EXCESS CCC COTTON STOCKS FRIDAY, JULY 22, 1955 HOUSE OF REPRESENTATIVES, Washington, D. C. The subcommittee met, pursuant to notice, at 10: 10 a. m., in room 1310, New House Office Building, Hon. E. C. Gathings presiding. Present: Representatives Gathings (presiding), Poage, and Abernethy. Also present: Representatives Hagen, Jones (Missouri), McIntire, and Whitten. Mr. GATHINGS. The hearing will come to order. The purpose of this meeting is to look into the advisability of legislation at this session with respect to amending section 407 of the Agricultural Act of 1949, having to do with excess stocks of Commodity Credit Corporation cotton. So that the record may be complete, we will have that copied into the record at this point. (Sec. 407 is as follows:) SEC. 407. The Commodity Credit Corporation may sell any farm commodity owned or controlled by it at any price not prohibited by this section. In determining sales policies for basic agricultural commodities or storable nonbasic commodities, the Corporation should give consideration to the establishing of such policies with respect to prices, terms, and conditions as it determines will not discourage or deter manufacturers, processors, and dealers from acquiring and carrying normal inventories of the commodity of the current crop. The Corporation shall not sell any basic agricultural commodity or storable nonbasic commodity at less than five per centum above the current support price for such commodity, plus reasonable carrying charges. The foregoing restrictions shall not apply to (A) sales for new or byproduct uses; (B) sales of peanuts and oilseeds for the extraction of oil; (C) sales for seed or feed if such sales will not substantially impair any price-support program; (D) sales of commodities which have substantially deteriorated in quality or as to which there is a danger of loss or waste through deterioration or spoilage; (E) sales for the purpose of establishing claims arising out of contract or against persons who have committed fraud, misrepresentation, or other wrongful acts with respect to the commodity; (F) sales for export; (G) sales of wool; and (H) sales for other than primary uses. Notwithstanding the foregoing, the Corporation, on such terms and conditions as the Secretary may deem in the public interest, shall make available any farm commodity or product thereof owned or controlled by it for use in relieving distress (1) in any area in the United States declared by the President to be an acute distress area because of unemployment or other economic cause if the President finds that such use will not displace or interfere with normal marketing of agricultural commodities and (2) in connection with any major disaster determined by the President to warrant assistance by the Federal Government under Public Law 875, 81st Congress, as amended (42 U. S. C. 1855). Except on a reimbursable basis, the Corporation shall not bear any costs in connection with making such commodity available beyond the cost of the commodities to the Corporation in store and the handling and transportation costs in making delivery of the commodity to designated agencies at one or more central locations in each State. Nor shall the foregoing restrictions apply to sales of commodities the disposition of which is desirable in the interest of the effective and efficient conduct of the Corporation's operations because of the small quantities involved, or because of age, location, or questionable continued storability, but such sales shall be offset by such purchases of commodities as the Corporation determines are necessary to prevent such sales from substantially impairing any pricesupport program, but in no event shall the purchase price exceed the then current support price for such commodities. (This sentence was added by the act of July 29, 1954, Public Law 554, 83d Cong., 68 Stat. 583.) SEC. 2. ✶ ✶ ✶ ACT OF APRIL 6, 1949 (d) The Secretary is authorized in connection with any major disaster determined by the President to warrant assistance by the Federal Government under Public Law 875, 81st Congress (42 U. S. C. 1855), as amended, to furnish to established farmers, ranchers, or stockmen feed for livestock or seeds for planting for such period or periods of time and under such terms and conditions as the Secretary may determine to be required by the nature and effect of the disaster. The Secretary may utilize the personnel, facilities, property, and funds of any agency of the United States Department of Agriculture, including Commodity Credit Corporation, for carrying out these functions and shall reimburse the agencies so utilized for the value of any commodities furnished which are not paid for by the farmers or ranchmen, and for costs and administrative expenses necessary in performing such functions. (Public Law 38, 81st Cong., 63 Stat. 43, as amended by the act of July 14, 1953; Public Law 115, 83d Cong., 67 Stat. 149; 12 U. S. C. 1148a-2.) ACT OF SEPTEMBER 30, 1950 SEC. 2. As used in this Act, the following terms shall be construed as follows unless a contrary intent appears from the context: (a) "Major disaster” means any flood, drought, fire, hurricane, earthquake, storm, or other catastrophe in any part of the United States which, in the determination of the President, is or threatens to be of sufficient severity and magnitude to warrant disaster assistance by the Federal Government to supplement the efforts and available resources of States and local governments in alleviating the damage, hardship, or suffering caused thereby, and respecting which the governor of any State (or the Board of Commissioners of the District of Columbia) in which such catastrophe may occur or threaten certifies the need for disaster assistance under this Act, and shall give assurance of expenditure of a reasonable amount of the funds of the government of such State, local governments therein or other agencies, for the same or similar purposes with respect to such catastrophe; (b) "United States" includes the District of Columbia, Alaska, Hawaii, Puerto Rico, and the Virgin Islands; (c) "State" means any State in the United States, Alaska, Hawaii, Puerto Rico, and the Virgin Islands; (d) "Governor" means the chief executive of any State; (e) "Local government" means any department, independent establishment. Government corporation, or other agency of the executive branch of the Federal Government, excepting, however, the American National Red Cross. (42 U. S. C. 1855a.) SEC. 3. In any major disaster, Federal agencies are hereby authorized when directed by the President to provide assistance (a) by utilizing or lending with or without compensation therefor, to States and local governments, their equipment, supplies, facilities, personnel, and other resources, other than the extension of credit under the authority of any Act; *** (c) by donating or lending equipment and supplies, determined under then existing law to be surplus to the needs and responsibilities of the Federal Government, to States for use or distribution by them for the purposes of the Act including the restoration of public facilities damages or destroyed in such major disaster and essential rehabilitation of individuals in need as the result of such major disaster; * * * The authority conferred by this Act, and any funds provided hereunder shall be supplementary to, and not in substitution for, nor in limitation of, any other authority conferred or funds provided under any other law. Any funds received by Federal agencies as reimbursement for services or supplies furnished under the authority of this section shall be deposited to the credit of the appropriation or appropriations currently available for such services or supplies. The Federal Government shall not be liable for any claim based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a Federal Agency or an employee of the Government in carrying out the provisions of this section. (Public Law 875, 81st Cong., 64 Stat. 1109; as amended by the act of July 17, 1953, Public Law 134, 83d Cong., 67 Stat. 180; 42 U. S. C. 1855b.) SALE OF FEED GRAIN-AGRICULTURAL ACT OF 1954 SEC. 208. Notwithstanding the provisions of section 407 of the Agricultural Act of 1949, as amended, or of any other law, the Commodity Credit Corporation is authorized until March 1, 1955, to sell at the point of storage any feed grain owned by the Corporation at ten per centum above the current support price for the commodity. (Approved August 28, 1954, Public Law 690, 83d Cong., 68 Stat. 901; 7 U. S. C. 1427 note.) Mr. GATHINGS. We have with us this morning Mr. F. Marion Rhodes, Director, Cotton Division, Commodity Stabilization Service, and with him Mr. Ralph Raper, Chief, Marketing Program Branch, Cotton Division, Commodity Stabilization Service, United States Department of Agriculture. We would like to hear from you at this time with respect to this legislation. There is a bill S. 2446 by Senator Eastland on this subject, and in view of the fact that there is no bill that has been introduced in the House that we could hold our hearing on this morning with respect to legislation of this type, should the committee vote out a bill, why, we would have to have one introduced in order to act on a particular bill in the House. We would like to have your views, Mr. Rhodes, with respect to legislation similar to S. 2446. (S. 2446 is as follows:) [S. 2446, 84th Cong., 1st sess.] A BILL To permit sale of Commodity Credit Corporation stocks of cotton that are in excess supply for unrestricted use at current market prices Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 407 of the Agricultural Act of 1949, as amended, is amended by changing the period at the end of the third sentence to a comma and adding the following: "except that when the quantity of a particular quality or group of qualities of cotton in the United States on August 1 of any year exceeds 50 per centum of the estimated domestic consumption and export thereof for the ensuing marketing year as determined by the Secretary of Agriculture, the Corporation may sell from its owned stocks during such marketing year for unrestricted use at the current market price in the United States a quantity of such quality or group of qualities of cotton not in excess of the difference between such quantity on August 1 and 50 per centum of such estimated domestic consumption and export.". You know that is one of the most serious complaints, is this spotted cotton-one of the most serious complaints against the loan program, that the trade does make a distinction between light and heavy spots, and that the Government makes none. It deducts the penalty of a heavy spot where the trade does not deduct it. Mr. RHODES. We, of course, have done a great deal of work on that. I am somewhat familiar with it, because a couple of years ago it was all under my jurisdiction. I think the fact of the situation is that when you class cotton in the fall of the year at picking time it might be a light spot at that time, but you put it in the bale for 6 months and open up the bale, the light spots will have turned to dark spots, and you really have spotted cotton. So we have never thought in the Department that we could justify the Commodity Credit Corporation making the distinction when probably by the time we would be moving the cotton a substantial part of it would have changed color. That is well-known in the cotton trade, that cotton changes color. The second reason for it was that we were making loans on cotton, we are not buying cotton. If a man goes to the merchants in the market and buys some cotton, certainly he should make a distinction between light spots and dark spots. We are merely making a loan to the farmer. And our loan is not necessarily, in fact is not intended to be the market price of that cotton. So I do not think there is any comparable comparison to say that we should make a loan based on a light spot, because a man purchasing the cotton could sell it to the mill to make cloth out of it and he does not make a distinction between the value of that. Mr. GATHINGS. Would you proceed then? You started on 7's. Mr. RHODES. I was just giving you an example, Mr. Chairman, but I can go clear on to if you would like to have all of the grades. Mr. GATHINGS. Why not proceed then? Let us get it in the record. Mr. RHODES. In the case of %'s, on the basis of our estimates, we would have had 335,000 bales that could have been sold under the Senate proposed legislation. Mr. ABERNETHY. You are speaking now of cotton that the Commodity Credit Corporation actually owns; is that not right? Mr. RHODES. No. Mr. GATHINGS. The total supply. Mr. RHODES. What I am trying to give is an estimate of the amount of cotton that would be available under this Senate bill. What we have here, Mr. Abernethy, is the breakdown by the class of the cotton in the carryover the beginning of the year 1954. Mr. ABERNETHY. You have no control over the sale of that cotton. This bill provides for the sale of cotton belonging to the Commodity Credit Corporation; does it not? Mr. RHODES. That is right, but we can sell down to the point where you have a 6 months' supply of cotton. And the only way I think that you can determine where you get the 6 months' supply is to take all of the cotton in the country, and not what we have. I just want to make myself clear. Mr. POAGE. I go a little further there. This bill places no practical limit on what you can sell. I know you own the biggest part of these 13/16th cotton that you could sell. You would have about 336,000 bales of 's cotton. Mr. POAGE. On the 13/16's, which is very low grade of cotton, what was your estimated consumption of that? Mr. RHODES. 107,000 bales was estimated consumption of 13/16's for 1954-55. Mr. POAGE. You had on hand what? Mr. RHODES. We had on hand 186,000. Mr. POAGE. Let us see how this formula works. This bill provides that you have 50 percent more than your estimated consumption. Mr. RHODES. We had on hand August 1, 1954, 185,000. We estimate we would use 107,000. Mr. POAGE. So that becomes your 100 percent? Mr. RHODES. So the bill provides that you will sell down to 50 percent of your estimated disappearance. Mr. POAGE. Down to 50 percent? Mr. RHODES. That would be 53, and you take the 53 from the 185 and you would have about 131,000 bales which you could sell under the proposed Senate bill. Mr. POAGE. You say you would have that much that you could sell? Actually, that 185,000 is the sum total in the United States, is it notthat is not merely Commodity Credit Corporation stocks? Mr. RHODES. That is the sum total of cotton in the carryover on August 1. It does not include, of course, any of the cotton produced in 1954. Mr. POAGE. I understand that. Mr. ABERNETHY. What is the average grade of staple of that cotton? Mr. POAGE. We are talking about 13/16's. Mr. RHODES. We hope it is 13/16's. Mr. POAGE. Of course, your grade on that stuff is probably low, too, is it not-you are talking about staple? Mr. RHODES. I am talking staple lengths. Mr. POAGE. Your grade is, also, low; is it not? Mr. RHODES. Yes, sir. A very large amount of it is light spots and some of it is, a substantial quantity is regular spotted cotton. Mr. POAGE. You do not make any distinction between regular spots and light spots, do you? Everybody else does. Mr. RHODES. You mean the classing service of the Department of Agriculture? Mr. POAGE. Yes. Mr. RHODES. That is not under my jurisdiction, but there is no distinction. Mr. POAGE. I mean in the loan. Mr. ABERNETHY. They do not make it. Mr. RHODES. There is no light spotted as such. It is either spotted or not. Mr. POAGE. If there are any spots at all you knock off about 5 cents; do you not? Mr. RHODES. No; it is not nearly that much. Mr. POAGE. Is it not? I thought that it was. was a tremendous difference there for spots. I thought that there |