in other words, that their domestic sales price is pretty close to the domestic market and that their export sales price at whatever they set it is a reasonable sales price. Mr. WEST. For export. Mr. HEIMBURGER. You have bought now this 1,000 bales of good staple length cotton from Commodity at the export price with, we will say, no intention of exporting that particular thousand bales. You will sell it to the Carolina mill at the domestic market price? Mr. WEST. That is right. Mr. HEIMBURGER. Now, you do have to export 1,000 bales. Mr. WEST. That is right. Mr. HEIMBURGER. So you go out and buy a thousand bales at the domestic market price of 8-inch cotton. Obviously, you cannot sell it abroad at any higher price than that at which they can go directly to Commodity and buy 7/8-inch cotton. Mr. WEST. That is correct. Mr. HEIMBURGER. So, what I am trying to clarify in my own mind is that you are really limited at both ends of your scale, the price that you receive for the better grade of cotton and what you get from the seven-eighths in export by Commodity's own sales program. Mr. WEST. That is correct, both that domestic and export sales program and, on the domestic end of it, plus the competition of the new crop cotton that I might be able to buy. Mr. HEIMBURGER. So if their sales price is right, there probably would not be, as you pessimistically surmise, an inordinate profit. Mr. WEST. Yes. Mr. FLAUTT. Mr. Poage, this bill is just a vehicle to expedite the surplus of American cotton and the Department thinks, and I am a producer and we think, that anything that will help consume or get this cotton into consumption, is worth maybe a little bit of profit to the fellow that handles it. The main thing is that we have to dispose of this cotton and get it out of the surplus. That is the reason we favor this bill. Mr. WEST. It might be interesting to you to know, Mr. Poage, that both of us are on the Cotton Export Advisory Committee to the Secretary, and that whole group agreed on the necessity of this bill. I think the general opinion was just about what we both have outlined here. Mr. POAGE. I think it is good providing that you do not have to export the same cotton that you buy. I think it is utterly impossible to buy from the Commodity Credit Corporation the same thing that you will sell. You will sell 1,000 bales of cotton and that man will want a soft cotton or hard or he might want spots or would not take spots. You get the staple length from Commodity Credit Corporation and you get the class, Middling or Middling Strict, or whatever you buy, but beyond that you are not going to get it from Commodity Credit Corporation, as I understand. Mr. WEST. They cannot make those differences that we, as commercial dealers, have to make. Mr. POAGE. That is right, and consequently you buy 1,000 bales from them and are selling 1,000 bales in Germany and you find that you cannot deliver but 600 of the 1,000 that you bought, and you have to buy some cotton. Mr. WEST. I have still got to sell that 400, if and when I am going to be able to do that. It is impossible. Mr. POAGE. I think I fully understand the desirability of the bill. Mr. GATHINGS. Are there any further questions? If not, we will go into executive session. (Whereupon, at 4:40 p. m., the committee proceeded to executive session.) |