New York State College of Agriculture At Cornell University Ithaca, N. Y. Library r~ HD 9034.A2T9i9"^'*'»">' '■*™^ Cornell University Library The original of tiiis bool< is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013862168 MISCELLANEOUS HEARINGS BBFORB THE COMMITTEE ON AGRICULTURE HOUSE OF EEPEESENTATIVES SIXTY-FIFTH CONGRESS • THIBD SESSION WASHINGTON GOVERNMENT FEINTING OFFICE 1919 MISCELLANEOUS HEARINGS BBFOEE THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES SIXTY-FIFTH CONGEESS THIBD SESSION WASHINGTON GOVERNMENT PRINTING OFFICE 1919 WHEAT PRICE GUARANTEED BY CONGRESS lU WHEAT PEIOE GUARANTEED BY CONGRESS. Committee on AGRicuxTxniE, House of Representatives, Washington, D. C, February 3, 1919. The committee met at 10.30 o'clock a. m., Hon. Asbury F. Lever (chairman) presiding. The Chairman. We have met this morning to receive suggestions in the matter of the wheat guarantee proposition. There are various representatives of the grain trade present. Mr. Reynolds, I understand you are to have charge of the hearings so far as the trade is concerned. Mr. Reynolds. Yes, sir. The Chairman. In the interest of economy of time, I will ask that each of the witnesses be permitted to make his general statement without interruption and then to adopt the plan of aJlowing the com- mittee to cross-examine the witness. And I will say to the witnesses, they realize, of course, this is the short session of Congress and the committee is very anxious to hasten the consideration of this mat- ter, although we want you to feel free to give us all the information you have and to make any suggestions you feel wUl be worth while. So far as I am personally concerned, I have no definite plan in my mind as to how this should be done and I shall be glad to have you gentlemen feel absolutely free to suggest some way in which the matter can be worked out. STATEMENT OF MR. A. E. REYNOLDS, CRAWFORDSVILIE, IND., REPRESENTING GRAIN DEALERS' NATIONAL ASSO- CIATION. Mr. Reynolds. Mr. Chairman and gentlemen of the committee, we have for some time recognized the task that was before you in work- ing out a plan for handhng the 1919 wheat crop, under proclamation of the President. We have had several councils among the trade to determine, as near as we can, some of the problems and some of the difficulties that confront the situation from the economic standpoint as well as the plan of making good this guaranty. We have reached a conclusion on a good many of the cardinal principles involved, but there is not an exact agreement on all; neither is there a disagree- ment, but there is the uncertainty that naturally creeps into a prob- lem of such great magnitude. We have decided on a few things: First of aU, we believe that the question of whether the guaranty should be made good should not even be a debatable question; that the Government of the United States is not ready to repudiate any of its obligations to the farmer. The great question of whether there should be any restriction on the 3 4 WHEAT PRICE GUARANTEED BY CONGBESS. planting of spring wheat to thus reduce the amount of the Govern- ment's guaranty is, in our opinion, not even a debatable question. The question as to whether the Government shall keep its hand in the deal to the extent of trying to reduce its loss to the minimum, or whether it shall throw down the bars and accept the maximum loss is, in our opinion, quite a debatable question. If the Govern- ment decides that it must restrict its loss to the very lowest minimum possible, one course of action naturally wiU be necessary. If, on the other hand, it decides that every barrier must be thrown down between the producer and consumer and give the consumer the very cheapest wheat products possible, an entirely different course must be followed. And we have not disagreed on that subject; we have, in fact, agreed on part of it, as our resolutions wUl show. The question as to the amoimt of loss that might be incurred by the Government is such an open and broad question we have come to the conclusion that only one course is commendable and that is provision sufficient to meet the maximum emergency is the only safe course to pursue. I desire now to read briefly and comment on some of these resolu- tions, and we will caU on others from time to time, but our whole intention is to be as brief as possible. Our first resolution is: That it is the sense of the grain trade here assembled that the guaranty to the farmers for the 1919 wheat crop should be made good. I think no further comment from me is necessary on that. Second. It is the sense of the grain trade here represented that for the purpose of carrying out the above guaranty a sufficient sum, not leas than !|il,250,000,000, be appropriated from the funds in the United States Treasury not otherwise appropriated. I want to comment a little on that. We have no doubt that the winter wheat planted already is 30 per cent in excess of last year. We have every reason to believe that the spring wheat planting in spring-wheat territory, given over whoUy to spring wheat, wiU be equally increased. We know that there will be a large increase of spring wheat in territory, usually given over whoUy or almost wholly to winter wheat; there are some who estimate that that planting will be 2,000,000 acres. That, of course, is problematical. But we do know, gentlemen, that there is now a demand all through the territory that might questionably be called spring and winter wheat territory for spring- wheat planting never before heard of. We know there is even a scarcity for the moment of wheat to fiU that demand. That territory would be northern Ohio, northern Indiana, southern Michigan, south- em Illinois, and quite a section of Iowa extending down probably into northern Nebraska. That territory is not usually very much given over to spring wheat. And in my State, Indiana, we have had a demand for spring wheat planting as far south as Columbus, which is probably 40 miles south of Indianapolis, where spring wheat has never been planted before commercially. It may be said this spring planting wiU not be successful; but it may produce some wheat. And after our long argument we have taken the supposition that spring wheat will be increased to the same extent as winter wheat. If so, we would have 30 per cent increase in planting in the entire crop. If we have favorable conditions and produce a crop commensurate with the acreage planted last year, we may expect 1,200,000,000 WHEAT PRICE GUARANTEED BY COITGRESS. 5 bushels of wheat; and it is not at all unthinkable that we might have this year 1,500,000,000 bushels of wheat. Then the next question is how much money will it take to make good to the farmer. We have to keep in mind all the time the first J)roblem I presented, WUl the Government try to reduce its so-called OSS to a minimum ? If so, then we have to come at once to the belief that foodstuffs in the United States, breadstuffs, will be reduced to the minimum; and we can only guess what that price might be, but it is not unfair to say that it might be $1.25 for wheat, and this proposition might be worse. In that event it would require the pay- ment to the farmer of $1 more a bushel than the public would nave to pay, and you might have a loss there of $1,250,000,000 or $1,500,000,000 on that score alone. , There are then two very interesting questions as sidelights on that. Something must be done to take care of the overage, if any, of the 1918 crop. There must be a loss incurred by somebody, and a very considerable loss, in tapering down from the 1918 crop to the 1919 crop. By that I mean that the millers are grinding 1918 wheat practically on the basis of $2.25; and if the price should go down at once, on the 1st day of June, and they- begin grinding new wheat at $1.25, there is a loss that must be considered. That is one of the open questions, as to what must be done on that. Hence after a debate not restricted in any sense but continued over the last five or six weeks, with meetings in Chicago, New York, and here in Washington for the second time, we see the possibility at least of a sum not less than $1,250,000,000, and that might not be suflSicient. And again, on the question of any appropriation that might be made being nonsuifioient to meet the emergency, a calamity would occur immediately if it became apparent at any time there was not enough money to meet this emergency and, during a recess of Congress, no means of supplying the funds. You can imagine if we begin to handle this new wheat crop in Texas on the 1st day of June and continue northward until we are handling it in Minnesota in September, and the funds are exhausted, the farmer is stopped from delivering his wheat because there is no money to pay his guarantee, and the grain trade of the country, naturally, in self- protection, would have at once to stop taking the wheat. So that a sum sufficient to meet this emergency, whatever the emergency may be, is absolutely necessary. We have named the sum of $1,250,000,000, as not less than the sum' necessary. The next resolution is : It is the opinion of the grain trade here assembled that the consumers of wheat and of wheat products in the United States are entitled to buy the same upon a price basis approximating that at which our wheat and wheat products are sold for export. So that I may not take up all of the time, Mr. Harwood, of Balti- more, was designated to speak on this subject. As he is not here, I think Mr. Randall will address you on that resolution. Mr. Young of Texas. Before you do that, I would like to ask you some questions. If the wheat acreage produces what we might expect it to produce, your idea is it will take $1,250,000,000 from the Treasury to make good the market ? Mr. Reynolds. That is our best judgment. <6 WHEAT PEIOE GUAKANTEED BY CONGRESS. Mr. Young of Texas. That goes on the theory that we pay the farmer on the basis of $2.26 for all wheat grown up to June, 1920, and marketed at that time ? Mr. Ketnolds. Yes, sir. Mr. Young of Texas. Granting that we make an appropriation necessary to buy all of this wheat from the farmer up to June, 1920, the farmer dumps that wheat on the Government, then, if I catch your suggestion, the idea is that this wheat be put back through the mill at such rate as the consumer can get his bread supply on the basis of $1.25? Mr. Reynolds. The method of how it shall be done is one of the questions, as I say, that is debatable. But we feel that one of the basic questions is whether the consxmier shall have it at a world's price; rf so, the measure of the Government's loss is the difference between the world's price to the consumer and the guaranteed price to the farmer. Mr. Young of Texas. Here is the point I am interested in: As- suming that the Government buys all of this wheat, which it will do, if we appropriate the necessary funds, the Government then has it stored m the warehouses all over the coimtry and in the elevators, where is there going to be any limit on the citizenship who are inter- ested in making a world marKet that will reach $1.25? The farmer is rid of it; he is no longer interested in keeping the price up; and who is going to be interested in making the price come up to even $1.25? Mr. Reynolds. Further along, we have another resolution that may be somewhat Ulimiinating on that; but we feel like this, that no one can foretell what emergency might arise. Your supposition that the Government might Duy all of the wheat, is a qiiestion of detail, whether that is to be the method or not; but if the Govern- ment should buy all the wheat, it might probably require more money. And we must keep in mind there will be some of it in course of consimiption all the time. Now the method of reducing tbe price, from a guaranteed price to a world's consumptive price, is the ques- tion on which we have not agreed, nor have we msagreed; because it is a question of detail that we feel can not possiluy be injected into this law. Mr. Young of Texas. It is evident that we, as representatives of the people here, who have to take care of the Treasury and keep faith with the farmers who have grown this wheat, must also take care of the people who are to be taxed and not have them pay extra- ordinary sums, if by law we can work out a system that will protect them. That is why I ask the question. Mr. Reynolds. Yes, sir. Mr. Young of Texas. My State is not a wheat State; yet we have planted over 2,000,000 acres this year, according to the Government report, they are planting spring wheat the same as they did last year. The main objection heretofore has been that a man would be a fool to plant sprmg wheat, and yet where they did plant it last year they raised as high as 40 bushels to the acre, and that is what they are going to do this year. That is the farmer's view point, and I do not blame him, ana now everybody is rushing to plant this wheat because it bids fair to be ths most profitable crop that can be grown. They are going to sell it to the Government: Is there anything to WHEAT PRICE GUAEANTEED BY CONGBESS. 7 keep the farmer who has ^own his wheat from dumping all of it at $2.26 and not even keepmg enough for seed wheat ? We, as law makers, are up against that situation. That is our question as it comes to my mind. Mr. Reynolds. We have debated that from every possible angle, and we recognize you have a grasp of the situation that is to be expected. Some have said that won't be fair on the part of the far- mer; I am not ready to say that won't be absolutely fair on the part of the farmer. He has a guarantee here which we think he should take advantage of. But the question is how to. break off the price somewhere. The farmer gets rtis price and the consumer over here wants a different price. The method of breaking that off is a question on which we have not agreed. And that is a question which they all say, and which we say, is one of the great questions. Mr. Reynolds. I mean a bill that has been presented to the com- mittee. If the sentiment in that bill would prevail, there is nothing anybody can do except to wait and see what agency the President might diesignate to do it ; and the graia trade has felt if that was the course finally decided on, all we could do would be to come along and to offer our good offices to help work out the problem, if they are wanted. Frankly, I think those people do not know whether to pay the farmer direct and turn the grain loose and let it go in natural channels, and in that way make the Government's loss possibly the maximmn; or, if that is done, it might make the Government's loss the minimum. Mr. Young of Texas. That is the point, would it go in natural channels, as the Government has taken it all over and since no pro- ducer has any interest in keeping the price up any more. He has to buy his seed back, and he is mterested the other way, of beating the price down as low as possible and getting his bread cheaper. And nobody in this country would be interested in keeping the price up, and if there was any chance of the Government's losmg $1,250,000,000 then wouldn't we be bound to lose it ? Mr. Reynolds. No doubt about it. I would like to ask any one here if he has anything to say in answer to this question. I am only aiming to state what we have agreed to and what we haven't disagreed on; and where we have not come to an agreement, I am frank to say so. Mr. Haugen. You stated $1,250,000,000 would be required. How do you arrive at that figure? Mr. Reynolds. As I explained, we arrived at it because we assumed that the wheat crop mi^t easily be 1,200,000,000 bushels. We as- sumed in returning to normal or seminormal conditions, based on world's prices, that it might not be unreasonable to expect that the wheat products would go to the consumer on the basis of $1.25 a bushel. We had to assxune some basis. Mr. Haugen. Right there: How much of the $1,250,000,000 would be required if all of the wheat were not marketed ? Mr. Reynolds. We assumed, just as I stated here, that all of this wheat will enter into the market, and that the Government's guaran- tee will have to be paid on all of it, Mr. Haugen. We believe the far- mer is entitled to it, regardless of whether ne sells it or whether he plants it, or whether he consumes it. It is said it has to be offered for market, and we think he wiU market all of this wheat and go and buy it back at some other price. 8 WHEAT PRICE GUARANTEED BY CONGRESS. Mr. Hatjgen. You believe he will market and buy back again and consume it or market and buy back, and so on ? Mr. Reynolds. It is fair to assume he may. That is a matter of detail and I will say frankly we have not been able to come to a con- clusion on that matter; and we doubt the wisdom of saying the farmer should be restrained from selling 10 per cent of his wheat to providle seed. The proclamation of the President says " all the wheat offered for market. Mr. Haugen. I appreciate that might be done, but I think it is hardly probable. Mr. Reynolds. That is the basis of our calculation. Mr. Hatjgen. Speaking about a certain portion of the wheat being sold at the world's price and taking into consideration the interest of the consumer, the consumers have been considerably benefitted by the fixing of the price of wheat, have they not ? Mr. Reynolds. I did not get that question. Mr. Haugen. The consumers got the benefit of the Government fixing the price at $2.26 ? Mr. Reynolds. Yes. Mr. Haugen. The price of wheat was much higher than the price at which it was fixed. Will you tell the committee what price pre- vailed at the time the Government fixed the price ? Mr. Reynolds. We recognize a short crop, or a world's failure, or a great failure here might change that very materially, and for that reason we have shunned recommendations on an act that might bind the Government too closely to take care of conditions that may arise from time to time. Mr. Haugen. I will ask you this question: In your opinion, what would have been the price of wheat if it had not been for the Govern- ment fixing the price ? Mr. Reynolds. I would Uke to repeat, Mr. Haugen, what I said in a hearing before this committee once before, when 1 said in my judg- ment it could be handled without fixing the price, and I think my language was this, that if a maximum was fixed, that wheat might go to $3 a bushel, but I hesitated to offer an opinion, Mr. Haugen. Isn't it a fact wheat was $3 a bushel when it was finally fixed by the Government at $2.26 ? Mr. Reynolds. Did it sell at $3 a bushel? Mr. Haugen. Yes. Mr. Reynolds. I have not heard of any price; I have not heard. of any premium; 23 cents, I think, is the highest I heard of over the Government's guaranteed price. Mr. Haugen. Isn't it a fact that wheat was selling at $3 a bushel? Mr. Reynolds. Before? Mr. Haugen. When the price was fixed at $2.26. Mr. Reynolds. I would like to ask Mr. Sager at what price it sold in Chicago. Mr. H. N. Sagee. I think I recall selling No. 2 red winter wheat at $3.40. Mr. Haugen. Hoover estimated the price might go to $7 and for that reason the price should be fixed in the interest and benefit of the consumer. The point I was making is this: The Government fixing the price at $2.26, the consumers of this coimtry have been benefited to the extent of the difference between the price fixed and the price that would have prevailed. WHEAT PRICE GUAEANTEBD BY CONGRESS. 9 Mr. Reynolds. Yes; I think so. Mr. Hutchinson. What do you think the price of wheat would be now if it had not been fixed by the Government ? Mr. Reynolds. I really have no opinion and nothing upon which to base an opinion. Here is Mr. Randall, a very prominent dealer and exporter, and I would like to have him answer that question. Mr. Randall. I think it is very likely it would have been higher. The emergency in Europe at present is great, we know, and it is quite likely it would have been higher. All food products, we know, are anomalies in the trade. If there is a shortage of 1 per cent, the price does not necessarily mean 1 per cent higher; it might be 25 or 50 per cent higher. And, likewise, next year's Crop, if the crop is 10 or 25 {)er cent greater, our price, the world's price, is very likely to be far ess than the difference in quantity. The food products, as we know, are anomalies in the trade. Mr. Hutchinson. Isn't it a fact there are a number of mills shut down now because thfere is no sale for flour at all ? Mr. Randall. That is my understanding. I am not a miller; I am an exporter, but I understand that is the case. Mr. Hutchinson. Then, why should the price be higher if they can not sell at any price ? Mr. Randall. Because there is no exportation at present except to the Government agencies. Mr. Hutchinson. Why is it that is so, that there is no export trade ? Mr. Randall. The Grain Corporation, established under the old act, I think takes charge entirely of the exportation of wheat and flour. Mr. Hutchinson. Nobody else can export it? Mr. Randall. No shipper has exported any wheat for the last two years. The Chairman. I think I noticed by the paper this morning that all the restrictions had been taken off. Mr. Randall. Except on wheat. Mr. Hutchinson. You have not any idea (there is an embargo now on grain from the interior) how long that is going to stand ? They won't let a inan ship a car of wheat now? Mr. Randall. I know at the present time you must get a license, or must get a permit, and the trade is hedged around with many fences by which all exportation has been curtailed in the last year or 18 months, since we went to war. Mr. Hutchinson. Do you know anything about whether the Grain Corporation can handle rye — if they have any authority of law ? Mr. Randall. I can not answer that legal question. I know they are handling it. Mr. Hutchinson. You know they are handling rye ? Mr. Randall. Yes. . Mr. Hutchinson. Do you know whether they have any authority of law or not ? Mr. Randall. I would not like to pronounce on that question. Mr. Wason. Mr. Randall, do you know upon what theory this embargo or restriction is placed upon wheat and other cereals ? Mr. Randall. The basic theory, I would say, was the transporta- tion-question, both in this country and across the water. Until two months ago the transportation in the United States was the mam 10 WHEAT PRICE G-tTAEANTEED BY CONGBBSS. question in handling munitions, troops, and everything of that sort. Grain had to take its place. And the same thing applied to exports^ tion overseas. Mr. Wason. And those same conditions are existing to-day regarding inland transportation ? Mr. Kandall. They are being modified slowly. As far as the grain trade is concerned, we are under the same restriction we were many months ago. Mr. "V^soN. And has the water transportation received any modification ? Mr. Randall. The overseas ? Mr. Wason. Yes. Mr. Randall. Some inquiries from abroad and some effort from abroad has come to this country from exporters trying to get American exporters to assist them in freeing the over-ocean transportation again. But the actual ability, the actual permits — I do not mean the paper permits — permitting over-ocean business to be done has not yet been opened freely. Mr. Wason. And do you understand that restriction is purety domestic, or is it made by our Government under agreement with either England, France, or Belgium ? Mr. Randall. Without knowing positively, I understand it is an allied agreement. Mr. YotTNG of North Dakota. I understood you to say that you thought the winter wheat was 30 per cent better in its showing now than a year ago ? Mr. Reynolds. No; the increase of acreage is 30 per cent over a year ago, and the prospect is fully up to ■vmat it was last year, or probably better. Mr. Young of North Dakota. And that you looked for a similar increase in spring wheat acreage? Mr. Reynolds. Yes, sir. Mr. Young of North Dakota. Now, don't you think we can be misled easily by this matter of acreage? Mr. Reynolds. The same method of collecting statistics is pursued from year to year, and that is the Government's own estimate of the figures, and we only take what has proven to be from year to year the best guide. You know they take statistics early as to the amount intended to be planted, and then the Supposed planting, and finally the harvesting, and carry it clear through, and it has not varied to any appreciable extent, and it is the best authority we have. Mr. Young of North Dakota. Of course, the figures are supposed to be reasonably accm-ate ; but isn't it a fact that what is indicated to-day to be the largest acreage we ever had planted to wheat in history might prove to be a poor crop? Mr. Reynolds. That is one of the contingencies that might occur. Mr. YotnsTG of North Dakota. You spoke about a world's price: Is there any such thing at this time, or is there any possibility imder the present conditions throughout the world, respectmg the financing and the transportation of the crops and the export of them, that there can be anything like what we used to regard as a world's price ? Mr. Reynolds. If you would aUow that matter to go until we get to that section of the resolution that bears on that, 1 would prefer some one else to speak on that who has given more thought to it WHEAT PEICB GUABANTEED BY CONGEESS. 11 than I have. It is an open question what the world's price is. That is one of the contingencies. We do not know what the conditions might bring forth from month to month ; we do not know what Europe might want, or at what price she might be able to take it. We 4o know that recently a large amount of wheat went from the Argentine to a Scandinavian country ; we had reason to belieTe that we should have sold to them, but we did not. We do not know what the world's price next year might be. Mr. Young of North Dakota. Do you expect the wheat trade will get back to anything like normal conditions within the next year, no matter what action we take here ? Mr. Reynolds. Answering for myself now, not for any decision we have reached here, my judgment is that wheat can not get to a normal basis on this crop, because we have no data upon which to base any calculation as to what the normal conditions will be. Further than that, we do not know how much we may be called upon to ship abroad; we do not know how much of our world crop may be left over. It does not look like there will be much ; but the whole ques- tion of the amount to be produced is questionable. All of the regu- lations in regard to imports are, as you know, suspended for the moment, but I am speaking from my personal idea of the thing, and I will say also these points hav« been generally dealt with, that the auestion of the world s price, gentlemen, is of very doubtful definition uring the next crop. Mr. Young of North Dakota. May I ask just who you do represent here; who are you speaking for? Mr. Retnolds. This is primarily, gentlemen^ the Grain Dealers National Association, and I suppose nearly every man here is a mem- •ber of the Grain Dealers National Association; it includes the country grain dealers, or grain handlers, exchange members, exporters, and I think we have among us a few millers. Mr. YouiiTG of North Dakota. What is your general feeling; what is your idea? Do you want to have the price of wheat high — the people you represemt — ^or do you want it low ? . . Mr. Retnoujs. I do not believe there is any definite idea or opinion on that. We only Jiave this to say about it; we feel that producing the largest amount of wheat of any country in the world, our people should have their breadstufiFs as cheap as other cotmtries. Mr. Young of North Dakota. As I imderstand, you represent men here who act as" sales agents for the people who grow wheat? Mr. Reynolds. Yes, sir. Mr. Young of North Dakota. And your idea is you ought to sell as cheap as you can ? Mr. Reynolds. Oh, no; not at aU. Mr. Young of North Dakota. That is what jou said ? Mr. Reynolds. I said one of the open questions was whether the Government's loss should be made the maximum or whether it should be the minimum. If the maximum loss is incurred by the Government, it naturally follows it will be the cheaper to the con- sumer; if that loss is regulated from time to time, the cost to the consumer will be correspondingly regulated. But, as far as our opinion of whether we prefer a high price or a low price, I woidd say we have no preference in the matter excepting as it carries out first the guaranty. There are just two things; we do agree most pos- itivefy that the guaranty must be carried out; therefore the price 12 WHEAT PRICK GUABANTEED BY CONGRESS. of wheat to the farmer is practically fixed; second, that the peojple must have their wheat products as cheap as the other nations of the world, and that that is a condition we can not foretell as to whether it is high or low. , ^ . -ir Mr. Young of North Dakota. I understood you to say to Mr. Haugen that this price was fixed in the first instance for the benefit of the consumers of the cotmtry ? Mr. Reynolds. I did not put it in that language. As 1 under- stand it, the price was fixed simply to forestall another emergency such as we had two years ago, when we did not have enough wheat; it was put out primarily as the law was originally passed to encourage production. That was primarily the object of the law as I conceive it. Mr. Young of North Dakota. In the first instance, it was put in operation just in the face of a crop that was already planted, already in the ground ? Mr. Reynolds. Yes, sir. Mr. Young of North Dakota. And could not have any purpose to influence the question of production that year, but, as you have abeady stated, the price was brought down from $3.40 to something a little over $2 a bushel. So that the price fixing in the first instance must have been in the interest of the consumer. Mr. Reynolds. I thought you meant the President's proclama- tion. Doubtless we all recall how an emergency arose all at once, in which it was said we had 650,000,000 bushels of wheat and our consumptive demand and our supply demand already made on us by the allies would require a great deal more, and at that timo the Government took over the handling of the wheat and Confess passed a law (I forget the date of it) fixing the price of wheat— that is, the 1918 crop, the crop we are just handlmg — and in that law it gave" the President the right, by proclamation, to extend it to the 1919 crop, which he did by proclamation. Mr. OvERMYEK. Don't overlook, Mr. Young, that was the min- imum guaranteed price. Mr. Young of North Dakota. Everyone knows it became a max- imum, and nobody at the time, it was fixed thought it would be the minimum. It could not work out any other way-. It was in the interest of the consumers — the fixing of that price— and what I am unable to understand is why, now that we are coming to another turn in the road, all these gentlemen who are supposed to represent wheat growers appear here with this great solicitude for the consumer. If the President made a price and indicated in his proclamation to the farmers it was a guaranteed price, everybody throughout the country must have known, the consumers and every- body else, it was done absolutely for their benefit and the consumers were satisfied; and now as between the Treasury of the United States and the consumers, I understand that the gentlemen here want to let the bars down and have the Treasury of the United States take up the slack between the price at which wheat may be pounded down to and the guaranteed price ? Mr. Reynolds. It can be conceived it will be a profitable arrange- ment to the Government; they might not need any money but mi^t be able to sell the wheat at $3, depending on world conditions. We have set up no argument as to price; we have stayed away f om it; we have said from the beginning if the world wants to buy wheat cheap, we want to have them buy it cheap. WHEAT PRICE GUAKANTEBD BY CONGRESS. 13 Mr. Young of North Dakota. Don't you think this, as hinted by Mr. Yoimg of Texas, that if all in the United States adjust themselves to a low price and we, all of us, accept the idea that wheat must come down to $1.25 or $1, that that in itself will be a tremendous factor in fixing what you call the world's price ? Mr. Reynolds. I am not able to answer a q^uestion like that, because I think it is problematical. My own opinion would be of no value to you. But I want to state this: I am a country buyer myself; I do not know what the result would be of fixing this. We only stand for the emergency that is on you gentlemen and on Congress to appropriate money to carry out the Government's guaranty, that it must be made good; ana, second, that our people should have bread as cheap as other nations of the world. That may be higher than the fixed price if a famine in wheat should occur. We do not have a preference in the price of wheat ourselves, as grain handlers or as gi'ain dealers of the country. We have no preference beyond what is for the good of the country, any more than you gentlemen would have. Now we have no opinion, because the wheat is not produced. We could have a 600,000,000- bushel crop, in which event wheat would be $3 wheat again. But you must keep in mind another thing, that this fiLxed price is only the minimum; the President in his proclamation distinctly says he will take occasion in the spring of 1919 to appoint another commission that shall determine whether it shall be still higher, recognizing, what we recongize, that no power can yet estimate this crop or the emergency that might arise. So I would say in answer to your question we are not committed to a low price; neither are we com- mitted to a high price, but we are distinctly committed to meet the conditions. Mr. Young of North Dakota. Mr. Barnes, the President of the Food Administration Grain Corporation, we have learned, has the view that the 1919 crop ought to be handled in substantially the same way the 1918 crop was handled, and if that were done that the crop would be bought from the farmers at the guaranteed price, the millers would buy xthe wheat at the same price, and everything throughout the United States would work out in the same way as it did, practically, in 1918, and the surplus for export would be in the hands of Mr. Barnes and his assistants to sell, and that the only loss, if any, the Goverrmient would take would be figured on 300,000,000 bushels as against, what you say, a possible 1,200,000,000 bushels or 1,000,000,000 bushels. Now, don't you think if we handle it in that way, so that our wheat would not be dumped on the world's market, depressing it, acting as a bear influence, don't you think if Mr. Barnes is permitted to handle Afrhatever we have to export in the United States and to control it, that the Government will get a very much better price for it than if we practically surrender, all of us through the country, and assume we have to sit back and let a concentrated foreign buying agency fix the price of wheat in the United States ? That is practically ■v^at we are going to do if we take your plan, whereas if the other plan is adopted, Mr. Barnes will be in a position to say something as to the amount they must pay for our wheat. For instance, if he figures out they must buy 50,000,000 bushels ad they are going to go hungry unless they get it, or if they are going to need 100,000,000 bushels of 14 WHEAT PBICE GUABANTEBD BY CONGKBSS. our wheat and are going to go hungry unless they get it, he can say "Gentlemen, we have paid $2.26 a bushel for every bushel of wheat we have here and we do not propose to sell to you for less," or "\ye propose to have a reasonable price for this wheat for which we paid $2.26, and we are going to have something to say in the fixing of that price." That looks to some of is as a proposition under which the United States Treasury will only suffer a very small loss, because w« will only figure on 250,000,000 or 300,000 000 bushels, and it will also be a decided factor in fixing the world's price. The Chairman. Yes, Mr. Eeynolds, suppose you answer that ? Mr. Reynolds. That might or might not conflict with our plan. I will say as far as the agency or means of handling this crop is con- cerned, we have stayed away from that. Your plan would not conflict with our plan if th«re was a short crop. But if I understand Jou right, you assume that the pubhc must pay the price for their readstuffs that will let the Government out without loss. Now, we believe there is a demand incumbent on Congress and on this country to furnish breadstuffs as cheap as foreigners get them. Your plan might conflict or it might not. If there is a big crop and you attempt to get the Government out without loss, it wifl conflict; if there is a short crop, you can get the Government out and still give our people as cheap bread as other people have. I hope I have made myself clear. We do not venture to come here to recommend anything as to the agency for handling the crop nor the method of handling the crop; we have tried to stick to a few basic principles. The first thing is the guaranty must be made good to the farmer; second, regarmess of what conditions may arise, that we ought to have wheat products at a price as reasonable, as cheap, as foreign countries get them. Now, the economic question underlying it I am not capable of determining the relation of that to wages and labor disturbances and th^ future encouragement to the production of wheat, and a thousand and one of those great economic questions that can not possibly be foreseen or foretold until tiiey occur; but I can see the plan you outline might not conflict at all with anything we recommend. But if we did have a great wheat crop and the Government did sustain a loss of twelve or fifteen hundred million dollars — ^when I say "loss" I mean if we paid $2.26 for wheat and England, Canada, and France furnished wieir people with food on the basis of $1.25 — we ought to stand for our people having it on the same basis; because we have the food in this country we have produce, and in a measure har? the balance of power in fixing this price. If we are not able to fix the price so that the world pays as great as the guaranteed price, then we conceive the Government must make good at once its own loss. Mr. Young of North Dakota. My impression is you have dodged the question. Of course everybody admits, if we had a very short crop m the United States, we can eat all the crop ; there is no need for coming to Congress at all, if that is the proposition. But we must face the situation assuming there is going to be a surplus; and the question I have assumed and the chairman has seconded it, he wants to know why you want to follow a plan by which we are going to take a loss on the entire crop of the United States, rather than on that par- ticular portion we export ? WHEAT PKICE QTJABANTEBD BX OONGKESS. 15 Mr. McLaughlin. Does not your plan involve the idea that the consumers of the United States should not be entitled to the benefit of low prices, if natural conditions woidd bring low prices ? Mr. Young of North Dakota. We have to keep that in mind and we have to keep in mind the Treasury. I think this, that inasmuch as during the entire war we have had a fixed price on wheat for the benefit of the consumers of the country, there is no particular reason why there should be so much solicitude, at this particular time, for the consumers, especially when we are confronted here by men who are supposed to be acting as the sales agents for the farmers and pro- ducers and grain growers. Mr. McLaughlin. No one has suggested that the Government avoid its responsibility under its guaranty. Mr. Young of North Dakota. No. Mr. McLaughlin. And if the Government makes good, the pro- ducers of the wheat will be taken care of. i Mr. Young of Nrth Dakota. Yes. Mr. McLaughlin. Now the question is, shall we carry out a plan such as you suggest and keep the price up when naturally it might go low, regardless of the wishes and interest of the great consuming public of this country ? Mr. Young of North Dakota. I will put this question to the witness, then: Keeping in naind what Mr. McLaughlin has said, that we should, let the consumer have the wheat at the world level, is there any duty upon the people of the United States to try to make a world level 50 cents lower than it ought to be ? Do you think there is any duty upon us to try to beat down that price? As Mr. Young of Texas says, every farmer in the United States wiU take $2.26 and sit back and take it easy? It will not be to the interest of anyone to keep the price up. If you know of anyone who would be interested in keeping the price up, aealer or otherwise, please say who it would be. Mr. Young of Texas. No ; it ought not to be artificially upheld. Mr. Young of North Dakota Whom do you figiure would handle^ exportations from the United States if we follow out your plan? Mx. Reynolds. We do not want to approach that phase of it. Mr. Young of North Dakota. Who would sell it; would any of you exporters sell it direct ; how would you handle it ? Mr. Reynolds. We think that is wholly a matter of detail, and the power is already given to the President to fix that, and we have thought best to stay away from it. Mr. Young of North Dakota. So far as I can see, you have not any plan at all; you say you are divided on these propositions? Mr. Reynolds. We did not come here in any assumed capacity to maie a law; we simply came here to advise on a few points on which we feel We are capable of advising, and beyond that we do not assume to go. T. , 1 1 The Chairman. The difiiculty seems to be, Mr. Reynolds, that you gentlemen have agreed upon one or two fundamentals which nobody anywhere disagrees upon, namely, you have agreed that the faith of the Government to the farmers must be kept. That is about all you have agreed on, it seems to me. What the committee would like to have is some tangible, feasible plan of making good that faith. The question of whether or not the Government shall assume a maximum loss or a minimum loss will be a proposition which the committee 107124—19 2 16 WHEAT PRICE GUAEANTEED BY CONGRESS. themselves will pass on, although we are very glad to have the opinion of you gentlemen on that proposition. But I think the committee recognizes, those of us who have given this matter study, and we have all done so, that the difficult problem here is in setting up the machinery to work out in a practical way the keeping of the faith. I think myself, speaking for myself alone, that this bill when' it is framed will have to be so mastic in its provisions as to meet any possible emergency; but, at the same time, we would like to be able to go upon the floor of the House suggesting to the Members of the House that this kind of machinery might work in one particular case and the other kind of machinery might be taken in another particular case. If you have a very large crop this kind of machinery might be necessary; if a short crop, a different kind of machinery might be be necessary. Is that true ? Mr. Reynolds. I will say, Mr. Chairman, we ran against a very difficult problem along that line for the reason we had a full line of suggestions for Judge Glasgow, who we thought was drawipg the bifl — ^we had a full fine of suggestions which he refused to, consider, and, as you know, he has presented to you a certain bUl. We do believe (whUe we did not make a resolution on that, I think I voice the sentiment of every man here) that the power in that bUl given to the President is too much, and at least too much of an uncertainty. And I hope you recognize the position in which we find ourselves if we come down here and indorse to you gentlemen any certain branch of the Government to carry this out, when the original law has all the authority to do that. We felt we would be assuming on con- ditions over which we had no control. Now, there are a few other facts set out here I have no read yet. Mr. Young of Texas. We want this guarantee made good to the farmers. The Government has made its pledge to that effect. I feel, too, that if we make the wheat crop that is indicated that our people are entitled to bread at a reasonable price and that the Government ought not to hold up the consumer by some war legislation to pay a high price for bread when the crop would justify a lower price. The consumer has to be considered and in making good the guarantee. What legislation will do both ? That is what is worrying me in this le^slation. Mr. Reynolds. I think if you want us to, that we would try to arrive at that conclusion. But here is the difficulty: We understand the President can appoint the present Grain Corporation or turn it over to the Bureau of Markets, or the Federal Trade Conmiission>'or create a new commission; he can do any of those things. Now we conceived the idea this law wotild not take away from him that power; we do not know. We are in a good deal more uncertain Eosition even than you gentlemen; you have the power to suggest a ill and we have only the privilege of suggesting a few things we think that bill should contain. 1 do not know what is the best plan; but we could bring to you the concensus of our opinion on that matter, but it will take two or three days to do it. But we will be glad to do it if you want us to do so. The Chairman. I think these hearings, from a telephone message I had this moming, will run probably until Thursday; and we woidd be very glad if you gentlemen would get your heads together and make some suggestions along these lines. I want to make this sug- WHEAT PBICE QUABANTEED BY 00N6BESS. 17 gestion: It seems to me there are four possible ways of handling this froposition, as I view it, and I may not have covered the entire field, 'irst, to restore prewaj conditions, allowing the trade to handle this whole proposition; second, to continue the present Grain Corporation, with its executive powers as toucliing wheat and wheat products; third, to let down the bars, go back to prewar conditions, allowing the trade to handle the situation, except giving the Government authority to step in when there seems to be any unusual effort to manipulate prices or when there should come a very heavy surplus which might disturb the world's price; fourth, to go back to prewar conditions, allowing the Government only, by way of license, to handle the matter of exports and imports. Have you gentlemen given any consideration to those alternative propositions ? Mr. Reynolds. I understand you would like us to consider those points in that matter and to meet with the committee again. The Chairman. Does not the committee think that covers in a rather broad way just the difficulties we are up against ? Mr. McLaughlin. Are those some of the things you have consid- ered with Mr. Glascow ? You said you have made numerous sugges- tions to Mr. Glascow that he has not received favorably, and you seem to think you are concluded by his conclusions. We are not. The Chairman. Not at all. Mr. McLaughlin. Neither are we concluded by the opinion that the President of the United States has the power. He has been exercising a lot of power, and I am not now criticising him, but it is up to us to determine whether that power shall be continued in his hands. We would like to have suggestions from you. You evi- dently think if you make suggestions, you are trespassing upon our preserve in making suggestions that would be unbecoming. Many of us have very Utfle information on the subject and we want help. Mr. Reynolds. I hope you recognize the fact we did not want to assume too much; we had better assume too little before this com- mittee than to assume too much. The Chairman. Let me suggest that you assume just as much as you want, because we want aD the facts and we want suggestions; you are in the grain trade and know the conditions, as we don't. Mr. McKiNLEY. Would this be in order, if I should make a motion that these gentlemen prepare and present to the committee on^ Wednesday their ideas of what a bill should be, in general terms ? Mr. Young of North Dakota. And accompany it with specific suggestions. Mr. Anderson. I would like to say this: I have no objection t6 the grain trade presenting a plan, but it does seem to me any plan proposed would nave to be at least in the nature of an alternative, because the indeterminate factors of the equation are such that any plan presented must be subject to modification to meet conditions over which we can not possibly exercise control. I hoped to develop that when it got to my turn, but I make the suggestion now because I do not want to embarrass these gentlemen by asking them to present an absolute concrete plan of handling the situation when we can not know what the conditions will be with which they will have to deal. 18 WHEAT PRICE GtTABANTEED BY CONGRESS. The Chairman. It seems to me, in my study of this matter (and I say this so that the trade will know my own view about it) that tma act has got to be drawn with so much elasticity that the agency of the Government handlmg it, if such is to be the case, or if a com- mission is to handle it, can best meet conditions at aU times. Be- cause I take it on account of the break-up of transportation and world finance, and the uncertainty of the crop to be produced, it is going to make necessary a readjustment almost from hour to hour, certamly from day to day and week to week. And if you gentlemen can work out some proposition elastic enough, and yet with as. many details as you can, with safety to the act itself, we will be very ^ad to have it. Mr. Ketnolds. We will be very glad, Mr. Lever, to go into con- ference this afternoon and on Wednesday morning, as suggested, if we may, to give you at least some agreement we reach or to tell you we disagree on it, in response to what the gentleman here said. That is the very argument exactly that has presented itself to us all the way 'along; we know there must be some elasticity and we there- fore only aimed to arrive at a few conclusions here, without going into the matter too much in detail. But we will be glad to do our best to come to a conclusion. Mr. G. S. Cakkenek, of Kansas City, Mo. I would like to say the Kansas City markets, and I think I can speak for aU the other markets, have given this matter a great deal of thought and consider- ation. There is and always will be some differences of opinion as to just how this matter will be worked out or should be worked out, just as there no doubt is some difference of opinion on some of the points in your own committee. And I woidd like to suggest that some one be permitted from each market to speak on this subject on the four plans you have outlined, and you will get the Kansas City opinion, the Chicago opinion, and the Minneapolis opinion, and that is what you gentlemen want, as I understand it. The Chairman. Exactly. Mr. Cakkener. You want suggestions. I think this body of men are in just as good a position to give you those suggestions right now as they would be following a conference, and I think it would take less of your time and a great deal less of otir time if that plan is followed out. I think if you start now and call on Chicago, Minneapolis, and Kansas City, then you will get the ideas and say to us to go home, and we will do the best we can, selecting the good from the bad. I think this expression of mine will meet with the very general approval of the representatives of the other markets at this conference. (The question of whether a postponement of the hearing should be had was then discussed, and it was decided that the hearing should proceed.) STATEMENT OF MR. L. F. GATES, CHICAGO, ILL., REPRESENT- ING THE CHICAGO BOARD OF TRADE. Mr. Gates. Mr. Chairman and gentlemen of the committee, I am not an experienced speaker, and I have never before attended a com- mittee meeting of this kind in any capacity; consequently, if I offend in any way or present it in a different way from that in which you are accustomed to have it presented," I beg your pardon in advance. WHEAT PRICE GUAKANTEED BY CONGRESS. 19 1 want to say further that in what I shall say, I shall speak, if in any case I enlarge upon the suggestions that are made from the entire body, only for the Chicago Board of Trade, and I hope anything that may not be in harmony with the general suggestions may be so considered. I want to say further in this talk I am going to talk about prin- ciples and not about personalities, and I want it distinctly understood in advance that it is not an attempt to discredit anybody or to fail to appreciate the patriotic work that has been done by a great many people in different Government departments in connection with this war work. The trouble we are faced with now is due to the fact that we adopted an economic fallacy at the beginning of this trouble. None of the economists who were called in to fix the price of wheat believed in it when they went in; they did not believe in it when they came out, they do not believe in it now. It is wrong in principle. The Government has broken a law. If they had been able to repeal the law they would undoubtedly have done it — the law of supply and demand; but they could not repeal it because they did not make it. The thing that they did was to interfere with its operation. I learned a long time ago, from one of the best teachers we have ever had, there are two ways of showing respect for and satisfying a law; one of them is by not disobeying the law, and the other is by disobeying the law and taking the consequences. Now, we are in the position of having willfully disobeyed this law, and we should just as cheerfully suffer the penalty. The United States Government has shown in its cornering of the market, because that is what it has been doing, one of the effects of cornering the market contrary to the law of supply and demand. You can not do it, whether you are an indi- vidual or a Government, without suffering the penalty. The question is are we going to accept that penalty cheerfully or are we going to try, by the putting on of technicalities, interjecting other things of that kind, to postpone this pitnishment ? We are going to have to settle with that law of supply and demand at thefinish, because we did not make it, and it has not yet been repealed. There are two ways now out of this difficulty in general. One is that the control shall be dragged along by some agency which shall try to minimize the loss to the Government. That would put it on a purely commercial basis and would disregard the economic and social factors involved. The other plan is to at once cheerfully go to prison and hope that by good conduct we shall get out early. It is a question whether we have the courage to do that. The Chicago Board of Trade stands for just that returning to the law of supply and demand, getting back to the prewar conditions, and providing only such machipery as will take care of this guarantee. Now, that may be hard medicine to take ; it may be we will not have the courage to do it, but that is what we ought to do, and that is what will cost us the least in the long run and bring us the best results, because it is not a question as to how much it is §oing to cost, it is a question of how much we are going to get out of it; it is a question of what we are going to gain by one method or another. One plan has been presented by the attorney for the'Food Corpora- tion. We have not had that presented here, and some have not seen it. The only thing we can do is to try to set up arguments for that 20 WHEAT PEICE GUABANTEED BY CONGRESS. uggested bill and then to knock them down. But in general that proposed bill is so vicious that if there were any knowledge on the part of the business men of this coimtry of the character of the bill and any thought that it might be passed, you would find you had not built temporary buildings enough in this town to take care of the men who would come here and remain until it was disposed of. It is wrong; that sort of legislation is wrong in times of peace. It is bad enough to have violated this law; now let us not commit a further error in trying to foist this control on the people in times of peace. It may "be urged that because conditions are tmcertain, we must have some agency with particular authority to do most anything; My answer to that is this: The old law of supply and demand has been able to take care of the crops for 50 years, through the organized markets of the country; conditions can not be known in advance, and that is why we have fluctuating prices in the world's markets, because the conditions change from day to day. The future markets take care of those changing conditions. You have a gradual readjust- ment rather than a shorp readjustment, such as made necessary in this case; the btirden is transferred to the many instead of falling on the few, in thfe exchange method of handling grain. It may also be urged that because tonnage is scarce, because it is controlled by the Governments, there should be a controlling agency of this Government to take care of it. But I am inclined to think we are not getting all the facts about this tonnage business, and I just want to quote a little on that. The world's shipping situation is indicated in a statement by Sir Albert Stanley, president of the British Board of Trade in London, January 25, in which he is quoted as saying that more shipping is available than there are cargoes for the snipping. This accounts for the tremendous slump in ocean rates which have prevailed within the last 30 days and confirms the state- ment of Sir Albert Stanley, of the British board of trade. We also find in George Broomhall's Corn Trade News of December 24, 1918, the following statement: Fifty thousand tons of Dutch shipping lying idle in American ports, are to be dis- patched to South America with cargoes for Brazil, Argentina, and Uruguay, and will eventually load graia for Holland. I have this further note, under date of December 24, an extract from the Corn Trade News of London — and we have to get these from such papers as we can pick up from the other side — <;oncerning the Australian shipping prospects: Concerning Australian shipping prospects, we have a statement from Sir James Maclay that the Government has sent out a large fleet to load wheat and other food stuffs, and a Melbourne cable mentions the expected early arrival there of 29 steamers to load wheat. The present outlook for tonnage must be considered distinctly encouraging. The daily shipping reports tell us that numbers of vessels are arriviM , and departing; we hear of a glut of tonnage (these steamers are mostly small ones and not suitable for long voyages), at the coal ports of South Wales; we know that cohstruc- tion is goung on rapidly whilst losses from submarine attacks have ceased; then we know, too, that Germany has returned the ships of the allies, which she seized in her ports at the beginning of the war, also that she has to place at the disposal of the allies the 2,500,000 tons of German shipping which has lam almost idle in her home ports since the beginning of the war. The first report about the German ships stated that they were to be placed at the disposal of Mr. Hoover for the conveyance of foodstuffs to Germany * * *. I would like to have aU of this inserted in the record. The Chairman. Without objection, that will be inserted. WHEAT PRICE GTJABANTEED BY CONGRESS. 21 Mr. Gates. Another argument that may be urged is the matter of finance. Foreim nations are further along in their readjustment than are we. Neutral coimtries and members of the allied group have already, through their individuals, not through their Govern- ments, sent inquiries to this country for offers — to mdividuals here. The individuals here have not been able to reply to them; individual initiative has been stifled ; we are not able to go ahead and run a busi- ness wiiich we have known for years and years; I speak of the grain dealer and exporter. That is the situation in the neutral countries. Inquiries have come from Spain, Holland, Norway, and they have been coming, too, from England, Fi-ance, and little Belgium (God bless her).. That is where they have been coming from. Those peo- ple are getting ready to do business and their Governments are wUl- mg that they should. Now, they are going to buy during this coming year where they can get the things the cheapest, naturally. Is it possible any of the enemy countries had made, even before they requested an armistice, finan- cial arrangements or provision for the necessities of life ? I have every reason to beheve that such arrangements were made by interna- tional financiers before the signing of the armistice and before the request for an armistice, and possibly that may be one reason for the armistice — that I do not know. I can not quote my authority on that, but I have reason to believe it is' true. It may also be suggested that inasmuch as we may have so much wheat we ought to use the need of these foreigners for our fats to get ' rid of our wheat. Would that be a pleasant thing to contemplate ? America has always been accused of being a purely commercial nation. Our standing in Europe because of our participation, even •though late, in this war has put us in a better position with European countries than ever before. Now, suppose we go to them — suppose in time of peace we go to them, in one hand with a hundred inillion dollars' worth of food to give away and in the other hand a club and say to them: "Now, gen- tlemen, we know you are going to need our fats, you must take our wheat; we know you are going to need our oats, you must take our wheat — at a price — at a price artificially high, at a price that would let us out without a loss?" The thing is morally and commercially wrong and unfair to the nations of Europe and will make us no friends. And if we try to settle with the law of supply and demand on that basis we shall be worse off at the finish than we are now. How is it that the steel men, that the copper men, are going ahead and doing business ? They can make then- financial arrangements. Why can not the grain trade? How would you like to so enlarge this proposed biU (it is large enough at the present time, goodness knows) that it would take in cotton, copper, and steel, because they may need some of those things in Europe, and we need it as a club to get rid of some of om- wheat ? Why, the thing is too ridiculous even to consider. It, is feared by some that in case we should permit the grain trade to handle this biisiness, that a national scandal would result. Gen- tlemen, that is questioning the honesty of the farmer and the coun- try grain dealer. There may be some of them who are not honest, but they are fully up to the average of honesty in this- coimtry, and that is very high. And particularly would there be little fraud when 22 WHEAT PEICE GUARANTEED BY OONGKBSS. the Government of the United States is the one that is going to fix the penalty for fraud. It must be remembered, too, that the period of the war is over. President Wilson when he said, "So ends the war," on November 11, said something we beheve; hostilities have ceased. Let us plan at least to get back as soon as possible after the signing of peace. At that time what shall we find ? We shall find the patriotic men who are devoting their efforts to this control because of their patri- otism, because the country was in trouble, wUI be replaced by hired men. We shall have to run this agency with hired men, not with men serving only as patriots ; don't forget it. It is an important factor in this proposition; it must be run with hired men. Now do we want to hire anyone to run the business of the covmtry; isn't it reasonable to suppose that in the grain trade collectively are more brains, more sense, than there is in any single individual, and a better chance for the grain trade to adjust itself than there would be on the part of any single individual. We must judge the future of this control by the past to a certain extent. Take the question of rye. We have a market in Chicago for rye — when the Government is m the market. There is no market established at Toledo, Detroit, or Cincinnati, and the people are shipping their rye back from those points to Chicago to catch a day when the Government wants to buy rye. If the man in charge of that happens to get down late (I do not know who he ia) there are no orders to buy rye; or if he happens to be busy with some one or forgets to put in a telegram the price, then rye is purchased at a lower price than that at which rye had been maintained. There is nothing in the law present about maintaining a rye price, and yet there has been an effort to maintain some relative value between the grains, and $1.62 has been the price at Chicago when the Government has been in the market; and when it has not been in the market there has usually been a drop of 5 to 15 cents a bushel before it would get to the point where the ordinary consumer would take hold of it. And there is no assurance from day to day that the Government is going to pay $1.62. The other day rye was purchased (the price not having been specified) by the Government agencies, at $1.57; and when the news reached headquarters word came in to make the price $1.62, and the sellers who had been perfectly satisfied to sell at $1.57 were given $1.62. That, we contend, is not the way to run a business. The only thing that is involved in this emergency is the maintenance of a guaranty on wheat. The United States wants its business back; the War Trade. •Board has shown that, this morning, in taking a good many things off the list. I understand the last restriction on coal was taken off recently. Of coufse, the coal men have to compete with other men for business outside of the United States. There is another inatter we must not overlook, and that is the social and economic conditions. There are in this country the seeds of a weed that has grown in Europe until it threatens to crows out all productive plants. If the President of the United States were here and could realize the possible growth of this weed, he would resent the attempt to give him power to create a price for wheat to the consumer which was not in line with the conditions in other parts of the world. ' He is begging us to send food to these people, to satisfy thfem, so that they may not disorganize governments everywhere. WHEAT PRICE GUARANTEED BY CONGRESS. 23 He says we must go so far even as to give away food if necessary. There is nothing like that advocated here; but the principle is there. What we need m this country is prosperity; we must have it. We must quiet this social unrest. Food, on the basis of world values, and not simply on the basis of artificially controlled domestic conditions should be given to the people of this country, no matter what it costs this Government. History will show, the history of the grain crops will show, that with prosperity we have always been able to take care of big crops; but when we have had hard times we could not take care of a Tittle crop at a becent price. I think statistics will bear me out absolutely on that. Consequently, if we are anticipating a big crop, it is absolutely essential we should have prosperity. The high cost of living is sornething that has come because of the war; it is something we want to get away from; there is a public demand for it. Why not hit at the keystone, and that is the price of wheat. It is the keystone of the present high cost of living; it affects so many other commodities. Cheaper wheat means cheaper chicken feed, means cheaper live poultry, cheaper eggs ; cheaper wheat, with the removal of restrictions on milling, so that a larger proportion of wheat can go into dairy feeds, bran and middlings, and so on, means cheaper feed. I mean after it gets started it means cheaper feeds for our dairies, which means cheaper milk and cheaper butter. The whole thing, gentlemen, will tumble if you knock out that keystone, the keystone of the high price of wheat. The problem is greater because of that broken law of supply and demand. We probably in all our history shall not find a better example of the fact that high prices stimulate production and curtail consumption, whUe low prices reduce production and increase con- sumption. Now, how better can we provide for the use of what promises to be a big crop than to permit the people a price on wheat according to the law of supply and demand ? If it be lower, it' will help readjust that situation, because the amount of acreage that is going to be planted this year (I mean the amount of feed-grain acreage that is going to be planted this year to wheat) is goin^ to disarrange the whole program ; but by a year from now, unless I am mistaken, in case you have free markets for everything, you will have the extra wheat that is raised in those feed lots — that is, corn land, oats land, and barley land — ^you will have that wheat sell at a feed price, and necessarily so, because we must have those feeds. The one commodity in which we have a monopoly of the world's markets is fats. The herds in Austria, Germany, and Denniark, where they used to raise plenty of hogs, have run down; they will not only need fats there, but they will need our brood animals. There is going to be that demand for fats. Now, if we haven't corn, oats, and barley to feed those hogs, we have to feed them wheat, and the two classes of grains will come together on a feed basis, untU that surplus is absorbed, until that dilFerence, until that extra surplus of one or a deficit of the other, is adjusted. It must be so, and it would be a good thing to have it so. It will not continue so, because when you get into that sort of a position you will find next fall your winter- wheat man will say I won't plant so much winter wheat now; I will hold my wheat over; I will wait on this thmg, because next year I do not want to have a lot of extra wheat at a low price. And they will plant that acreage in corn, oats, and other grains, and you will get. 24 WHEAT PRICE GUAKANTEED BY CONGRESS. a year from this coming season, a readjustment; you will have a smaller acreage of wheat, without any guaranteed price, and you will have a larger acreage of feed grains. Thus will come the swing the other way and you will get back to a reasonable level for both grains and there will come what might be called the historical relative value of the different grains. We have to expect low prices; there is no use of denying it; condi- tions seem to indicate it. We can not expect, if we go on a world's basis, to maintain anything like the guaranteed price without some artificial means such as I have called attention to before. The situa- tion abroad is that Argentina and Australia have a large exportable surplus which they have continued to hold because of the transports^ tion situation, which is now being relieved. Mr. McLaughlin. How large, relatively ? Mr. Gates. The memorandum transmitted to you by the Bureau of Markets and the Food Administration jointly will give lyou that, Mr. McLaughlin. I think you' will find those figures there, and I do not dispute them at this time because they are oflBioial and they are the best we have. They have also recently come out, as I understand, with a statement that Europe and some other coimtries will need to import something like 728,000,000 bushels, and those figures will be available to you through the department. Mi. Anderson. That is considerably above the normal importa- tion, is it ? Mr. Gates Very much; yes, sir. Mr. Haugen. Can you approximate the amount of the surplus in this country ? Mr. Gates. Yes; approximately. But I beg that you do not take those figures as entirdy correct. Argentina, including the crop that has just been harvested, wiU have about 175,000,000 bushels* I understand there were about 45,000,000 left from the last crop, and the surplus from the new crop is about 130,000,000 bushels. Mr. Haugen. How about Austraha ? Mr. Gates. Austraha, as I understand, because she has been out of the market for a long time, has something hke 210,000,000 bushels. That is according to the department's figures. Mr. Haugen. I raised the question because I understand on the best authority Austraha has about 45,000,000 bushels and Argentina about 120,000,000 bushels. That goes to show how wide a difference there is in the estimates of the various bureaus. Mr. Gates. I only quoted the figures of the Government Depart- ment. It is known there is a large surplus in Austraha, and it is sup- posed some of it has been damaged because of the lack of storage and the lack of other room to hold it. Mr. Haugen. You would consider Mr. Barnes an authority on the estimates of the surplus of any country, as naturally he has given it a great deal of thought ? Mr. Gates. Oh, undoubtedly he has given it a great deal of thought, sir. But always in Chicago, in the absence of anything better, that could by any construction be considered as better, we take the official figures of the departments in Washington as the most reliable statis- tical statement of the crops. Mr. Haugen. After all you have accepted Mr. Barnes's estimates as reliable as those of any man ? WHEAT PRICE GUAKANTEED BY CONGRESS. 25 Mr. Gates. Would you consider them as reliable as those made by the departments of this Government ? Mr. Haugen. Or anybody else. Mr. Gates. I would ask you that. I would never be willing to grant that individual opinions were as good as those that have been carefully prepared from Government sources. Now, if you consider his statement at this time a Government source, I would not question it. But the main figures we have available Mr. Haugen. Occupying the position he does, it is natural to assume he has investigated and he is as well informed as anyone could be ? Mr. Gates. That would be a natural inference. May I ask, Mr. Chairman, being inexperienced in speaking, that I be permitted to finish before questions are asked of me ? The Chairman. I think that is the more orderly procedure. Mr. Gates. Our problem at home is complicated in the same way by an increase in acreage, as we have seen, and while we might wish there were some way to discriminate between the man who was simply planting wheat as a profiteer, because of the high price, and the man who would have planted wheat anyway as a patriotic measure, I see no way of definitely determining that, and, conse- quently, we assume that can not be undertaken. Now, as I say, this violation of this law has increased the loss the Government must take, if it is willing to take its punishment for a violation of the law. But the stilling of the soci£|,l unrest, the stimu- lation of prosperity that would follow the assumption of such a loss would be well worth the money. I am a little bit old-fashioned and I dislike to spend money unless I get my money's worth. If you think you are being held up, you always have resentment toward the power that holds you up. I think that the Government can not afford to be a party to holding up to the American consumer this price in order to save the Public Treasury, and to putting the tax on the per capita basis, hitting particularly the man with a large family, whose situation is such that he is more likely to be misled by this movement toward Bolshevism, or whatever you caU it, than any other class we have in the country. Let me say that such necessity for the economic readjustment, the blame for the necessity for that readjustment, shotQd come where the violation occurred. It was the Government that violated this law. The exchanges simply fur- nish the machinery for handling this business; they wUl not be justly blamable for any readjustment to the law of supply and demand; they can not justly be blamed with such a loss, even though it fall heavily on the United States Treasury. We have, for the exchange method of handling grain a very good authority. This is an extract from the address of the president of the Grain Corporation to the grain dealers assembled at Buffalo, N. Y., in September, 1917. MR. BARiraS'S, ADDRESS BEFORE GRAIN DEALERS OF BUFFALO. I have always been an advocate of the grain-exchange system of the gi'ain business. I believe it has justified itself by 20 years of demonstration to be the most efficient and most economical method of translating the fai'mer's produce into the people's food. I believe the American exchange system is far more perfect as a means of that commercial conversion than any grain system which is in existence to-day in any country or in any clime. I believe that in wheat, especially, the dailv and hourly and minute fluctuations of a price, which to the unthinking record only the 26 WHEAT PEICE GTJAKANTEED BY CONGBESS. speculative instinct and the opportunities for gambling, are in effect the recording of intelligent appreciation of underlying factors on which intelligent business must always base its operations. When you realize that wheat is the prime food of the world, and that it is a crop which almost consumes itself exactly each year, and- that it ifi a crop of which some portion is being matured in some section of the world every monl^ in the year, and that the climatic development of each month adds or detracts from the total supply available for a world's yearly consumption, you will see there is a real reason for daily adjustment to the conditions of growing crops, to a reappreCia- tion of the demand to the existing supply, which must be regarded by intelligent business men from d^y to day and year to year. . But that applies only when the world is free to respondto its natural influences; when the commercial competition of Australia and Argentina, of India and Russia, and Canada and the United States, was free to enact their parts; but when war broke that chain of communication, when the relation between markets was severed as it never had been before, we face a condition which requires a new order of things. When constituted authority put its heavy hand on the commercial play of supply and demand, it became necessary for us to readjust our methods of business or pensh. I have no sympathy with Government control of foods, or of any article of commerce in which there is a fair and assured play of commercial factors, except that which is forced by war necessity; and that condition is with us to-day. Further, Mr. Barnes's address to the council delegates of grain exchanges in Chicago, January 16, 1918: I have often argued, and I am ready to argue at any time, that the American system of markets has been the most intelligent development of business science in the marketing of any of the stable and primary crops. I know that there are abuses, just enough of them on our exchanges to furnish the basis of unintelligent criticismj I know that some of the men engaged in the grain business on our exchanges scarcely know the reason for the existence of the exchange. I know that some of them hardly comprehend the intricate machinery which is so simply manifested to them in the quotations and fluctuations posted hour by hour. But I know, and so do you, when you think far enough, that a crop of primary food of the world, such as the wheat crop, is and of necessity must be of vital interest to all traders of the world and e^e- cially those who believe that by intelligent anticipation they have a right to live in the machinery of trade. I know that what has seemed to the uninteUigeiitithe recording of senseless fluctuations, the evidence of manipulation and extortion, 'is as a matter of fact recording of the most intelligent attempt to forecast and anticipate the adjustment of supply to demand in that which the world must have. We have had recently published in the press statistics in regard to the clean-up of this year's crop, and the president of the Grain Cor- f)oration has assured us the demand for the next few months is very arge. There is no question about getting back, I would not advocate trying to get back to this law of supply and demand from the present situation until after the signing of peace. The machinery is all there to do it; it would require no additional legislation; but if the figures of the president of the Grain Corporation are correct, the problem for the next year would be much simplified because he has stated the surplus from the 1918 crop will be cleanedup. I understand it has also been stated that 50,000 tons of Dutch shipping are on the way to take wheat at the high price, even though they might go down to Argentina and get it at the price of $1.26. But I wish to say to remove the visible supply of food grains in this coimtry between now and the 1st of July, would require the loading of 50,000 tons per day for every business day between now and the 1st of July — some- thing that was never done in the history of the country so far as I know. It is understood, too, that the Winnepeg Exchange is to be opened. They have no guaranty on the Canadian crop for 1919 and consequently are free to go ahead. Suppose they reopen and help to establish a world's market, because no one exchange estab- Ushes a world's market — suppose they help estabhsh a world's mar- ket, and we do not open; we maintain an artificially high price, where WHEAT PEICE GUABANTEBD BY CONGEESS. 27 is the business going to go ? It is going to go to our neighbor over the line. People become accustomed to handle their business through certain channels; kept out of those channels they seek another one, and once having taken it they are not likely to come back to the other. So that we may lose permanently much of the grain trade of the world, in so far as it applies to helping to determine the values of grain in the world's markets. Our remedy is exceedingly simple; it is simply financial legislation to care for the guaranty and to return to the prewar conditions and opportimity for the exercise of individual initiative. Now, let us see the United States through its Government, let us see all the people give all the peo^ a good example of what a man who violates the law should do. We have broken the law; now are we going to quibble about it; are we going to take appeals and try to postpone this penalty? If so, when is it going to stop? Is it going to stop with the expiration of the period of the guaranty ? Let us suppose that the agency, whatever it is, has on hand a lot of wheat the 1st of June, 1920. What are you going to do then, continue for another year because you have that surplus on hand ? It is not con- ceivable. We must go back to this law of supply and demand some time; let us do it now. Again I want tq say, anything I have said has been dealing with principles and not with personalities; and I want to thank you for being so patient and to beg your pardon if I have offended. (Papers submitted for the record by Mr. Gates are as follows:) In an official statement of the United States Food Administration, December 1, 1918, No. 8, we find a hunger map of Europe, showing where, according to the views of the Food Administration, Em-ope needs food, and advertising America's food pledge of 20,000,000 tons. In a statement cabled from Paris January 26 the United States Food Administrator said: "We are prepared to export at the rate of from 15,000,000 to 20,000,000 tons," a voluntary reduction of 5,000,000 tons from the advertised pledge, not because we have not abundant supplies nor because there are not ships in which to carry the supplies, but because the Food Administration evidently has learned that Europe does not need in excess of 15,000,000 tons of food. The world's shipping situation is indicated in a statement by Sir Albert Stanley, president of the British Board of Trade in London, January 25, in which he is quoted as saying that more shipping is available than there are cargoes for the shipping. This accounts for the tremendous slump in ocean shipping rates which have prevailed within the last 30 days and confirms the statement of Sir Albert Stanley of the British Board of Trade. We also find in George Broomhall's Corn Trade News of December 24, 1918, the following statement: "Fifty thousand tons of Dutch shipping lying idle in American ports are to be dispatched to South America with cargoes for Brazil, Argentina, and Uruguay and will eventually load grain for Holland." Exhibit A. [Extraote from the Corn Trade News of London, Deo. 24, 1918.] world's wheat situation. Supplies of foreign wheat to our mills continue to be on liberal scale. The bulk of the offerings consist, as hitherto, of American winters; but sales of hard wheat are more in evidence, and we have also heard some mention of larger supplies of Australian: The steamers recently dispatched to Australia will certainly bring some liberal sup- plies for the spring. With regard to actual quantities of grist, there is official confirma- tion that stocks in this country are very liberal, and we know that there are very good 28 WHEAT PKICE GUABANTEED BY CONGBESS. supplies in North America, Argentina, and Australia. Prices in the United King- dom and North America remaia unchanged; Argentine markets have eased moder- ately, and Buenos Aires quotations show a reduction of 25 cents to 30 cents per quintal on the week. Concerning Australian shipping prospects, we have a statement from Sir James Maclay that the Government has sent out a large fleet to load wheat and other food- stuffs, and a Melbourne cable mentions the expected early arrival there of 29 steam- ers to load wheat. The present outlook for tonnage must be considered distinctly encouraging. The daily shipping reports tell us that numbers of vessels are arriving and departing; we hear of a glut of tonnage (these steamers are mostly small ones and not suitable for long vowes) at the coal porta of South Wales; we know that con- struction is going on rapidly whilst losses from submarine attacks have ceased; then, we know, too, that Germany has returned the ships of the allies, which she seized in her ports at the beginning of the war, also that she has to place at the disposal of the allies the 2,500,000 tons of German shipping which has lain almost idle in her home ports since the beginning of the war. The first report about the German ships stated that they were to be placed at the disposal of Mr. Hoover for the conveyance of food-, stuffs to Germany, but we felt very doubtful whether this was correct, and subse- quently more exact information was issued saying that the tonnage was to be placed at the disposal of the allies and pooled under tiieir control. We have little doubt that some of the steamers will be used to convey foodstuffs to Germany, but others will be employed for the conveyance of goods to allied countries as and when required. The last word on the tonnage question is from Sir James Wilson, K. C. S. I., who sums up the position by saying that * * * "the supply of shipping in the world will soon be found equal to the demand for shipping, and freights wxU fall to a level not much more than double the rates which were current before the war." With all available shipping facta before us 'We can confidently repeat that the position is. very favorable from the poiut of view of importing countries. W '^'^ IJf^liAMMM (The committee thereupon took a raoess uniil 2.30 o'clock p. m.) AFTEE RECESS. The committee resumed, pursuant to the taking of recess, at 2.30 o'clock p. m., Hon. Asbury F. Lever (chairman) presiding. The Chairman. The committee will come to order. If agreeable to the committee, in order to accommodate Mr. Van Dusen, of Min- neapolis, we will defer the cross-examination of Mr. Gates until we can have the statement of Mr. Van Dusen, who desires to leave this afternoon on account of some business arrangements with the Senate. STATEMENT OF MR. F. C. VAN DUSEN, OF MINNEAPOIIS, MINN. The Chairman. Please state your business. Mr. Van Dusen. Grain business. Minneapolis feels as though the Government guaranty on the price of the 1919 crop should be made good, as I think we all do. She also feels that it is of the greatest importance that sufficient money be appropriated by this bill so that any loss which might be sustained in the handling of the crop may- be taken care of, and also so that there would be siSSicient credit back of the Government agency to enable it to borrow money to carry on the business, as it will have to if it takes over as much grain as prob- ably it will be required to. As has been stated this morning, the aggregate of winter wheat is large, and the prospect of a crop at the f)resent time seems quite favorable. It is also expected that quite a arge increase in the acreage of spring wheat wiU be sown. We are, however, a long way from a crop; it may be that we will raise as WHEAT PEICE GUAEANTEED BY CONGRESS. 20 much wiieat as some estimates have been made; it may be that we will' not. The winter wheat is in a condition now where it possibly could be easily damaged, so that any estimate that is made of what will be raised during the coming year is a guess, and one man's guess is about as good as another's. As to how the next year's crop should be handled, we think that we all would like to see the grain trade restored as the grain business functioned along the lines that it has been previous to the war. Gen- erally speaking, I believe that the grain in this country is handled as scientifically and on as small a margin as any business that it would be reasonable to compare it with. We do think, however, that as long as the Government guaranty is in existence it is impossible to turn the trade back to the lines under which it had previously been handled, and it, is hoped that when the guaranty has been re- moved it can be. As long as the guaranty is m force some Govern- ment agency must be employed to make that guaranty effective. We think that the Food Admiaistration Grain Corporation, which is offi- cered by able men who have had a great many years of experience, is the best agency to handle the proposition and to make the guar- anty effective. As to a plan, it is altogether too early to make a plan. A plan that might be made that would apply to a twelve hundred million crop might not be a wise plan on a crop of half that size, or vice versa. Therefore it seems to us as though there ought to be broad legislation and as broad authority given to the President to handle this propo- sition for the coming year as you gentlemen who have the handling of that can see your Wjay clear to make it. Leave it with him to designate such part of that authority as may seem wise or best from time to time. The directing in the bill, if it should seem to you to be wise to do that, to have this agency nam.ed, we would be pleased to see the Grain Corporation named. We do think, however, that anything in it that might direct how the crop should be handled would be imwise. It might embarrass the corporation, or the agency, in carrying out details. The Chairman. Have you any further general statement, Mr. Van Dusen ? Mr. Van Dusen. I do not know of any. The Chairman. Then, you disagree with Mr. Gates entirely in this proposition ? Mr. Van Dusen. Yes. The Chairman. You think it is absolutely necessary for the Gov- ernment to continue some kind of control ? Mr. Van Dusen. I do. The Chairman. What do you say as to Mr. Gates's proposition, that at the end of 1920 you wiU have a surplus of wheat on hand, at the end of the guaranty time; that would be June 1, 1920 ? Mr. Van Dusen. Of course, that depends largely on the size of the 1919 crop. If the crop is very large, I think there would be a surplus. The Chairman. Would you have the bUl so restricted as to absorb any sm-plus in the Course of time ? Mr. Van Dusen. I think you would have to. As to the amount of the appropriation that the bill might carry, it does not seem to me necessarily that that means the loss that should be sustained. I 30 WHEAT PKICE GUABAWTEBD BY CONGRESS. think the guaranty to the farmer is one obligation that the GoTrenir. ment has. I think another obhgation that perhaps should have equal weight is to make the loss to the Government, and therefore to the taxpayers, equally as small as could be consistently managed. The Chaieman. I think there is something in the suggestion that if we are going to drop the burden on aU this business on the con- sumer, that you probably would strike a class of people whe are hardly able to bear the burden. It might be better to let the loss come through the Treasury, rather than through the consuming public, which, after all, constitutes the Treasury. Mr. Van Dusen. I think the bill as drawn ought to be sufficiently broad so that this and other matters of detail could be worked out by the agency that has the handling of it. The Chairman. And you think we would have to control impor- tation ? Mr. Van Dusen. Yes. The Chairman. What about licensing of exports ? Mr. Van Dusen. I should think the exports would have to be con- trolled. The Chairman. You would not reopen the exchanges ? Air. Van Dusen. No, sir; not to future trading. The Chairman. Would it be possible to open the exchanges under strict license and regulation as to short selling, permitting the Gov- ernment to stabilize the situation if manipulation should be in the air ? Mr. Van Dusen. I think it would be unwise to do it. Mr. Young of Texas. I think we all believe the Government must make good this guaranty out of the Treasury. Then the next propo- sition is that the Government has the wheat on hand, the entire crop. We have a duty to the consumers in that way. My individual view is that the consumer ought to get wheat, flour for bread at a fair market price. if we get back to normal conditions. The thing I am worried about is if we are going to try to help the consumer so that he win get "his flour at a reasonable, price which he ought to have, how are you going to protect the Government in this loss between what the consumer might buy, his flour at and the $2.26 that the Government has had to pay for the wheat. What suggestion have you as to that, as to a law that will guarantee that the consumer is going to be properly protected and at the same time the Treasury not be forced to sustain too great a loss ? Mr. Van Dusen. I would think, first of all, that it is, as you say an obligation of the United States to make the guarantee good. As to the loss, if you have to take the maximum loss, the place to settle it is right at the country points, with the farmer, and in that way you wiU sustain the maximum loss. It seems to me as though it might not be inconsistent, however, to leave the question of the price at which wheat should be sold for export, as well as to the millers, from which the flour should be made, and on which basis it would be sold, to be worked out according to the conditions, the world conditions at various times. Mr. Young of Texas. Here is a thing I can not get through my mind on the proposition. I am not familiar enough with wheat to know, to be able to form a judgment satisfactory to myseK, but I do know about the cotton market. Two exchanges in this country play quite an important part in handling all the cotton crop. The cotton WHEAT PRICE GUABANTEED BY CONGRESS. 31 crop of the South has had no price fixed upon it by any act of Con- gress; they have simply been able to go into the market and get ■what they could. This is the fourth short cotton crop in succession. The crops range from 10,000,000 to 11,230,000 in the present year and the normal crop between 13,000,000 and 14,000,000 bales, so the world is short. For the last 10 days spot cotton has been worth in my home town and every other cotton-growing community 26 cents to 28 cents a pound. The exchanges, at New Orleans and at New York, have been so manipulated, there being no Government control anywhere, that they have got the market forced down until the quotations have gotten as low as 19 cents, when that same cotton was selling as spot cotton at 20 cents, having exchanges that ought to be able to restrict values and the values be something like the real value of the article. But they have not done it. We know that cotton is worth 35 to 40 cents if we can get it in the markets of the 'world; everyone knows that, when you take these short crops we have had. Now, as I say, there is no Government agency to handle these exchanges. The only reason that the cotton did not drop down to 19 cents, as quoted on the New York Exchange and the New Orleans Cotton Exchange is the fact that the farmer who raised that cotton did not sell. He is holding it. That is why he is able to keep that price up to where he can get something like what it is worth. I am not making any charges against your wheat exchanges, because I do not loiow how these exchanges are handled, but if they were to take the same course the cotton exchanges of the country have taken, they could bring the wheat that has cost the Government 42 .2 6 down to 50 cents a bushel. That is what I want to dodge. Have you any kind of suggestion how that can be prohibited ? Mr. Van DusEN. I would not want to make any statement as to handling cotton. Mr. Young of Texas. I am just using cotton as a parallel. Mr. Van Dusbn. I think so long as there is a guaranteed price on wheat it is impossible to function in the ordinary way as the grain business has heretofore been handled. Therefore I think it would be unwise to open the exchanges for future trade. There is o^ne thing I overlooked saying, which I would like to say, and that is that I think it would be unwise to authorize the Government to either buy or build elevators or warehouses, for two reasons. One is that it > would be impossible to build elevators and get them completed after it was known what the crop was and what the necessity for such ele- vators would be, and to get them completed in time to be of any serv- ice or use for next year's crop. The Chairman. Is there any danger of a rush of wheat on the market as soon as it is known that the Government is going to make this guaranty, so that it would clog transportation and overburden your storage space ? Mr. Van Dusen. I think there is every reason why we should ex- pect the crop to move promptly. It is a large price; if it is handled along the Imes that it was been handled last year there is no incentive to the farmer to hold it back, and there is every reason why he should The Chairman. Do you think he would market it so rapidly that there would not be storage space ? , , , i. -,• Mr. Van Dusen. I think it would depend largely upon your ability to export wheat. Ib7124r-19 3 32 WHEAT PBICE GUABANTEED BY CONGEESS. The Chairman. In other words, your own idea is that you have got in operation practically the same machinery you had before_| Mr. Van Dusen. Yes, sir; excepting I do believe there is a short- age of storage space at the seaports, but throughout the country there is all the elevator space necessary. Tljie second reason I wanted to bring out for thinking it would be unwise for the Governenmt to build storage or buy it was that I do not thmk the Government ought to get into the grain business, and as soon as they had the investment in properties there would be perhaps a real business reason why they should continue to be in business. Mr. Eainet. Your suggestion is that the Grain Corporation, or such agency as the President might create, would have very large authority, extendmg to determining what the reduction in the price, if any, should be made in the food products of the country. Is that right ? Mr. Van Dusen. That is correct. I think it must be that way. Mr. Rainey. Would you leave the entire matter to the President and the board ? Mr. Van Dusen. The President and such agency as he might ap- point, you mean ? Mr. Rainey. Yes. Mr. Van Dusen. Yes, sir. I think when that agency is appointed they ought to be able to control it, but without that broad authority, if they were restricted, it would be decidedly unwise. Mr. Rainey. Do you look for any general (Jemand in the country for a reduction in the cost price of wheat and food products ? Mr. Van Dusen. I think you are perhaps better advised on that than I am. Mr. Rainey. We are tied up here pretty closely and are not in as close touch with the people as you are, but we imagine there would be quite a demand on the part of the people for a considerable reduc- tion, and it might be irksome to them if the world price of wheat was low to have the Government do anything that would keep the price of wheat and the cost of food products high, in keeping with the guaranteed price of wheat. Mr. Van Dusen. I think there are a good many questions that are involved in that question of world price, or what might be con- sidered the world price, on our grain. I think the financial condi- tion abroad enters mto it to a very large extent. If those countries are obliged to look to this country for credit to enable them to buy grain, certainly this country should have the preference in the selling of it. Mr. RaIney. Then the President and his agency should be able to influence, and perhaps arbitrarily, the world price for wheat ? Mr. Van Dusen. I would not say that. They might be able to sell our grain to better advantage than possibly grain coming from some other countries. And another thing, the question of shipping enters into it to quite an extent. We coiild get to European coun- tries cheaper than some of the other graia-exporting countries, excess-raismg countries. Mr. Rainey. It might be wise, or it might not be, but would you advise vestiQg authority in the President to maintain, if he thought best, a high price for the world wheat, and to compel the wheat con- suming public in this coimtry to buy flour and other food products at that nigh price ? WHEAT PKICE GUAEANTEKD BY CONGEESS. 83 Mr. Van Dusen. I would be entirely satisfied to leave that to the judgment of the President and such agency as he might appoint to handle this crop. Mr. Rainey. That is all. The Chairman. Any further questions ? . Mr. Hutchinson. Do I understand you consider the function of Congress to appropriate $1,250,000,000 to the Grain Corporation and the President can do these things ? Mr. Van Dusen. I am very much afraid myself that to under- take to direct how it shall be handled will so complicate the proposi- tion as to make it unwieldy. Mr. Hutchinson. Do you think it is right for a grain corporation to put an embargo on and say that people shall not ship their .wheat and anything else ? Mr. Van Dusen. You mean, this year ? Mr. Hutchinson. This year or next year. It will be wiser next year than this year. Mr. Van Dusen. I think the embargo has been forced because of our export conditions. Mr. Hutchinson. You think that is the reason ? Mr. Van Dusen. Yes. Mr. Hutchinson. Do you have any dealings with the farmers themselves ? Mr. Van Dusen. Yes; we operate a country elevator. Mr. McKiNLEY. Do I understand you would have the Govern- ment guarantee all this surplus of the 1919 crop regardless of whether it was delivered in 1920 or not ? Mr. Van Dusen.- No; I think the bill states it will not be delivered. Mr. McKiNLEY. Do I understand that regardless of the law of supply and demand you would give the President of the United States the absolute power to tell the people of the United States what they should have to pay for their food next year ? Mr. Van Dusen. I think it is explained in this way, that whenever surplus wheat should be exported from this country, that should be used as a basis on which to seU wheat to millers and the flour to the consumers in this country. Mr. McKiNLEY. Is that your idea of fixing it that way? Mr. Van Dusen. I would be willing to see it fixed that way. Mr. McKiNLEY. It is true, is it not, that to have any advantage for the guaranteed wheat in the way of elevator capacity, the ele- vators would have to be completed by August, 1919 ? Mr. Van Dusen. I should think then, or very soon after August, 1919. Mr. McKiNLEY. Is it possible to build the elevators by August, 1919? Mr. Van Dusen. I would think not. Mr. Young of North Dakota. I gather from what you have said that you bplieve with the present condition of world exchange and the financial condition in the different countries, that it would not be possible for the grain dealers as they operated before the war to finance the 1919 crop? Mr. Van Dusen. I do. 34 WHEAT PRICE GUAKANTEED BY CONGRESS. Ml. Young of North Dakota. I uuderstand you have also stated that the storage capacity of the country will be less this year, prob- bably « Mr. Van Dusen. I did not know I said that, Mr. Young. Mr. Young of North Dakota. You said something about having increased storage bmlt, and I understood you recognized the need for extra storage. Mr. Van Dusen. I said I thought it would be unwise to authorize the Government to build additional storage for the' handling of next year's crop. Mr. Young of North Dakota. The statement was made to some of us that the available storage for the 1918 crop was about 500,000,000 bushels, but that dm-ing the 1919 crop, by reason of the fact that other hues of business are going to be unshackled, that a whole lot of that storage will not be obtainable for the 1919 crop, and that it might be necessary to make some arrangement with farmers to store the grain on the farms, so as to hold it back, and make some allowance for storage. Mr. Van Dusen. The Grain Corporation, I understand, has with considerable trouble compiled figures showing what the grain storage is in this country, and if I am not mistaken mose figures are between 900,000,000 and 1,000,000,000 bushels. Mr. Young of North Dakota. That would include practically the graineries on the farms, too, would it not? Mr. Van Dusen. No, sir; those are simply the figures from the licensed companies that are now doing busmess. Mr. Young of North Dakota. Can't you conceive a situation that may arise next year, whereby it may be necessary to ask the farmers to hold the wheat in the graneries because there is not enough storage, or because it may not be exported fast enough, and it may be desir- able to have them hold it back and make some allowance to them for that service ? Mr. Van Dusen. I can not see any reason why all of the storage capacity that was available last year should not be available next year. I can conceive of how the storage can be blocked if no grain is shipped out of the elevators, but I can hardly conceive of any such condition as that. Mr. Young of North Dakota. Have you heard it proposed any- where that it might be desirable in handling the grain this yeai- to make some little inducement to the farmers to hold it back and allow a little storage compensation, so as to avoid congestion ? Mr. Van Dusen. Yes; I have heard it this year and last year, and I think that a very imfeasible proposition. Mr. Young of North Dakota. There was an experienced grain man who made the statement that the available storage womd be cut down as much as 100,000,000 bushels, and it might be necessary to make some arrangement with the farmers to store the grain tempo- rarily, and make some allowance for that service. Ml-. Van Dusen. May I ask why the storage is to be cut down this year from what it was last year ? Mr. Young of North Dakota. The statement was made to us that other lines of business have been more or less hampered during the war and that in the general loosening up this year some of the space that was available in 1918 would not be available this year. I WHEAT PEICE GUARANTEED BY CONGRESS. 35 suppose another reason would be the promise of a bigger crop this ?'ear, and if we have as big a crop as some of the gentlemen here have orecasted it might be necessary to ask the farmers to store the wheat. Mr. Van Dusen. I can not see why if the storage was there last year and available it should not be there this year. Mr. Young of North Dakota. If the crop was bigger ? You used the storage to the limit last time. Mr. Van Dusen. You probably know that the exporting of wheat during this last year has been very much interfered with for many reasons. I should not think wheat would have as much trouble of that kind next year as we had this last year, because the war, as we speak of it, is over. Mr. Young of North Dakota. One step further: The plan sug- gested by others here this morning would probably involve a settle- ment with every farmer, covering the difference between the guaran- teed price and the price at which it was accepted by the trade. That would involve perhaps a separate settlement on each load he brought in, especially if he only brought in one load a day. Do you not see that that would be an almost impossible proposition in the way of accounting ? Mr. YAa Dusen. I can, and I can also see in it an open road to a great deal of fraud. . Mr. Young of North Dakota. Partictdarly in respect to the matter of storage, if they let the farmers hold back some wheat for storage, there wiU be that question coming in, of the price at which it is accepted. The farmer may come in and say he wUl not deliver to-day, but desires to have the price fixed to-day, and it is held back. In the meantime the prices drop, and he makes delivery later. Does not that leave an opening for fraud ? Mr. Van Dusen. Yes, sir; very much so. Mr. Young of North Dakota. The expense of putting such a plan into operation would probably be very great, would it not ? Mr. Van Dusen. I should think so. Mr. Young of North Dakota. Take a little village where they have two or three elevators, and perhaps nothing more than a store and a bridge. We would have to have an accounting force right there to represent the Government ? Mr. Van Dusen. I do not know how it would be handled, but it would involve an enormous amoimt of detail, and I can hardly con- ceive of how long it might be. Mr. Young dl North Dakota. Whereas, if the other plan were worked out, the adjustment would probably be in the shape of ship- loads rather than wagon loads ? Mr. Van Dusen. I understand the way the Grain Corporation handles that at the present time is they take this grain at the ter- minal and pay for it when it is delivered to them in the sha,pe of ware- house receipts that are properly protected by such securities that the Government is protected properly. _ Mr. Young of North Dakota. It is a simple transaction. I would like to ask you also as to the market price, that was prevailing in the market at thp time the Government fixed the price of the 1917 crop ? Mr. Van Dusen. I can not recall the exact figures, but it was very much higher than the price the Government fixed. 36 WHEAT PKICE GUAKANTEED BY CONGRESS. Mr, YoxTNG of North Dakota. In your judgment the action of the Government up to this time has been distinctly in favor of the consumer ? Mr. Van Dusen. Yes, sir. In other words, I think the price would have been higher than it has been during the last two years. Mr. Young of North Dakota. So that those who have in the past asked the Government to interfere with the law of supply and demand, for the benefit of the consumer, are now asking the Government to step in again and interfere with an orderly and businesslike method of carrying out this wheat proposition for the further benefit of the consumer ? Mr. Van Dusen. That may be the interpretation. Mr. Young of North Dakota. You have been a great many years in the grain business, have you not ? Mr. Van Dusen. Yes, sir; aU my life. Mr. Young of North Dakota. Is it not your contention that the United States can be, if it wishes, a big factor in fixing the world price ? Mr. Van Dusen. I should think it could be quite a factor. Mr. Young of North Dakota. And do you not think that the pro- posal to allow the trade to buy wheat at what they regarded as the world price, would have a tendency to reduce what would otherwise be the market price ? Mr. Van Dusen. I think it is very difficult to say what the world price is to-day, and what it was yesterday. Mr. Young of North Dakota. Do you not think it would be dif- ficult to say what the world price will be six months from now, or any time next year ? Mr. Van Dusen. I do think so. As long as the shipping is short and world financial conditions are upset, it is almost an im- possibility. Mr. Anderson. Is your contention that what the consumer should pay is not an important factor ? Mr. Van Dusen. No; what I said is that I think you gentlemen would be in a better position to say than I what the price to the consumer should be. Mr. Anderson. Assuming that the woild's price, if that can be determined, is lower than the guaranteed price, there must be some way of determining the difference and fixing up that later. If we do noi do it at the source, where are you going to do it ? Mr. Van Dusen. I intended to cover that by saying that I thought the authority to sell wheat at anything less than the guaranteed price should be with the President, and he could impart that to the agency that he uses for this purpose. Mr. Anderson. If the price is fixed arbitrarily by the President without any reference to the world price, either fixed by the exchange method or determined in accordance with the price at which it is. sold abroad, what becomes of the miller and the people who are undertaking to export on the basis of the world market ? Mr. Van Dusen. I should think the Government agency ought to have control of the exports, not only of wheat but also of wheat products. Mr. Anderson. Then it is evidently your conclusion that the consumer is only entitled to whatever price in this coimtry the President or the agency who has the authority fix, without any reference to the price abroad ? WHEAT PRICE GUARANTEED BY CONGRESS. 37 Mr. Van Dusen. Based, in addition to that, Mr. Anderson, on the amount the wheat we should export should be sold at. Mr. Anderson. If you have the control of the exports in the United States hj the a;rain corporation and it has authority to buy all of the grain in the country and to sell it for export only when the world surplus has been exhausted, of course it could sell at any price it pleased, so that the price in this country would be fixed absolutely by the agency that buys the grain, or Tby the President, .instead of on a world basis, would it not ? Mr. Van Dusen. I can hardly conceive that the President or the agency that he might use, would not give due consideration to the laboring conditions in this country, and aim to See that the price of bread was made on a proper basis. Mr. Anderson. Does it not seem to you that it would be better to arrive at the difference between the world basis and the guar- anteed price by some such economic method as the use of exchanges than by the arbitrary say-so of either the President or an agency selected by him ? Mr. Van Dusen. I am afraid that so long as the guaranteed price is in force, the opening of the exchanges would be very disastrous. I can not iee where they have got anything to function on. Mr. Anderson. It strikes me we have to taJse one horn of this dilemma or the other. Either we proceed upon the theory that the Government is going to take full control of the situation and main- tain the guaranteed price, all the way along, or we have to take the other horn of the dilemma and admit there will be a difference between the guaranteed price and the price at which we have to sell flour and Dread, and adopt some method for absorbing that difference. We do not get anywhere by ignoring that fact. Mr. Van Dusen. You feel as though that ought to be directed in the legislation that is passed ? Mr. Anderson. I do not know that it is possible to do that, but it seems to me we must be able to say that there is some way of dealing, with that proposition if it arises. Mr. Van Dusen. I quite agree with you that that is a problem that has got to be handled, but it seems to me it was much better if your committee were willing to leave that in the hands of the Presi- dent or the agency that he used, than it is to try to direct it in such legislation as might be passed. Mr. RuBEY. You believe the President through his agency would be able to control the difference in the socalled world price and the guaranteed price, and give the consumers the benefit of that? In other words, do you not believe that this agency, when the world price has been estabhshed, if it is less than the guaranteed price, and the Government is compelled to sell this grain abroad for less than the guaranteed price, the agency can, by its regulations in the sale of the grain to the millers, regulate the price so as to give the public the benefit of that difference? Mr. Van Dusen. I think it could do that; yes, sir. Mr. RuBEY. And do you not think it would be a proper thing for them to do? Mr. Van Dusen. I think so, The Chairman. What effect, in your judgment, in a psychological way would the effect of the price of bread across the Canadian line 38 WHEAT PRICE GtTAKANTEED BY CONGBBSS. being 10 cents a loaf and the price of bread on the opposite side being 12 cents a loaf have on the machinery that might bring about that condition ? Mr. Van Dusen. I do not think that would be very material. Many things have sold in the two countries at different prices during the last two years. I do not see why it would make any particular difference if it should continue another year. The Chairman. You think that the price of bread in France and England being a great deal lower than the price existing here would not have its effect on our people ? Mr. Van Dusen. If there was a very large difference it would have some effect. Mr. RuBEY. Do you not think this agency of the President wiU so conduct its affairs as to avoid that great difference ? Mr. Van Dusen. I think so, if it is provided that they are per- mitted to do so. Mr. Haugen. How about the price in France, which is about $1.72 above our price? In determinmg this question inteUigently and properly I think it is necessary to first ascertain the magnitude of the proposition, first, as to the surplus at the present time. Mr. Van Dusen. The surplus in this country? Mr. Haugen. Yes. Mr. Van Dusen. I understand from the statement that Mr. Barnes made that the grain and wheat in this coimtry will practically all of it be sold, and if shipping can be provided, it wiU practically all of it be moved out of this country by the middle of the summer. Mr. Haugen. You agree with Mr. Barnes in his statement when he said positively that there is no surplus for 1918 ? Mr: Van Dusen. I certainly would take that statement as brang correct. Mr. Haugen. He states: Since the inception of the Grain Corporation, September 1, 1917, the Grain Cor- , poration has handled the following quantities of wheat: Bushels Total purchases 587, 000, 000 Total sales 445, 000, 000 Wheat on hand owned by Grain Corporation 142, 000, 000 In reference to this latter quantity, we have certain obligations which between now and the end of the crop year are estimated to materialize fuUy up to this quantity. Also an analysis of the crop position, assuming the crop estimates of the Departaient of Agriculture to be correct, would indicate that all the wheat in country elevators, mill elevators, and on farms of the United States will be needed for home consumption, or almost so; so that, as far as one can forecast five months' future operation, it looks as if the United States would probably be able to sell its entire 1919 surplus of wheat without loss to the National Treasury. Mr. Van Dusen. I have no figures on thatj Mr. Haugen. I think it was stated here this morning what the figures were. Mr. Haugen. The Department of Agriculture estimated that there were 185,000,000 bushels, but our consul in Argentina reports 245,000,000 bushels. Mr. McCall. I think he includes the whole stock on hand, and the other reports just the crop that is being harvested. Mr. Haugen. The Department of Agriculture estimates it at 158,000,000, which would indicate that we have no surplus at the present time. Mr. Van Dusen. Yes, sir. WHEAT PEIGE GUARANTEED BY CONGRESS. 3& Mr. Haugen. And that the only thing we have to deal with is the crog of 1919. Mr. Van Dusen. I believe that to be correct. Mr. Hutchinson. I understand you to state thiat we had a storage of 900,000,000 bushels of wheat. Mr. Van Dusen. This includes the terminals as well in the United States. Mr. Hutchinson. Have you seen the report signed by the repre- sentative of Mr. Hoover and also Mr. Houston, the Secretary of Agriculture ? Mr. Van Dusen. No. Mr. Hutchinson. They claim that the storage is 350,000,000. Mr. Van Dusen. I think that certainly is a mistake. Mr. Anderson. The total estimated elevator capacity for carrying wheat is probably at a maximum. You are talking about the total elevator capacity of all grain ? Mr. Van Dusen. I am. Mr. Anderson. They have obviously limited the capacity. Mr. Van Dusen. That is obviously for wheat alone. Mr. McCall of Minneapolis. You raised the question about the difference between the price of bread here and in Canada. Previous to the reciprocity act the difference was represented by 25 cents a bushel. Canadian wheat was 25 cents less a bushel than ours for many years, and nothing was heard of it. STATEMENT OF MR. I. P. GATES— Continued. The Chairman. Mr. Gates, as I understood your statement this morning, your proposition is that the quicker we get back to normal conditions, allowing the economic law of supply and demand to operate, the better in the end for the coimtry. That is your funda- mentalnroposition ? Mr. Gates. That is fundamental, yes; but it should be qualified to this extent : It woidd not be safe to get back until the business of this country and the business of the foreign countries is turned back to the people of the countries instead of being handled by the Gov- ernments. The Chairman. Do you expect that that would happen immedi- ately upon the signing of the treaty of peace, or will it be some months? Mr. Gates. It will happen over there, in all probabiUty, sooner than it will over here. The Chairman. Have you any suggestion as to the time or any- thing of that kind ? Mr. Gates. Yes, sir. We should have an open market when these restrictions, both domestic and export, are removed. When all the Government buying agencies are disbanded so that grain dealers and millers can trade direct with the grain merchants of the world; then the laws of supply and demand can function, and the Government loss be at a minimum. That can not be done immediately. I recognize that my position is that we could take that action as soon as it is reasonable to do it. That .Government agency in this country should be discontinued not only in its present form but in any attempt to perpetuate it through any newly formed corporation or combination. 40 WHEAT PRICE GTJAKANTEED BY CONGEESS. The Chairman. I do not think there is any difference between you and the committee on that, that the sooner we can get back to normal conditions the better foj- the coimtry. The question before the committee is, when we will be able to do it and how we can do it. Mr. Gates. This is my answer as to when. The Chairman. The burden of your argument this morning seemed to indicate to my mind that you feel that as soon as peace was declared it would be better to cut off all this at once; then allow trade to resume its functions. You now qualify it by saying that as soon as possible. Mr. Gates. It is to be presumed that this is a reason why the final declaration of peace wiU be deferred, to allow time for the rearrange- ment of these and other matters. The Chairman. I think you are probably right about that. What do you have to say, Mr. Gates, as to the restriction on imports ? Mr. Gates. You will not need a restriction of imports if you return to prewar conditions. The Chairman. Why not ? Mr. Gates. Because we shall presumably have a surplus to dispose of, and we shall not be at a higher level than other coimtries that have wheat to sell. The Chairman. What would be your judgment, Mr. Gates, as a grain man, as to the tendency on the part of the farmers to rush their grain to the market, just as rapidly as possible, and get their money in bank to be sure there is no slip between the cup and the lip, and thereby overcrowding transportation facilities and over- crowding grain elevator capacity ? Mr. Gates. I should say we have a fair notion of that from what they have done this year. Tbe Chairman. Give us your experience as to that. Mr. Gates. They marketed early, more freely than usual, but they did not market their entire crop. We raised in this country, accord- ing to the statement that I think you aU have, 917,000,000 bushels of wheat. Our harvest begins early in June in the South and extends rapidly to the north at the rate of about 30 miles a day. The wheat was marketed more rapidly than it would be imder normal condi- tions because, as you say, next year there would be no object in holding it up; but I think the statistics before you show tha.t up to the 1st of November, only about 500,000,000 had been marketed, and 588,000,000, 1 think, had left the farms by the 1st of December. That means that in six months less than two-thirds had been mar^ k;eted. The Chairman. Now, Mr. Gates, let me ask you another question. Do you think the shipping of the world is in any such condition as to enable countries like Argentina and Australia to compete very seriously during the next six months with our wheat in the markets of Europe ? Mr. Gates. I should think yes. The Chairman. What is the difference in the amount shipped by those coimtries and our country? Mr. Gates. That I can not state, but I think Mr. Rosenbaum will be able to teU you something about that. WHEAT PRICE GUARANTEED BY CONGRESS. 41 Mr. RosENBAtJM. It is irtlpossible to quote rates at the present time, because they are changing very rapidly, but approximately the rate from Argentina has been about the same as from American ports. The Chairman. Would that apply to normal times, Mr. Rosen- baum, or to these war times ? Mr. RosENBAUM. It does not apply to such an extent in normal times as during the war. The Chairman. We understand shipping has been concentrated. Mr. RosENBAUM. The parity has always been maintained during normal times, but not with the same exactness as under Govern- ment control. Mr. Gates. As questions of that kind come up, on which I am not personally so well posted, 1 shall have the privilege of calling on •other members of the delegation ? The Chairman. Yes. Mr. Anderson. My understanding is that your proposal this ■morning was predicated on the possibility of free exchange of com- modities under normal conditions ? Mr. Gates. Yes, sir. Mr. Anderson. Then I assume that you would regard the situa- tion as entirely different if it should be found that those normal conditions did not exist ? Mr. Gates. We know that they do not exist to-day. It is pre- -sumed that at or snortly after the oflB-cial proclamation of peace there will be such normal conditions. Mr. Anderson. That presumption, it seems to me, is rather violent, in view of the fact that England and France both are now giving sub- ■sidies to the consumers; in other words, they are buying wheat at •one price and selling it at a lower price in order that the consuming public may get the benefit of it. Therefore, it is altogether unlikely that they will be able to let go of that situation immediately upon the ■conclusion of peace. Is not that true ? Mr. Gates. That is possible, but not probable. They will probably ■find some way — the merchants of England are keen — they will find •some way of adjusting the comparatively small amount of domestic production to the import requirenients. Mr. Anderson. The credit situation, the inability of the ordinary ■commercial concern^ to arrange credit abroad, would prevent the Tesumption of trade to a great extent. Do you know anything about that ? Mr. Gates. I, know that is a problem that is now confronting inter- national bankers. Their opinion on that would be better thau mine, but I assume they will reach a satisfactory solution of the problem; it is not to be supposed that they are unable to do so. Mr. Anderson. Do you think the probabilities of the continuance ■of the allied buying pool, buying on Government account for lack of ■sufBcient private finances, is great enough to enable us to pass this legislation upon that premise alone ? Mr. Gates. If I imderstand you correctly. Congressman Anderson, if that buying were to be continued, if we were to assume that the Government of England would continue to control, then I would say it would not be safe, because we know what happened to us when the Governments of foreign nations were permitted to come into this 42 WHEAT PEICE GUABANTEED BY CONGEBSS. market and corner our market, which is what they did in the spring of 1917. Mr. Anderson. Consequently it would not be advisable, m your opinion, for the committee to draw this legislation predicated upon the idea that there will be absolutely, upon the signmg of the terms of peace, a return to normal trading conditions ? Mr. Gates. Not without the additional assurance that those agencies will be discontinued and concentrated buying will be dis- continued. Mr. Anderson. Of course, it is not expected to be possible for this committee to have that assurance before this legislation is drafted, introduced, and probably passed. Therefore, it seems to me likely that the committee in enacting legislation will necessarilj' be obliged to allow for the possible contingency of the allied pool or combination on Government account continuing. Mr. Gates. Then it should carry specific direction that as soon as- such a situation arises trade should be returned to its normal channels, Mr. Anderson. I want to call your attention to one of the reso- lutions offered by the grain trade, which, it seems to me, is subject to more than one interpretation. It is this: "Resolved, that it Ls the opinion of the grain trade here assembled, that the consimiers of wheat and of wheat products in the United States, are entitled to buy the same upon the world's price basis approximating that at wmch oiu- wheat and wheat products are sold for export." If that is predicated upon your theory of entirely open markets, it obviously means one thing; that is, that the consumer shall have the benefit, of the world's price. If, on the other hand, it is predicated upon the theory that the exports should be controlled and limited, of course it means another thing. Because, if the exports are controlled, the price of wheat in this country might be maintained upon the basis of the guaranteed price without any reference to the price abroad. I have a ciu-iosity to know upon which one of these theories this reso- lution was predicated. Mr. Gates. So have I, because if it is predicated upon the theory of anything except the substitution of those words for the market price, which we did not feel we could use them, somebodv has put something over on us, and I have foimd no disposition on tlie part of any grain men to retreat from the position that this was anything but an expression as near as might be of world price. We did not use the words "world price" because we felt that right now it was- impossible to determine the world price; that is, under present con- ditions. Mr. Anderson. It was your conception, at least, in this resolu- tion that there might be a difference between the guaranteed price and the world price, and that the consumers of this country would be entitled to the world basis ? Mr. Gates. Yes; our consumer is entitled, competing in industry with the consumer in foreign countries, to his bread on some relative basis, which was expressed in this resolution on the export basis. The only discussion that came up in connection with that was as to whether to use the word "salable or "sold." I hope if any member of the trade has a different idea of that, that he will express it because I am siu-e that nothing else was expressed by the meeting except the general thought that the people of this country should have the WHEAT PRICE GUAKANTEED BY CONGRESS. 43 advantage of a price for their bread commensurate with the price the foreign consumer pays. Mr. Anderson. Suppose we assume it is not feasible to open the •exchanges of this country, and that it is not feasible to return entirely to normal trade conditions; would it then be possible,, in your opinion, to figure back the price of wheat on the basis of the price Eaid by the consumer for bread so as to determine the difference etween the guaranteed price and the world basis ? Mr. Gates. I think that is a matter that might safely be left to the agency of the Government that under those conditions would have to make some such provision. If you are not going to have open markets, there must be some commission that must determine what the world's value is. Mr. Anderson. If there is a price at which bread shall be sold differing from the price at which it would be sold on the basis of the guaranteed price, there must be some way of determining the price at which it will be sold, and thereby determining the difference. I was "trying to ascertain whether, in yovu: opinion, that upset price could be ■placed upon the value of bread in foreign countries. Mr. Gates. Yes; I should say it could. Mr. Young of North Dakota. Speaking about the price of bread, I think it is pretty well known that before the war the price in Lon- don, a great distance from our grain fields, for a 16-ounce loaf was 4i cents, and the price paid at Washington and other portions of the ■country for a 12-ounce loaf was 5 cents. Did you or any of your friends make any complaint about what the consumer was paying for his bread during that period ? Mr. Gates. No; Taut I will tell you about that. England bought -our wheat and bought our wheat and paid for it in cash. That is, the spot wheat, and for future delivery. She sold that wheat to mil- lers in England to make bread for the people there at a lower basis than she had paid. Mr. Young of North Dakota. You mean, since the war began ? Mr. Gates. I am talking about the years 1916 and 1917. Mr. Young of North Dakota. My question was directed to before ■even England got into the war. Mr. Gates. That I know nothing of. Mr. Young of North Dakota. I wiU put the question again so that we will xmderstand each other. Before the war started, even before -we got into it, the price in England for a 16-oimce loaf was 4J cents, and the price for a 12-omice loaf in the United States was 5 cents. Did either you or any of your associates call attention to the fact that at that time the people of the United States, the consumers, were not getting their bread as cheap as they ought to, and suggest that we should enact some legislation at Washington ? Mr. Gates. So far as I am presonally concerned, I did not know about that. I did know that after the war was started and when the high price for wheat in this country was reducing the domestic consumption, the consumption in England, because of a subsidized price, which was low, increased the consumption in England. Mr. Young of North Dakota. If before the war we got along with a different price for bread than they had in. Great Britain, is it not reasonable to suppose that when we get on a peace basis again, even during the next 12 months, we can have a different price for bread here than they have in Great Britain ? 44 WHEAT PRICE GTJAEANTEED BY CONGEEES. Mr. Gates. Yes; and we probably always will, relatively.' That comes from confusing the words "bread" and "wheat." There is no question that our consumers who go to the ■ bakery and buy bread pay more than they do ia England whefe they go to the store and get it. In this coimtry they have got to provide for a delivery price to take a loaf of bread around to the house, and they have to wrap it up in. a fancy paper. All those things enter into the cost of the local bread that is furnished to the public, and on which you base your price. As I understood Congressman Anderson, he was speaking of bread,, not simply the loaf, but as an expression of the product of wheat, that went into human food, not the particular loaf. We were not discussing the difference in marketing, because as between the flour and the bakers' loaf I think you wiU find a large part of the difference in cost. Mr. Young of North Dakota. I gather that your position is that the consumer ought to get his bread as cheaply as anybody in the world in the next 12 months. Mr. Gates. Yes. Mr. Young of North Dakota. And you stake your whole theory of this hearing upon that proposition. There is another thing you mentioned, and that was that if fraud occurred in connection with the working out of your system we could have a law that would punish fraud to remedy that. Do you think that would be sufficient ? Mr. Gates. That is not all we. would have. This matter of adjust- ing the price as between the guaranteed price and the market price is a matter of auditing and disbursing, and we have organizations, governmental organizations, that handle those matters now without trouble, such as the Internal-Revenue Department, such as, for instance, we have had in connection with the Department of Agrii" culture and the Food Administration. Country elevators were asked, to report daily on how much they took in and how much they sent out, and those reports were coming every day to the zone agents who kept track of them. Furthermore, the thrashing returns were- recorded. Every thrasher had to send in a* return as to what he thrashed for each farmer. There is no reason why that should complicate the problem. It is no further complicated than it was before, and it is purely a matter of auditing and disbursements Mr. Young of North Dakota. Under the old system he sold at the elevator at a certain price. Every transaction was closed under the same rule and under tne same price fixed for the entire year. Under your proposition you have a constantly shifting price, and you have got to make a separate settlement covering every load of wheat that is brought in. Mr. Gates. You do not mean that before the war they had the same price ? You mean now ? Mr. Young of North Dakota. No; now. Your statement was that you did not see that one would be any more difficult than the other. Mr. Gates. There would be a little more detail, that is all. A man would get his money just the same. Mr. Young of North Dakota. He would get his money all right. It is a question of accounting. Mr. Gates. It is a question of accounting. The country dealer will pay the farmer just as he always did before this scheme went into- WHEAT PRICE GUARANTEED BY CONGRESS. 45 effect, the scheme we are now working of Federal control, and ipaj him on the basis of the market price, and give him vouchers which can be presented through any bank to the Rederal Reserve Bank in the district, just as any draft would go through the bank. It is not as complicated as it seems. Mr. Young of North Dakota. How would it be covering the case, where the farmer is asked to store the wheat, with the price fixed at one time, and deliver later at another time? Mr. Gates. Just make yourself clear, please. Mr. Young of North Dakota. There is an element of storage that ?'^ou have got to take into account. If it is necessary to ask the armers to nold back the wheat, and if it should be decided to allow them to do so and give them a little allowance for storage .so that they will hold it back, a great many transactions might be fixed with agreements to buy at the market price of a certain date and delivery made later. Mr. Gates. My plan does not contemplate that either.; it contem- plates allowing the grain to flow through. Mr. Young of North Dakota. If we take your plan, then we are leading up to a whole lot of machinery and complications and allowing opportunities for fraud. It does not make any difference to the farmer — ^he gets his price anyway — but it makes a whole lot of differ- ence if the market takes a drop this week as to whether the delivery be made on the basis of last week's price or this week's price. There are aU kinds of chances, it seems to me, for fraud. Mr. Gates. Take it on that question of fraud. I remember some years ago I tried to divorce my conviction about certain, commercial Eractices from the question and tried to consider it purely as a usiness proposition, and it would not pay. Suppose, for instance, there is such fraud that the farmer gets the money and the dealer does not get it. That farmer would have to sell his grain cheaper to that dealer the rest of his life or as long as he lived in the community. If the farmer had anything on the dealer, it would be a perpetual hold- up of the dealer. CoUusion is a pretty hard proposition to figure on as a general matter. Conspiracy is a very difficult thing to arrange for when you know that the United States Government is the agency you are conspiring agaiast. There are plenty of men who disregard local authorities who are scared to death when you mention the United States Government. Mr. Young of North Dakota. Here is another phase of it : Assume that the farmer sells his entire wheat crop for $2.26 and then turns around and buys back his seed for $1.25 or $1. Do you not think this plan leaves the door wide open to that kind of a transaction ? Mr. Gates. No. Any Government agency that is appointed to look after this matter, whether it be simply an auditing agency or such as has been designated, could handle that matter adequately without a^ serious trouble. Mr. McEaNLEY. Win not* the question of elevators take care of itself in the fact that there are no cars to take away the wheat quicker, that a man can not deliver it until he gets the cars ? Mr. Gates. That will probably take care of it. We had in prewar times frequently congestion at terminals. Sometimes it reached to the extent of railroads embargoing the market so that there could be no shipments to the market of grain for a certain period, but just as 46 WHEAT PKICE GUAEANTEEt) BY CONGEESS. soon as that cleared up the market was cleared up. Those are matters that have to be encountered most every year during the rush oisrim^i Mr. Hutchinson. Mr. Gates, I have been very much impressed with your statement. I want to ask you whether you are in favor of section 13, under the present conditions, that is, the regulation of exchanges? Mr. Gates. I certainly am not in favor of such a provision under normal conditions, but if in the present emergency the Government wishes such a provision in regard to wheat alone, I personally would not resist. I speak for mysdf only, and not for the Chicago Board of Trade. In normal times I should be seriou^y opposed to such a provision. Mr. Hutchinson. What we want is a solution for the handling of this wheat-grain guaranty. My idea in regard to that is that the farmer, when he takes his grain to the mill, should get the price, whatever the agency is, whether it is the grain corporation or some other corporation, and then that he should issue a certificate, with an afl&davit attached, and with that go to the local bank and get the rest of his money. I do not think it is your intention to have the elevator man pay the whole price? Mr. Gates. No ; I believe that the flow of the grain ought to be on the world basis as soon as possible. That is why I fa,vor cutting this off right with the man that has the guaranty, that is, the producer. The doser you can cut them off to the producer, the better you wil be. You will start the flow through on the normal basis of price, which materially affects easy financing, and caring for the fiow and making it normal. Mr. Hutchinson. That would not be any trouble, would it, if the man can get a certificate for his wheat, say $1 .25 a bushel, and then go to the local bank and get the money ? Mr. Gates. Then you would have two agencies instead of one. Mr. Hutchinson. You would not have the bank pay the fuU price ? I mean the Govenunent ought not to pay it back right away ? Mr. Gates. Unless the country dealer is projected himself in ad- vancing that money, then you. can not ask him to do it. If you are going to have anybody else handle it on a guaranteed price, you would have to protect all those different agencies that handle the grain. Mr. Hutchinson. Would not that be a check on any fraud that might arise, if it was handled' in that way. Let the person who buys it issue a sworn certificate that he bought from John Jones 100 bushels of wheat at $1 .25 a bushel ? Mr. Gates. That was my suggestion. I think that having two people involved, one making out the document and the other certi- fying, presents a most extraordinary diB&culty in perpetrating a fraud. Mr. Hutchinson. Then what is your idea about having this agency and fixing the price of wheat once a week, say on Monday morning, fixing it at $1.25, or according to the exigecies that arise? Mr. Gates. Well, we have had that once a year. You could make it oftener, but that is what we were trying to get away from. Mr. Hutchinson. I know, but you have got to have conditions now which would benefit the consiuner. WHEAr PRICE GUARANTEED BY CONGRESS. 47 Mx. BLaugen. I understood you to say that you favored the retiu-n of prewar conditions, substituting the law of supply and demand, in place of the Federal Government fixing the price, and that that was wholly to the interest of the consumer. Do you believe it should be done in order to lower the high cost of living ? Mr. Gates. I say that to return to the law of supply and demand, no matter whom it benefits or whom it hurts, is the only logical thing to do. Mr. Haugen. What I desire to know is what you had in mind, whether it was for the purpose of loweriug the high cost of living ? Mr. Gates. It was not for any purpose except to get back to a correct economical principle. Mr. Haugen. What is your contention, that it should be sold at the world's market price, or at the original price fixed by the Govern- ment? Mr. Gates. I think it should move through the channels of trade on the basis of the world market price. Mr. Haugen. And then that the Government should make up the difference between the world's market price and the guaranteed price ? Mr. Gates. Yes, sir. Mr. Haugen. Wliy should that be done? Mr. Gates. Because you promised to do it. Mr. Haugen. To help out the consumer? Mr. Gates. No. Mr. Haugen. I understood that your sympathies were with the consumer. Mr. Gates. No; my sympathies are with the law of supply and demand. Mr. Haugen. I though you put it differently. You spoke about the social conditions which it was necessary to take into consideration, and you spoke about certain wages Mr. Gates. That is at this particular time, Mr. Congressman. Mr. Haugen. I want to find out just where we are. What is your plan in that respect? Two plans have been suggested, one that it should be sold on the world*s market, and the other that the arti- ficial market should be relied upon. Mr. Gates. My belief is that it should be sold on the basis of the world's market. Mr. Haugen. Why should that be done ? Mr. Gates. Because that is economically sound. Mr. Haugen. At certain times, that is in normal times ? Mr. Gates. Any time. Mr. Haugen. Do you contend, then, that a grave mistake was made in not following that pbUcy during the war? Mr. Gates. I not only claim .that, but I claim that a crime was committed against the law of supply and demand by the United States Government that violated that law. Mr. Haugen. It was a crime against the American people? Mr. Gates. No ; not against any people, against a law that is higher than the law or authority of any individual country. Mr. Haugen. I think we all agree as to that. It is generally agreed that the price fixed by the Government materially cut the price to the producer probably in two, and that the producer was deprived of the market price and of the law of supply and demand, 107124^19 4 48 WHEAT PEICE GUABANTEBD BY CONGRESS. and suffered a considerable loss. Whatever the wheat grower lost the consumer gained, did he not ? What was his loss was the con- sumer's gain ? . Mr. Gates. Mr. Congressman, I understood that was done as a means of winning the war and of helping to feed ou,r allies on the other side and those associated with us in the war. Mr. Hatjgen. Exactly. Mr. Gates. I did not understand it was in favor of the consumer. Mr. Haugen. We agree on that. Now that the farmer or wheat grower has been deprived of the benefit of the law of. supply and deniand, or, in other words, has been robbed, say of $1 or $2 a bushel, is it fair, is it proper to now ask him to go down in his pocket and subscribe to a fund or pay his share in reducing the cost of living? Mr. Gates. I think, sir, that it is just as fair as it is to ask him to pay any other war expense. This matter is a part of the cost of the war and the methods that were taken to win it. Mr. Hattgen. Don't you think that having been compelled to sell his wheat for half price, he has almost done his share ? Mr. Gates. It would be pretty hard to convince me that was true. As a matter of fact, during 1916 and 1917 Mr. Haugen. We will settle this price business. I have before me the prices fixed by the various countries. Italy, for instance, fixed the pri6e of hard wheat for 1918 at $3.60, soft wheat, $3.18; in 1919, hard wheat $4.44; soft wheat, $3.96; France, in 1919, $3.84; 1918, $3.96. AH the time the United , States got $2.26. HoUand, for instance, in 1919, fixed the price at $3.30; in 1918, $2.96; Switzerland, $3.18 for 1919, $3.36 for 1918; Norway, $4.09 for 1919, and $4.58 for 1918; the United States and Canada, $2.24 for 1918. Mr. Gates. There was no price fixed for 1919. Mr. Haugen. It seems clear that the American wheat grower was discriminated agaipst as compared with the guaranteed price in other countries. '^ Mr. Gates. No ; I could not quite agree with you, Mr. Congressman. How much was the freight ? i Mr. Haugen. The freight ? ' Mr. Gates. Yes. Mr. Haugen. I am speaking, of the guaranties in other countries. Mr. Gates. All right. I say howmuch was the freight? Howmuch would the $2.26, plus freight to France, for instance, figure ? Mr. Haugen. The freight fluctuated. I could not answer that question. Mr. Gates. Would it make it any higher? Mr. Haugen. The freight certainly was not a difference of $1.70 a bushel. Mr. Gates. I am not so sure of that. It was over a dollar. Mr. Haugen. I will ask some one who is very familiar with that. I take it that it was less than 25 cents a bushel. Mr. Gates. Oh, no. Mr. Haugen. I say, a good deal of the time. Mr. Gates. I think the freight was as high as 90 cents a bushel from Baltimore. Mr. Haugen. Well, there is a discrimination of 80 cents a bushel. Mr. Gates. In addition to that, there is marine insurance, war risk, and all that sort of thing, and all expenses, and then there is 10 cents freight from Chicago. WHEAT PRICE GUARANTEED BY CONGRESS. 49 Mr. Wason. And freight after it arrives abroad. Mr. Haugen. I do not care to prolong it. You desire to be under- stood, then, that the farmer, now, after receiving a price which he has, should w;e now call upon him to subscribe to Liberty bonds and go down in his pocket and do his share in order to make up the dif- ference between the guaranteed price and the world's price? Mr. Gates. Yes; in so much as he is a taxpayer, as compared with the other taxpayers. Mr. Haugen. Do you believe that he has been used fairly in the matter ? Mr. Gates. Yes, sir. May I just interject, please? You know they had a guaranteed price in Australia. Do you know what. that was? Mr. Haugen. That is much lower. I can give it to you. It was 95 cents. Mr. Gates. Well, was not the price in this country fair to the farmer, as compared to that ? Mr. Haugen. I take it, it is not necessary to discuss Australia, because everybody is familiar with the situation there. We did not have the shipping facilities. If they had had a billion bushels of wheat, we could not have gotten a bushel of it. The wheat was there all the time, but it was not available. Mr. Young of Texas. This guaranteed price on wheat, of course, as everybody recognized at the time that Congress passed that law, was based on the principle of making safe to the farmer his extraor- dinary efforts in producing wheat that would help win this war. That was the theory on which the bill was passed. I might say in passing that the wheat farmer*! were here and advocated befo,re the committee the passage of such a law. There was not a protest against it, as the record will show; and, to get the record straight, they advocated, too, not to name any amount in that biU as to the guaranteed minimum price, but the bill, as originally drawn, left that power in the hands of the President or agency that he should appoint to name the price ; and, further, the bill, as originally drawn, by which they stood, did not make it mandatory that he should fix that price, but left it to the discretion of the President and the agency he should appoint, and that kind of bill passed through this com- mittee and passed the lower House of Congress. Then it went to the Senate, when the wheat-growing men from the western part of the Nation got uneasy about that kind of a power, and there they wrote into that law that the minimum price should be not less than $2 a bushel; and it came back to the House in that shape, and the House accepted the price of $2 a bushel, and I might remark in passing, too, in answer to my friend, Mr. Haugen, that at that time it was supposed — ^we had not been in the war but a little while— that the coxintries with which we became allied later in the war were, through their different buying agencies, competing against each other for the then wheat supply of the world. That stilted the price so high that the consumers could not buy, but when we got mto the -War Mr. Hoover, who had just been appointed, when this bill was up before this committee, stated that they were then organ- izing a system by which there should be one buying agency for ourselves and our allies, which rendered an abnormal condition, so 50 WHEAT PRICE GUARANTEED BY CONGRESS. far as the markets in this country and the world were concerned, taking away from the farmer the normal markets and leaving this one buying agency. Withthat abnormal situation brought about, the question then came up, "What are you going to do about it? Are you going to leave it to just one man, or one committee or agency of the Government, to make a price for the farmer's wheat V Congress took the position in the law as actually passed that we ought to say in the bill that this minimiun price of $2 should be named. Otherwise this com- mittee could have reduced that stilted price that we fought when the bill came up and named any price that we saw fit to name. And then when the thing went to the President he raised the ante from S2 to $2.20. So much for the history of the legislation. Now, here is the point I want to get to. There is no criticism about what we have done. We did it to win the war. We did what we thought best and it is not necessary to discuss that here. But now the war is over, we have won it, and we ought to congratu- late ourselves that we have won it with no less effort than we have, and now we have got this condition, that the farmer has a guaranteed price on his wheat and has no right to kick because the wheat fanner IS the most prosperous farmer in the United States. I want to see them get this price because we promised it to them, and we have to pass legislation so they will get it. Yet I want to see the other thing. We have 100,000,000 people to feed in our own country and I want to see them fed at reasonable prices ; and I feel it would be a crime against 100,000,000 people to force them to pay war prices for bread during peace times. AU that I want to do in writing this law is to fix it so that the farmer will be saved this $2.26 a bushel for wheat. I also want the law written so that, assuming $1.50 would be a fair price for wheat if it had not been for this abnormal situation entering into it; the consumer would have the benefit of the $1.50 price. That is my individual view ; but what I want to know is what kind of legislation we can pass to cover that kind of principle in the law, as I want to vote for that kind of legislation. Now, the law of supply and demand has been suspended; it is suspended now. It was suspended when' we fixed this $2.26 pricp. Now, we are going to open up this country so the law of supply and demand can come in and take charge of the crop after the Government has bought it. We want an elastic law, but we want to fix the law so that the farmer will be interested in keeping up the high price of wheat. Now, can you give us any sugge"sti6n as to how we could write in a provision of that sort? Mr. Gates. What would be the object of a farmer in reducing his own profit ? Mr. Young of Texas. I am a farmer, and own thousands of bushels of wheat. My wheat in Texas would go on the market in June. We have over 2,000,000 acres planted there. I am putting myself in a position of a man who has a crop of a thousand bushels. The minute I harvest that wheat, as a business proposition, I know what my price is, $2.26. The Government has assured me a market, and I take my wheat and say, "Here is your thousand bushels of wheat. Pay me $2.26 for it." But in my operation next year I have to reseed the land on which that thousand bushels of wheat grew. It would be a business proposition for me to buy back my seed at. $1.25, $1.50 or $1.75. Then, as a constmier of wheat it would be much better for me WHEAT PKICE GUARANTEED BY CONGRESS. 51 to buy flour made out of 75 cent wheat than flour made out of $2.26 wheat. Mr. Gates. Are you going to be a short seller for that reason ? Do you not raise anything but wheat? Mr. Young of Texas. I am going to sell exactly what I get, my thousand bushels, and then if I need 200 bushels to reseed my land, unless there is some protection in here, I might be able to buy that 200 bushels of my own crop right back for $1.25 or $1.50 or $1.75. Now, that is what we have to put something in the law to protect. Mr. Gates. Would it not be reasonable to look to your Department of Agriculture for a suggestion in regard to the seed wheat end of it, that is for a clause or section in the bill that would provide that seed wheat shall not be marketed ? Mr. Young of Texas. That is what we want to do now, to provide a bill that will take care of that situation. The Chairman. Do you think there is anything in that suggestion ? Mr. Gates. It could be done; somebody would do it. Mr. Young of Texas. And it will be done unless w;e can so frame the law to take care of it, will it not, and that is what I want to know now. I do not know how these other gentlemen feel, but according to my own views, I know we have got one of the hardest questions that any committee ever had, to do the right thing about this matter. Mr. Gates. It could be done; they could sell their entire crop, unless there was a provision against it, and buy it back in seed wheat. Mr. Young of North Dakota. As I understand it, Mr. Young of Texas, has asked you how you can expect to have a law of supply and demand operate in the United States when it is not to the interest of anybody in the United States to see that he gets a good price ? In fact, most of them would be interested in pounding the price down. You have advocated here that we get a condition under which the crop would be handled under the law of supply and demand. I think Mr. Young has demonstrated that you could not get that con- dition under your plan, as suggested. Mr. Wason. If I understand the gentleman, he says to return as soon as possible. Mr. Young of Texas. I think the principle is elementally correct, to return as soon as possible, but, gentlemen, Ve are in this shape. We have got to report this bill. Congress adjourns in less than 30 days-, and we have got to write a law. Now, if the Government takes it, now are you going to fix it so as to keep the Government from being too great a loser, and then fix it so that the consumer of wheat will not be unfairly treated. Mr. Gates. I wanted to say further, with regard to the matter of finances, that other commodities, as I stated this morning, are be- ginning to slow forward, and the harvesting machinery, farm imj)le- ments, copper, steel, cotton, and those other commodities are being handled by the people that usually handle them. Now, what I am getting at is, if it can be done, after all the Government has given by the promise to the farmer of a certain price for his wheat, why should you interfere with returning the grain business to the grain trade ? The Chairman. What you want us to do is to write into this propo- sition that whenever it seems wise to do it, this bull shall be turned back to its rightful owner? Mr. Gates. It must be turned back. 52 WHEAT PRICE GXJABANTEED BY CONGRESS. The Chairman. I do not think we will have any objection to doing that, because that is what we want to do, yet at the same time we get an indefinite piece of legislation. Mr. Ketnolds. Mr. Chairman, we would like to hear next from Mr. Carkener, of Kansas City. The Chairman. I think, gentlemen, we ought to confine ourselves as far as possible to the things that have not already been discussed. Mr. Gates has given a very thorough exposition of his views this morning, and we have practically agreed upon the things involved. Mr. McLaughlin. This has occurred to me. Evidently there has been a draft of a bOl, but I have never been able to see it. Some of the gentlemen spoke this morning of some of its provisions. Sug- gestions have been made to those who drafted it, suggestions have been rejected. I think pretty soon we ought to get down to some- thing concrete on this general proposition. The Chairman. You are right, absolutely. What has been referred to as a draft was a proposition that was presented to me and to Senator Gore, as the chairman of the two committees on agriculture, in the House and in the Senate, by Judge Glasgow. Senator Gore has not inti-oduced the bUl in the Senate, and I have not introduced it in the House, because, giving it a hasty glance as I could while on the floor of the House with the agricultural appro- priation bill, I did not agree to the propositions involved in it. I concluded that the best way to get at this matter was to let these gentlemen come here and give us their general views about this proposition, and then we could determine ourselves much more readily what we should do, so, therefore, the biQ has not been introduced. STATEMENT OF MR. G. S. CARKENER, REPRESENTING THE BOARD OF TRADE, KANSAS CITY, MO. Mr. Carkener. Mr. Chairman and gentlemen, I am from Kansas City, a market in the southwest, where we handle first, the move- ment of the new crop. You suggested this morning that there were four possible plans, and I would rather like to talk about them. The first one you suggested, as I remember, was to return to the prewar basis. The Kansas City board of trade is veiy anxious to do that when we can return to a prewar basis so far as the buying and selling side is concerned. In view of the fixed price, the farmers selling price, we do not see how we can, as long as that price is in effect and that crop is before us, return to prewar basis. The second, as I remember it, was a continuation of some agency that would handle the crop, and we do not see anything excepting some agency created by you, that would handle the 1919 crop. We all realize the fact that the farmer has to have his $2.26. We are fearful of an open and unrestricted market, because while we have bandied large crops in the past, we insist that our method of handling it most economical. The third proposition, as I remember it, was a prewar plan, accept- ing Government support at some point to be agreed upon. Of course a great deal would depend upon the point created, and that is problematical. The prospects now are for a very large crop. If the crop should happen to be large, or quite possibly even a mode- WHEAT PRICE. GUABANTEED BY CONGRESS. 53 rate crop, that supporting pi-ice would, in my opinion, and our opinion, oe the price, especially in heavy movement. The fourth one was the prewar, excepting that the Government should handle exports. To that we have not given any special consideration. We, of course, realize that the situation is an unfortimate one, but it is one we face and we do not see how it can be handled in any other way other than through your agency, with the broad power to limit to any reasonable sum the loss to the Government, provided the crop is heavy, as we think there is a possibility of it being. There is absolutely no reason why the farmer should hold any part of his crop back, and it would move just as fast as the facihties for its movement were offered, but imless there was some support, in all probability the result would be a very low price while the heavy movement was on. The price might come back later on. We feel that this agency could probably gradually, and no doubt would gradually take the market down to a service basis, so that at the end of the guaranteed period the remaining part of the crop could be turned back to the trade on a value basis. The Chairman. This is the difficulty that is in my mind. If we were to produce a biUion and a quarter bushels of wheat in this present year, and that is practicable, by June 1 or July 1, 1920, you may have 300,000 bushels of wheat in the hands of this agency of the Government. What are you going to do with that wheat ? Mr. Carkener. Any loss on that would have to be taken. The Chairman. Simply have to be taken? Mr. Carkener. It would have to be taken, unless they wanted to carry it over to the next year and the next year, and that would absolutely interfere with the movement of coming crops. I think the loss would have to be taken on it. The Chairman. If you hold it, it becomes a constant menace ? Mr. Carkener. A constant menace. We have to carry the pos- sibility of a lower service value. It seems to me that has to be faced, that there is a possibility of a very considerable loss on the part of the Government. I think the agency can reduce that loss from what it would probably be if the markets were opened unre- strictedly. The Chairman. So, as a matter of fact, it is possible that the Government may stand to lose at both ends on the proposition, both as the large crop begins to move and at the end of the guaranty period, where you have got the surplus? Mr. Carkener. I think there would be a loss probably right from the jump if we raise a large crop, provided it is put on some basis whereby you can still have a surplus as it becomes available. The Chairman. Mr. Carkener, have you had through the wheat belt this year this remarkable weather that we have been having in Washington, this very rnild winter? Mj. Carkener. Yes, sir. The Chairman. Some of us have had the idea that we might run into a lot of flies and bugs and insects on account of that. Mr. Carkener. That, of course, is very possible. My thought in connection with this agency, if it had the power, was that it might turn the business back to the trade most any time. If the crop should be reduced to 600,000,000 or 700,000,000 bushels, that agency 54 WHEAT PRICE GUAKANTEED BY CONGRESS. then might turn the crop back to the grain trade. Your sentiment will be such that that could be done with very little loss to the Government. I do not see how a law can be passed at this time ex- cept one creating an agency with very broad powers that would not make possible a very great loss to the Government. We are very anxious to have the business back as soon as we can, but we do not want it to come to us with a big crop and with prices depressed! say, to $1 or 95 cents, therefore entailing great loss to the Goveim- ment and criticism on the board of trade to which they would not be entitled. Mr. Wason. I take it that your proposition would be to treat it as a business man would who had an unfortunate contract* on his hands; that is, to charge it off to profit and loss. Mr. Carkener. I think that the contract is an unfortunate one, and I think it should be handled as a business man would handle it, sell thegrain as best he can, and make the loss as small as possible. Mr. Wason. That is unfortunate in dollars and cents, but fortunate in the result which was attained, namely, help win the war. Mr. Carkener. Yes, sir. Of course, the object of helping to win the war, in my opinion, was the reason for fixing the price in 1917 at a much lower price than would have obtained, which enabled us to fm-nish bread at a reasonable price to our allies. Mr. Wason. And to our own people. Mr. Carkener. And to our own people. Mr. McKiNLEY. You operate in a country which is a winter-wheat country ? Mr. Carkener. Ours is almost strictly a winter-wheat country. Mr. McKiNLEY. Do you think it would be unfair for the Gov- ernment to protect themselves to this extent, that there should be no guaranty for spring wheat raised in yom- country ? Mr. Carkener. We do not raise much spring wheat; but there will be some spring-wheat acreage. I do not think there would be anything unfair, though, in some move on the part of the Government. Mr. McKiNLEY. You do not think it would be unfair ? Mr. Carkener. No; I do not think it would be unfair on the part of the Government to adopt some move which would prevent a big spring acreage in our country. Mr. Young of North Dakota. Did I understand you to say that you expect the Government to stand the loss on the wheat simply that is exported on the price practically the same as that fixed by the Congress ? Mr. Carkener. It seems to me that is a reasonable view for Con- fress to take. There has been a good deal said about resolution To. 3 which we presented. Mr. Young of North Dakota. But is that your view ? Mr. Carkener. My view is that when that agency — if I were running the agency I would hardly feel like selling it so that if I paid $2.20 in this country I would sell it so that it wouM sell on a flour basis of $1.20 in Europe. Mr. Haugbn. You said that the Board of Trade in Kansas City wanted very much to return to the prewar conditions. What advan- tage would that be to you, or what advantage is it at present to the board of trade ? WHEAT PRICE GUAEANTEED BY CONGRESS. 55 Mr. Carkener. Well, the handling of the wheat crop under the practice in force the last two years has to a very large extent taken from us. Mr. Haugbn. In what way ? Mr. Carkener. Well in 1917 no one in the market could buy a bushel of wheat; practically everything that came to the market was turned to the Grain Corporation at the fixed price. Mr. Haugen. It came on the exchange. Mr. Carkener. It came, but it was csSled by them on the exchange. Mr. Haugen. By called, you mean bought by the exchange ? Mr. Carkener. No;, bought by the Gram Corporation. Mr. Haugen. The exchange would as soon sell to the corporation as to an individual ? Mr. Carkener. I am a member of the exchange, and I can make some money by buying and selling on the exchange. If you buy on the exchange and find some buyer on the outside and can sell to him at a profit you can make some money; that I was not permitted to do. Mr. Haugen. It was a matter of speculation ? Mr. Carkener. No; a matter of merchandising. No; I can buy wheat cheaper, being located in Kansas City, than some buyer in New York State can. In other words, he is supposed to pay me something for my location. Looking for the wheat he would want to use. Mr. Haugen. Then the present movement is, really an advantage to the shipper. It cuts off the middleman, is that the idea, or speculator ? Mr. Carkener. Well, you don't have the normal movement. Mr. Haugen. How much of a surplus are we likely to have of the 1919 crop ? What is your estimate ? Mr. Carkener. Well, what is the size of the crop going to be ? Mr. Haugen. Nobody knows; it is simply a guess at the best. Mr. Carkener. The winter wheat acreage is large, and the pros- pect is perfect. Of course, it would depend on the weather from now on Mr. Haugen. Do you consider it very good ? Do you consider the prospects very good ? Mr. Carkener. It is very fine. Mr. Haugen. And you look for a big winter wheat crop ? Mr. Carkener. Yes, sir; that is the indication at the present time. Mr. Haugen. Well, your proposition is that wheat should be handled just as equipments are handled; that is, sold, the Govern- ment to take the loss ? Mr. Carkener. I do not see how you are going to do anything else. Mr. IIaugen. Y'our proposition would be, then, that the Govern- ment should buy all the wheat and then dispose of it the best it can ? Mr. Carkener. That is the idea. Mr. Haugen. A corporation coiild be provided for, the proper machinery set up, and money made available. Mr. Carkener. I do not see how it can be handled in any other way and make your loss a minimum loss. Mr. Haugen. You are not suggesting returning to normal condi- tions at the present time. Mr. Carkener. I would want to return to normal conditions just as soon as we can, but I do not see how you can as long as you have an abnormal price. 56 WHEAT PEIOB GUARANTEED BY CONGEESS. Mr. Haugen. You do not advocate a returning at this time? ,s. Mr. Carkener. No, sir. Mr. Haugen. Can you set any time or any date ? Mr. Carkener. I imagine we would return at some time at the end of the 1919 crop year, which should be Jime or July, 1920. Mr. Haugen. By that time the whole matter would be disposed of and our obligations fulfilled ? Mr. Carkener. Yes, sir. Mr. Haugen. Then you would be in favor of setting up the proper machinery and providing the money to buy and sell the entire crop? Mr. Carkener. I do not see how else you are going to do it and make the loss minimum. Mr. McLaughlin. Is it likely the Government will suffer any un- reasonable loss unless there is some reasonable effort to reduce the world price ? Mr. Carkener. Will you repeat that, please ? Mr. McLaughlin. You speak of saving the Government some imreasonable loss. Is there any way by which the Government can suffer any unreasonable loss except by the reasonable reducing of the world's price? Mr. Carkener. There are, of course, so many contingencies that m ay enter into this that it is difficult to tell. But suppose we should raise a crop of a billion and a quarter bushels; the sellers are very good merchants and know about as much as we do about the situa- tion; the farmer would rush his wheat to the market, in my opinion, as fast as transportation would carry it. They would crowd the elevators and the wheat would have to go abroad; and wouldn't they bid for it just as low as they could? In other words, every- one is selling; I would like to sell, you would like to sell, and everybody would like to seU, if I saw a similar line of wheat coming to the market; here is the case of our market. Mr. McLaughlin. You speak of an unnatural condition that occurs more or less every year during the seed time, when there is a large quantity of wheat and the price is apt to be low. There are certain things that can properly influence the world's price — and that would not be if there was an abnormal loss on the part of the Government — that would be a loss the Government would sustain from natural causes; the abnormal loss, as I would use that word, would be a loss sustained because of unusual and perhaps improper methods used to keep down the world's price. Such methods can be used, can they? Mr. Carkener. Well, of course, the foreigners would be our cus- tomers, and they would naturally withhold bidding for any volume of wheat until the price looked very attractive to them. Supposing they get their immediate requirements from the Argentine and Australia; it seems to me natural if there was -not support to the selling price that they would make their bids on the basis which would mean a considerable loss to the Government, in view of the guaranteed price. Mr. McLaughlin. Well, that is a natural condition. Mr. Carkener. Yes, sir. Mr. McLaughlin. That is a natural condition; and under those circumstances it would seem that the Government should take its medicine; but there are some unusual and unnatural conditions. WHEAT PRICE GUAEANTEBD BY CONGBESS. 57 I don't knoTV any word to use except improper methods which may be used to keep down the world's price. Do you think the Govern- ment should have the power to interfere with those unnatural and improper methods? It seems to me it should. It seems to me, that the Government should have , authority, and exercise that authority, to interfere with the natural course of affairs and keep the prices above what they would naturally go to; and as a con- sequence the coiisumers at home would not get the benefit of the natural prices that would naturally come to them. Mr. Carkenee. It seems to me that this year is different from any -other year we ever experienced. I think we aU know that; we have had big crops before; we have had low prices; but you always had the farmer on the other side trying to hold his price as high as he ■could. Mr. McLaughlin. The farmer is going to be taken care of, any way. Mr. Carkenee. Yes, sir. Mr. McLaughlin. Then, except the machinery to take care of this, you can eliminate him ? Mr. Caekenee. I don't see how you can eliminate him; previous j^ears hel did not sell his wheat, but he would hold it for an advance. Mr. McLaughlin. And you think such a condition may exist as to make this world market price even above this guaranteed price; do you have that in mind as a possibility ? Mr. Carkenee. That is a possibility. Mr. McLaughlin. Hardly a probability ? Mr. Carkenee. Hardly a probability; it is not the fear of the tra'de at all. Mr. McLaughlin. My feehng has been that the farmer and wheat ^-grower would be taken care of, anyway, but that some machinery may be necessary to enable the Government to properly take care of the farmer. Now, I have in mind that the consumers in this country : should have the benefit of the world's price of wheat. I may be wrong about that and it may be difl[icult to bring about a situation, or to provide the machinery whereby they will get the benefit that I conceive they are entitled to. And then there is another difficulty: Gentlemen like yourself buy wheat early and the price wiU fall later. You have to have some protection. I confess I do not know as much about this matter as I would Uke to know, and the committee would, as a whole, like to have some help to frame this biU. Am I not right . about that; the trade would buy early? Mr. Caekenee. It would not buy early if the crop was large. Mr. McLaughlin. Then there would be confusion and loss ? Mr. Caekenee. I think there would be a great deal of confusion. The Chaieman. And that is the reason you suggest this agency? Mr. Carkenee. Yes, sir; that is the reason I suggested this agency. Mr. McLaughlin. But the agency to stabilize the price and not to keep it up in such a way as to keep up the cost to the consumer or deprive the consumer of the benefit that would naturally come /to him. Mr. Caekenee. My opinion is that the consumer should be pro- tected and that he should not be charged lor his flour on the basis of $2.26 for wheat provided the world's value was verymuch lower. 58 WHEAT PRICE GUARANTEED BY CONGRESS. STATEMENT OF MR. NISBET GRAMMEE, A GRAIN MERCHANT OPERATING A GRAIN ELEVATOR IN BUFFALO, N. Y. The Chairman. Give your name and business to the stenographer, Mr. Granuner. Mr. Grammer. My name is Nisbet Grammer; I live in Buffalo, N. Y.; I am a grain-elevator operator; a grain merchant. The Chairman. Now, Mr. Grammer, you have heard enough of this discussion to know just what the committee is driving at. If we will confine ourselves to that line of talk and that line of discussion, I think we will expedite the discussion very much. ' Mr. Grammer. Gentlemen, because of the guarantee, and a guar- antee that will continue for some time — this is referring specially to the foreign Governments buying both among the neutral nations as well as among the allies, they are all buying through a commission — I believe it is essential for the Government to have its agency to properly protect their guaranty and the farmer too. I think that the agency that has been handling the 1918 crop has in many ways done it to good advantage. I think a sirnilar agency confined solely to the handling of wheat and its products would be very desirable. ■ I do not feel, however, that because we have agents and the Gov- ernment has the market cornered, that the Governmeilt, or its agents, should go into the com, rye, or barley, or any other kinds of food supplies, but should direct its agency entirely to wheat and products, both for domestic consumption and for export consumption. And the Government also, by accepting that theory, cancel any require- ments on the grain trade or licenses for those who do not desire. to handle wheat, but .desire to confine themselves to handling other grain, and they should also confine their control of transportation to the handling of wheat and wh^at products, and have nothing to do with the control of transportation on other grains. I believe, however, that the agency should be- authorized by law to have preference in the using of the means of transportation. Also a preference in controlling the space in grain elevators that they require for storage, but do not believe it is practicable or the right thing to do for the legislature to provide for the construction of elevators, nuUs, feed, or flour or cereal warehouses, simply because the Government has become stuck on a wheat deal. The Chairman. You need not worry about that phase of it, Mr. Grammer. Mr. Grammer. The reason I referred to it at all, is Mr. Glascow referred to it, and I think that is simply out of the question. They ought to go into the building of churches. I beheve it is reasonable to assume now, knowing the winter wheat acreage and knowing the preparations being made for the spring wheat acreage, especially, the spring wheat acreage that is contemplated to be sown tins spring in the winter-wheat States, that in spite of almost anything other than a weather calamity we are going to make a very enormous crop of wheat this year. I think the agency of the Government is necessary, not only to maintain the price which is low as a minimum price, and we have had some wheat this year, gentlemen, sell 15 and 20 cents above that price, on the open market, I think it is going to be neces- sary for that agency to take that wheat and store it and carry it for a long while. I believe all the elevators of the United States that WHEAT PRICE GUAKANTEED BY CONGRESS. 59 are in the line of traffic will be pretty well filled up by the middle of July for the next year and a half. I think the guaranty to the farmer to take the wheat from him and pay him a minumum price necessarily carries with it an obligation and expense to the Govern- ment it incurred after it had bought it until they can get rid of it. There has been some talk about our entire supply of wheat raised in this country that all would be needed, and there have some figures been given out by the Food Administration that it is all booked or sold and that not much will be carried over. I hope that is so. I do not think hardly it will be out of the country by the 1st of July, 1919; I do not think they can get transportation to take it all out. I think the movement of wheat and wheat pro- ducts out of this country has not been extraordinarily large. I think we will have some left over, but I hope the gentlemen who are next to it will have their optimistic views carried out and that it will be out of the country. But I believe that if we raise the acreage that it seems to me we will, I believe we will have a large amount of it in July, 1919, and July, 1920, because it will be too large for them to get rid of it. And I believe we should provide a means for them to take up a loss which I think they are going to have, not only in dis- tributing their wheat, but in selling out their cargoes. The Chairman. You would have that fund a revolving fund, would you ? Mr. Grammer. Absolutely; I think, further, that it is essential to have a very large fund established among the bankers of this coxmtry so that in bringing up this wheat it can be financed through the cor- poration, because the Food Administration last year refused to pay m' advance and grain trade financed it untU it was in storage. I think that the fund behind the grain corporation should be sufficiently large enough so that no matter what the conditions may be the bankers may feel safe in lending to the growers until they get their funds back. The Chairman. What fund do you suggest ? Mr. Grammer. I think at least $1,250,000,000; 1 think that is all. The Chairman. $1,250,000,000? Mr. Grammrr. Yes, sir. The Chairman. Anything further ? Mr. Grammer. No, sir ; 1 think that is all the general statement. The Chairman. I understood you to say something a moment ago about paying something for storage ? Mr. Grammer. If the Government takes wheat to let them pay the storage until they move it out. The Chairman. Suppose the Government should undertake to take the crops off the farmer's hand, would they undertake to pay the farmer ? Mr. Grammer. I do not think they should. T think the elevator man should be paid. I do not think it is possible to take delivery any place but in the grain elevators. The Chairman. In this matter of transportation I am very glad to hear you say you would give preference to wheat and wheat product. Mr. Grammer. Wheat is wheat, but I tried to state very positively that no control should be exercised over anything else. The Chairman. I hope the committee will take note of that trans- portation proposition. 60 WHEAT PRICE GUAKANTEED BY CONGEESS. Mr. Haugen. What was your basis for the bilHon and a quarter estimate ? Mr. Grammbr. Approximately $1 a bushel on the estimated crop.. Mr. Haugen. Why did you piake it SI a bushel? Mr. Geammer. It is a round figure, and it is easily calculated. I could have said 99 cents, but ll is easily calculated and easily estimated. Mr. Haugen. You don't claim it is a dollar loss on the bushel? Mr. Grammer. Yes, sir; I think the Government will lose at least that. Mr. Haugen. It would be possible for the Government to handle it without losing a single dollar. Mr. Grammer. No; I do not think so; I think on that large a crop- you would lose that much. Mr. Haugen. If the Government buys all the wheat it can fix th& price at anything it wants to. Mr. Grammer. I do not think you can have a consumption of much less than 500,000,000 bushels. Mr. Hoover said he had learned to economize so that we had gotten down to about 420,000,000 bushel* as we educated the people more and more to use substitutes. But now we will have Mr. Haugen (interposing). That is our trouble now; we have too many substitutes for flom-. Mr. Grammer. We can't encourage them too much to use flour now that we have been encouraging them to use substitutes. Mr. Haugen. How much have the people been consuming per capita ? Mr. Grammer. I think Mr. Hoover said some four himdred and. odd milUons of bushels in the year ending July, 1918. Mr. Haugen. That is in war times; how much in peace times ? Mr. Grammer. I think it is about 600,000,000 bushels. Mr. Haugen. How much per capita ? Mr. Grammer. That is a matter of division. Mr. Haugen. Including seed wheat, about 700,000,000 bushels. Mr. Grammer. Yes, sir; I am told that it averages about 5$ bushels per capita. Mr. Haugen. For food and seed ? Mr. Grammer. No; for consumption alone. Mr. Reynolds. That is without the seed; the estimate is about 5i bushels per capita before the war period for food alone. Mr. Haugen. Then it woiild be about 700,000,000 for food and seed? Mr. Eetnolds. That is about right, I should think. Mr. Haugen. About 100,000,000 bushels for seed. Mr. Reynolds. About that. Mr. Haugen. Then that would be consuming about 800,000,000 bushels. Mr. Grammer. Oh, I gave you general figures. Mr. Haugen. Well, let us get down to specific figures. Mr. Grammer. Mr. Hoover's estimate was about 600,000,000' bushels before the war period. Five and a, half bushels per capita for food, and add to that about 90,000,000 for seed, and you would have in the neighborhood of 600,000,000 bushels. WHEAT PEICB GUABANTEBD BY CONGEESS. 61 Mr. Haugen. Now, there is certain to be a big crop. We have been talking about that business, ^nd we talked about guaranteeing the prices, and it is estimated at not less than 1,000,000,000 bushels, and now at 1,250,000,000. I take it climatic conditions will enter, and it is strictly a guess. The probabilities are we will have a billion bushels and a surplus of two hundred or three hundred million bushels. Mr. Grammer. I think we wUl; I guess — and I am just guessing at it — there wiU be 500,000,000 or more of surplus. Mr. Haugen. You are assuming there is going to be a large increase in acreage ? Mr. Grammer. Yes, sir; in spring wheat to be sowed. But we have the largest acreage in winter-wheat States we have had for years — about 140,000,000 acres. Mr. Haugen. What indications are there that there wiU be large spring acreages ? Mr. Grammer. I have inquired of all the men we usually get our information from about these matters and our information is there will be about 3,000,000 acres in Ohio, Indiana, and Illinois that have not before been used for spring wheat. Mr. Haugen. How does the price of wheat compare with corn at present ? Mr. Grammer. Corn has fluctuated a good deal but good corn is around $1.30 in Chicago now. Mr. Haugen. How does that compare with the present price of wheat ? Mr. Grammer. It is about 60 per cent of the price of wheat now. Mr. Haugen. Generally corn sells for as much as wheat. Mr. Grammer. Not generally. Mr. Haugen. In years past. Mr. Grammer. No, generally not. Mr. Haugen. In years past. Mr. Grammer. No, generally not. Mr. Haugen. The average. Mr. Grammer. No; I could not. When we have had a wheat corner there is no relationship between the price at all, and that is the situation now. There is no relationship between them at all, unless somebody having a wheat deal wants to deal with the other. Mr. Haugen. You are referring now to somebody on the board of trade. Mr. Grammer. That is exactly the situation now, only the entire United States is behind it. Mi. Haugen. If it is in the power of the Government to control the price, it is also in the hands of the Government to prevent loss. Mr. Grammer. I do not believe the Government is, if we have a bumper wheat crop, will keep up the price; because I think the cargoe will be so big that it will break the Government's back like it broke Joe Leiter's. Mr. Haugen. I am asking you about this $1,250,000,000, what is that for? Mr. Grammer. To take care of the losses. Mr. Haugen. You spoke of two thirds of it being market. Mr. Grammer. All of it will be market. Mr. Haugen. Not all consumed; it will be on a price fixed by the Government if we have to take into consideration the surplus, and 62 WHEAT PRICE GUARANTEED BY CONGRESS. the surplus will be two hundred million or three hundred million or five hundred million — a half billion dollars ? Mr. Gkammek. I believe you will have to authorize the President to appoint a commission to fix the price for Government consumption and to sell wheat at the same price as the export price. ,Mr. HLaugen. Of course, if the Government determined not to sell it for less than that it would be at that price. Mr. Geammeb. But they will have to get rid of it some way, or it vrill spoil on them, if they keep it too long; we got along with four hundred some odd million bushels last year. Mr. Haugen. But they got rid of it. Mr. Gkammer. Yes; the farmers are getting rid of it. There isn't much demand for flour. Mr. Anderson. May I ask you whether you or your association has considered any other method of financing this proposition except by direct appropriation ? Mr. Grammer. No, sir; we have not. Mr. Young of North Dakota. You speak of the desirability of leav- ing rye out of the legislation 1 Mr. Grammer. All other grains, sir. Mr. Young of North Dakota. One of the other gentlemen said that rye was selling lower than wheat all the way through during the last 12 months, sometimes down as low as $1.53, and yet rye flour was selling for more than wheat flour; isn't that a fact? Mr. Grammer. I don't know; I think if it is a fact it is all wrong to permit them to do it. Mr. Young of North Dakota. None of you gentlemen were down here complaining that the com and rye flours were selling too high, were you ? Mr. Grammer. No ; corn flour is different. Rye flour, however, is a different proposition, I think. Mr. Young of North Dakota. Some of us are anxious to know your anxiety for the consumer; you are the men who represent the growers and shippers, aren't jou'i If not, I don't know why they should employ you to sell their products. , Mr. Grammer. Is that a question ? Mr. Young of North I^kota. That is a question or a statement, whichever you care to talA it. Mr. Grammer. I want to answer you if it is a question; I was waiting for the question. Is the question why are we interested in the consumer ? Mr. Young of North Dakota. Yes; why is your special interest in the consumer at this time? Every man who has spokeii here has voiced his interest in the consumer. Now, isn't it a matter of fact that you want it opened up so as to make a fluctuating market and a fluctuating price so that you can make more money ? Mr. Grammer. No, sir; I told you I did not want it opened up dn wheat until the Government could buy and furnish it to Europe and until the guaranty has been closed up. I think it is an entirely wrong thing to do until you get away from this price basis. Mr. Young of North Dakota. You are suggesting two prices; first, the price to the farmer. Mr. Grammer. Yes, sir. Mr. Young of North Dakota. And then another price to the trade. Mr. Grammer. Yes, sir. WHEAT PRICE GUAEANTEED BY CONGRESS. 63 Mr. Young of North Dakota. And the latter to be fixed by the world's price. Mr. Grammer. I didn't say anything about the world's price. Some gentlemen preceded me said something about that world's price; I don't know anything about that. Mr. Young of North Dakota. What is your other price ? Mr. Grammer. I would suggest a price fixed from tmie to time by a commission appointed by the President so the burden would not be on the Executive entirely. Mr. Young of North Dakota. How can you give the trade more any stability' than it has now ? Mr. Grammer. The business is fairly stable now. I do not desire to have it fluctuating too much. Suppose a price set from month to month — as the price of hogs was set — for reasonable delivery of wheat from the Government agencies to the consumer, just the same as some one for the Government must set the price at which the Government sells its wheat for export. There should be no distinction in selling the wheat for export and for domestic use. One should be as low as the other. Mr. Young of North Dakota. Then, in large measure, you are not standing for the law of supply and demand on the price ? Mr. Grammer. Absolutely not. The Government has broken that up, and since the break-up the Government has done — ^I don't think the law of supply and demand, so far as the Government has taken hold of it . With so many Government restrictions on it, I do not see how the law of supply and demand can control. Mr. Young of North Dakota. Then you do not agree with any of the gentlemen that have preceded you ? Mr. Grammer. Yes, sir; I do. Mr. Young of North Dakota. I have not heard any of the other gentlemen say that the selling price should be fixed by the Govern- ment to the trade; if anybody has said that I didn't hear it. Mr. Grammer. I simply carried it further than they did. Mr. Young of North Dakota. Then to that extent you do not agree with them ? Mr. Grammer. No; I simply carried it further. Mr. Young of North Dakota. One gentleman said he wanted it fixed on the law of supply and demand entirely. Mr. Grammer. He said he did when conditions made that possible : but he said that it could not be done now. Mr. Young of North Dakota. I think there is a hopeless conflict between the statements of you gentlemen. Mr. Hutchinson. Do I understand you want this confined to wheat ? Mr. Grammer. Wheat and wheat products. Mr. Hutchinson. How do you want to handle the rest? Mr. Grammer. Let the trade handle it. Mr. Hutchinson. Do you think the trade can handle it ? Mr. Grammer. Yes, sir. Mr. Hutchinson. You don't have any question about it? Mr. Grammer. No, sir. 107124—19 5 64 WHEAT PRICE GUARANTEED BY CONGRESS. STATEMENT OF MR. BENJAMIN STOCKMAN, OF DTJLUTH, MINN., REPRESENTING THE DUIUTH BOARD OF TRADE. The Chairman. You may give your name and address to the stenographer, Mr. Stockman. Mr. Stockman. My name is Benjamin Stockman. I live at Duluth, Minn. I may say, Mr. Chairman, that I am a miller, but I represent the board of trade incidentally and if there are any questions you want to ask me I will be glad to answer them. Duluth has a special market. Last year when we had a small crop we handled 25,000,000 bushels of wheat' This year we handled 100,000,000 and this year wlU probably handle 150,000,000 bushels. We could handle it faster but we can't get it away from Buffalo as fast as we could ship it. Yoii know, probably, there are many boats there in winter storage waiting for shipments. Now, I feel as others nave expressed themselves, that the guaranty should be fulfilled; all the wheat produced before July, 1920, should be at the guaranteed price, but I do not feel that this money that is to be voted by you and by Congress should be used as a subsidy for cheap food, because it was not intended for that purpose. I feel, however, that if we sell flour or wheat abroad for less money than we sell it for in the United States we will be subject to a great deal of criticism. That is all I care to say on that subject of price fixing. We have heard so often that question raised, whether we do not sell flour cheaper abroad than at hom^; I think if that was done there would be a great deal of criticism and prob- ably fair criticism. Now, I think that by figuring what we have sold our export wheat for we can arrive at what the domestic price should be, and like the others who take the same view with me, I think it is impos- sible to handle it except .through a Government agency; and I should like to state that the feeling of our board is that we do not want to return to prewar conditions under present conditions, although we would be glad to do so as soon as possible. The Chairman. The price then for domestic use should be what the export price is 1 Mr. Stockman Yes, sir. The Chairman. Do you have any fpar the world market might be manipulated so as to reduce the price to a very low basis ? Mr. Stockman. No, sir; I have not. I think that we ought to merchandise that wheat as well as we' can; use all available means and finance it for every, reasonable benefit that we may secure; every reasonable benefit that we have should be used in getting out of this guaranty as cheaply as possible, and I also feel that we should get out of it as cheaply as possible. The Chairman. Always keeping in mind the fact that you do not want too big a difference between the price of flour in England and the price of flour in America ? Mr. Stockman. Yes, sir; that is what I have said. Mr. Young of North Dakota. As I gather, you would not object at all to the Food Administration Grain Corporation maintaining the price up as high as they can get, even up to $2.26 a bushel, provided they got the same price abroad as at home ? WHEAT PRICE GUARANTEED BY CONGRESS. 65 Mr. Stockman. Yes, sir. Mr. Young of North Dakota. Is it your belief that they should make that price as near $2.26 as they can ? Mr. Stockman. Yes, sir. Mr. Young of North Dakota. So you haven't got the same views as the others, that we should drop this price immediately to $1 or $1.25 to make food cheaper ? Mr. Stockman. No, sir; I do not think that guarantee was made for that purpose. Mr. Young of North Dakota. The guarantee was not made for tha consumers, was it ? It was made for the farmer. Mr. Stockman. Yes, sir. Mr. Young of North Dakota. The fact is, however, it was for the' benefit of the consumers when the guarantee was made ? Mr. Stockman. Itwasat the time. Mr. Young of North Dakota. And all through since we have been in the war and the food act has been in operation it has operated to favor the consumers ? Mr. Stockman. Well, that might be debatable in the last two or three months, but before that time, tertainly. Mr. Young of North Dakota. The law passed by Congress saved the consumers against the law of supply and demand that would have made the wheat sell for considerably more ? Mr. Stockman. Yes, sir. Mr. Young of North Dakota. So that they have been the benefi- ciaries of the legislation up to this time ? Mr. Stockman. Up to two or three months ago, probably. Mr. Young of North Dakota. So it is your view that for the remain- ing portion of the time it would not be out of the way to let the price fixed continue for the domestic trade as well as the foreign trade ? Mr. Stockman. If it can be done; if it can be marketed at that price I am m favor of it. Mr. Young of North Dakota. If later it should be shown to this. committee that the Grain Corporation, on account of the world condi- tions — ^world supplies of wheat and the probable supplies in the United States, that the crop can be handled on the basis of $2.26, you think that would be the proper thing to do providing the Grain Cor- poration can do it. Mr. Stockman. Yes, sir. Mr. Wason. I understood you to say that the guarantee was made' for the benefit of the farmer on wheat, as you understood it ? Mr. Stockman. Yes, sir. Mr. Wason. But the consumer got the benefit of the guarantee. Mr. Stockman. He got the benefit. Mr. Wason. He got the benefit in this way, by providing a suffi- cient crop of wheat for our people here at home ancl to aid our allies^ Mr. Stockman. Yes, sir. Mr. Wason. What other benefit did he get ? Mr. Stockman. The consumer? Mr. Wason. Yes; by that guarantee. Mr. Stockman. Well, last year he would have paid a much higher- price. Mr. Wason. And that was worked out by the license system- through which the Food Administration operated, was it not ? 66 WHEAT PBICE GUARANTEED BY CONGRESS. Mr. Stockman. Yes, sir. Mr. Wason. They made the guaranteed price to the fanner to protect him from loss, did they not ? Mr. Stockman. I don't understand. Mr. Wason. They Ucensed the millers, did they not, or mantifac- turers ? Mr. Stockman. Yes, sir. Mr. Wason. And required them to buy wheat at the guaranteed price, and no higher, isn't that right ? Mr. Stockman. Oh, no; no lower. Mr. Wason. No lower, I mean. Mr. Stockman. Yes, sir. Mr. Wason. Would they allow them to pay a higher price ? Mr. Stockman. Yes, sir; we did pay higher prices at the beginning of the season. Mr. Young of North Dakota. Last year ? Mr. Stockman. Yes, sir; last year. Mr. Wason. What do you mean by last year? Mr. Stockman. Last year's crop. They are paying 12 cents over for it in St. Louis now, I understand. Mr. Wason. What was the purpose of this license put upon the millers ? Mr. Stockman. They were given this wheat at a certain price And they were expected to pass on the flour to the consumer at. a moderate profit, which was arranged between them and the other parties. Mr. Wason. Didn't they fix the price that the miller should pay for the wheat before the manufacture of it ? Mr. Stockman. No; he could pay as high as he liked over the ■Government price, but he could not pay below, because the Govern- ment had a buying agency aU the time to take that wheat at that stipulated price. Mr. Wason. And did they do it that way ? The Government did it that way. Mr. Stockman. Last year, you mean? Mr. Wason. Yes, sir. Mr. Stockman. Last year they took all the wheat and there wasn't enough to go round, and they allotted the miller's wheat on a three years' average consumption, and they afterwards reduced that to 90 per cent. Mr. Wason. What did they do this year ? Mr. Stockman. This year they gave us permission to go in and l)uy all we could at any time, both mills and elevators and at the same time they maintained in every terminal market a buying agency and so we only got it when we gave as much as the Govern- ment would give for it. Mt. Wason. Now, last year this agency required these licensees to buy the grain from the grain corporation, did they not ? Mr. Stockman. Yes, sir. Mr. Wason. And what profit did they take? Mr. Stockman. The millers paid them 1 per cent. Mr. Wason. On the price that they sold for ? Mr. Stockman. Yes, sir. Mr. Wason. Is that the usual commission ? WHEAT PRICE GUARANTEED BY CONGRESS. 67 . Mr. Stockman. The commission this year is 1^ per cent. Mr, Wason. Last year it was 1 per cent ? Mr. Stocicman No; this year there is no commission; we do our own buying. Mr. Wason. When was the 1^^ per cent? Mr. Stockman. I thought you meant the commission for selling^ wheat on the market. Mr. Wason. This 1^ per cent Mr. Stockman (interposing). One and one-half cents, pardon me. Mr. Wason. And the Grain Corporation obliged the millers to- pay 1 per cent ? Mr. Stockman. One per cent. Mr. Wason. Consequently, if they paid $2.20 for wheat you would have to send in 22 cents to the corporation ? Mr. Stockman. Two and two-tenths cents. Mr. Wason. Yes; double the ordinar}- commission. Do you happen to know what became of that money that went into the grain corporation ? Mr. Stockman. I suppose it was the ordinary profit to pay for storage, and so on. I don't know what they did with it. Mr. Wason. Do you know whether there was any loss to the cor- poration for any wheat they had ? Mr. Stockman. I don't know. Mr. Wason. I mean did they have anything stored that became unfit for consumption 1 Mr. Stockman. I haven't seen any report; I don't know. Mr. Wason. Have you heard so? Mr. Stockman. No, sir. Mr. McLouGHLiN. I want to ask a question or two to see whether I understand what his idea is as to what ought to be done. Do you think this agency to be created should have the power and should exercise it to prevent any manipulation of the world price on wheat ? Mr. Stocicman. Prevent any manipulation ? Mr. McLaughlin. That this agency should have the authority and. exercise it to prevent a manipulation of the world price on wheat? Mr. Stocicman. Why, I thmk that it should be permitted to use- every legitimate means of merchandising that wheat at as high a price as possible — every legitimate means — and if it finds there is any conspiracy against it that it has a perfect right, as any other concern has, to use any legitimate business means to enable it to protect itself against such conspiracy. Mr. McLaughlin. That is, if there is a conspiracy on the part of foreign buyers or foreign consumers improperly to reduce the price of wheat in the world's markets, you think this grain corporation should have power and authority to circumvent it ? Mr. Stockman. Yes, sir; any improper methods used. Mr. McLaughlin. And, on the other hand, you think this graia corporation should so conduct its business as to save the Government, from as much loss as possible ? Mr. Stockman. Yes, sir. Mr. McLaughlin. But you say, as I understand, that this grain corporation could itself manipulate and keep the prices high so as to- make the loss as low as possible ? Mr. Stockman. No; I didn't say that it could manipulate. 63 WHEAT PRICE GUARANTEED BY CONGEESS. Mr. McLaughlin. Well, arbitrarily it could. Mr. Stockman. Not arbitrarily; what I said was if it decided to sell wheat abroad at a certain price it should make the same price at home. Mr. McLaughlin. It should make an artificial price to save the Crovemment as much as possible. Mr. Stockman. I did not say that it should make an artificial price. Mr. McLaughlin. You didn't use those words, but isn't that the effect of what you said ? Mr. Stockman. I don't think so, sir. Mr. McLaughlin. Well, if the Government maintains a price on wheat why isn't it a manipulation of the market ? Mr. Stockman. It can't maintain a price on wheat unless it will sell for that price abroad if there is a demand for it. Mr. McLaughlin. Well, it may be able to fix prices at which wheat may be sold abroad. Mr. Stockman. It may. Mr. McLaughlin. Should it do it arbitrarily? Mr. Stockman. It can't do it unless the wheat is worth S2.26 Mr. McLaughlin (interposing). Suppose the world's price of wheat should be inclined to be $1.50, but the Government arbitrarily fixed it, by controlling the supply, at $1.75? Mr. Stockman. I think Mr. McLaughlin (interposing) . Wouldn't that be a manipulation ? Mr. Stockman. I don't think it would be manipulation. Mr. McLaughlin. I am just getting your view of it. You think that would not be a manipulation? Mr. Stockman. I do not. Mr. Haugen. What is your estimate as to the world's supply of wheat ? Mr. Stockman. I have no estimate. Mr. Haugen. Db you estimate a surplusage or a shortage ? Mr. Stockm:an. I am told there is no surplus, but I have no infor- mation. Mr. Haugen. I have reference to the 1919 crop. Mr. Stockman. Yes; I think we are aU agreed there is no surplus at the present time. I have no information on which to give an opinion on that; all our ordinary sources of information are closed to us. I couldn't give an opinion on that. Mr. Haugen. I believe you stated you are a mOler. Mr. Stockman. Yes, sir. Mr. Haugen. Did the Grain Corporation enter into an agreement for a certain profit, or agreeing to buy the product of the wheat or Hour at a certain price ? Mr. Stockijan. No. Mr. Haugen. They entered into an agreement to buy ? Mr. Stockman. Buy the wheat? Mr. Haugen. First, the Grain Corporation sold the wheat to the mUler? Mr. Stockman. Yes, sir. Mr. Haugen. Then entered into an agreement to buy the flour ? Mr. Stockman. No; they did not enter into any agreement to buy the flour. WHEAT PRICE GUARANTEED BY CONGRESS. 69 Mr. Haugen. I have here a copy of the agreement. The Grain Corporation agi-ees to purchase, after July 1, 1919, on 30 days' notice, from the mLUer on certain terms, and so on. Mr. Stockman. Buy the flour? Mr. Haugen. That is what it says. Mr. Stocicvian. They agreed to take back our surplus wheat, but I never knew they agreed to buy the flour. Mr. Haugen. This is paragraph two of the agi-eement, and is a wheat in Chicago, and we will pay you the difference between $1.50 ■a,nd $2.26." Mr. Young of North Dakota. But the guarantee is for ft certaig. ■quality of wheat, and it is your idea to o^l aaything wheat and t6 :give the farmer $2.26 without making delivery? ' Mr. Teasdale. There would bOt be a particle of difference what the .grade of the wheat was, he is entitled to $2.26 on the basis of Grade No. 1. You settle on the basis of $1.50, and if he has sample-grade wheat, or if he has a feed-grade wheat, he has received 76 cents from the Government, and when he takes his wheat to the sample-grade wheat dealer at the country station he will not get $1.50; he will . get $1.50 less the grade. That will work out very easily. Mr. McKiNLEY. Where are you gping to settle with tlie farmer « Mr. Teasdale. That is a question of detail; it depends on what plan you adopt. Mr. Young of North Dakota. You hinted a few moments ago the farmer might conclude not to deliver his wheat at all, and in that •case he gets $1.50 for very low-gra,de stuff. Mr. 'Teasdale. He has to sell at some time or else feed it. Mr. Young of North Dakota. Not at all; you say you are going to give him 76 cents, and when he does bring it in you give him $1,50 or something less than that. And then you said a few minutes ago hs might not sell at all; that he might feed it or keep it untU another year, and in that case he has gotten more than his grain is worth if it is low-jfflrade. Mr. Tjbasdale. If he sold on the basis of $1.50, he would get what it was worth. Mr. Young of North Dakota. Oh, no; he wondd not get what it was worth. He might get more because he may n®t deliver. WHEAT PEICE GUAKANTEED BY CONGBESS. 85 Mr. Teasdale. If he feeds that wheat he has to feed it practically on the basis of what the dealer would have given him for it. I do not think there is any chance for him to get more than it is worth on that. Mr. Young of North Dakota. You first stated the farmer might conclude not to deliver his wheat at all if you gave him the 76 cents ? Mr. Teasdale. Yes; he might feed it. Mr. Young of North Dakota. And you thought that would be a good thing, and you say it would in the general run of prices save the Government something, if he was paid the 76 cents? Mr. Teasdale. Yes. Mr. Young of North Dakota. And you contend if his wheat were off grade when it was brought in he would not get $1.50; he would get something less than that. But now if he concludes not to bring it in, I say the farmer has received more than he is entitled to if his wheat is off grade, and that the Government has lost something. Mr. Teasdale. I do not see how you figure that, unless you say he is not entitled under the guaranty if he keeps it on the farm. Mr. Young of North Dakota. If he keeps it on the farm and it is off grade and he gets 76 cents, he will get more than he is entitled to. Mr. Teasdale. No, sir; absolutely- not. Mr. Young of North Dakota. He is not entitled to $2.26 unless his wheat is of the grade on which that price is based in the President's proclamation. No. 1. Mr. Teasdale. He won't get the $2.26 unless his wheat is of that grade under this or any other plan. ' Mr. Young of North Dakota. You were just stating he is going to get paid for it anyway. At what time are you going to pay the 76 cents ? Mr. Teasdale. That will depend altogether on what plan you adopt to settle with the farmer. If you pay on the basis of the thrashers' return, you pay when he furnishes the thrashers' certificate. Mr. YouTSTG of North Dakota. If he is not going to make delivery, how are you going to have it graded ? Mr. Teasdale. It don't make any difference what the grade is. Mr. Young of North Dakota. It certainly makes a difference to the National Treasury how much you are going to pay the farmer if the quality of his wheat is below No. 1 northern and. it is settled for. on the basis of $2.26 per bushel. Mr. Anderson. It is worth as much to feed as it is to sell; no more and no less. If he sells he gets' the market price of his wheat and he gets the 76 cents. Mr. Young of North Dakota. But the Government wlU have paid more than its guaranty if the wheat is low grade. Mr. Haugen. Why should the price of wheat be made to cor- respond to the value suggested ? Mr. Teasdale. For two reasons, Mr. Haugen, as I conceive it. One is to induce a freer use of wheat for feed and other purposes; the other is the consumers of this country would not be wiUmg to pay for their bread based on $2.26 if it were only worth $1.50 in the markets of the world. Mr. Haugen. That is assuming the price of wheat is to be below $2.26 ? 86 WHEAT PRICE GUARANTEED BY CONGRESS. Mr. Teasdale. We are bound to face that proposition; there is every prospect of a big crop. Of course, if there is a short crop, it offers a compHcation. Mr. Haxjgen. There is always that "if" about it. . Mr. Teasdale. I say the agency who fixes the price fixes it on the world's value. If it is above $1.50, they should fix it above. Mr. Haugen. It is to help the consumer pay his cost of living? Mr. Teasdale. Morally, yes. The more wheat you sell for human food the less the food shortage and the easier it is to maintain a price on wheat. Mr. Haugen. Then if the wheat should go to $3.25, it would be perfectly proper to charge that extra dollar ? Mr. "Teasdale. If that were a fair price. Mr. Haugen. If that were a fair price; but it would not reduce the cost of living, would it ? Mr. Teasdale. No; if the world's necessities demand that price, then the world has to stand for that price. Mr. Haugen. Isn't it your contention that the consumer should be treated fairly in the matter ? Mr. Teasdale. To treat the consumer fairly and to enable him to buy as cheaply as world's conditions warrant; no cheaper. Mr. Young of North Dakota. You were in favor of that when it was reduced from $3.40 to $2.20? Mr. Teasdale. I never considered $3.40 a fair price. Mr. Young of North Dakota. It was the market price, and that is what you advocate now. Mr. Teasdale. No, sir; it was a price advocated by the people who were ia trouble. Mr. Haugen. If the wheat grower has been compelled to sell his wheat at a lower price than he would have received under the opera- tion of the law of supply and demand, you think it would be fair, then, to ask him to purchase bonds and to pay his share of the taxes in making up this difference, this shortage, to help out; where he has already contributed a dollar a bushel heretofore, you think he should now be called upon' to pay the additional tax? Mr. Teasdale. I see no reason why he should not be in the same category with every other taxpayer. Mr. Haugen. Do you think he should be treated like the other people, have the same consideration? Mr. Teasdale. The producer? Mr. Haugen. Yes; the farmei;, the wheat producer, is entitled to the same consideration as the manufacturer. Mr. Teasdale. Absolutely, yes. Mr. Haugen. Now the fact is everybody except the farmers were permitted to make profits; that the Government put its iron hand on the producer and said "Mister, you sell at my price, fixed by the Government," and then after that occurs, that price was fixed away below what it would have been under the operation of the law. of supply and demand ? I take it there is no (question about that. I can go into that if the gentleman cares to discuss it. Mr. Teasdale. I think the fallacy of that, if you will permit me to say so, is that the law of supply and demand was suspended at that time absolutely, largely by the U-boats and things of that kind. WHEAT PRICE GUAKANTEBD BY CONGRESS. 87 Mr. Haugen. That was suspended so far as the wheat grower was concerned, but it was not suspended so far as the manufacturer of other articles which the Government bought was concerned. Mr. Teasdale. The situation was this as one Englishman expressed it to me: He said, "We are at war; we are short of food stuffs, and we have a lot of hungry allies to feed." He said, "Now, we have to have the wheat; it don't make any difference to me whether I pay $1, $2, or $4, or $5 for it." It was not a question of price, it was a question of getting it. Mr. Leshee. It is a question of just what you are going to do; if you really know you will get $2.26 you won't need to take §1.50 ? Mr. Teasdale. Yes, sir. Mr. Haugen. I take it, as the gentleman has stated, there were a lot of hungry people and it was necessary to feed them. Hoover said the price was likely to go to $7 a, bushel. As stated here, yes- terday, the price was $3.45. I believe, if you will look up the record, you will find the price was $3.48, and neutral nations offered $1 pre- mium, which made it $4.45. Hoover said it would go to $7 and our Nation fixed the price at $2.26 and other nations fixed it at $3.60 and even as high as $4. Our Government fixed it as low as $2.20, and the wheat grower took the $2.20 and made the sacrifice of $1 or $2 a bushel — ^possibly $5 a bushel. He was discriminated against. On the other hand, the manufacturers of munitions and other things not only had the benefit of the law of supply and demand, but the benefit of stimulation. The Government bought in larger quantities and stimulated the price. Now, then, he is entitled to some considera- tion, when he has come in and sacrificed a dollar or two a bushel. Mr. Teasdale. The farmer never made as much money in his life as he got on the basis of $2.26 a bushel for his wheat. And that he is satisfied with it is shown by the fact he put in the largest crop ever known, with a guaranteed price of $2.26. Mr. Haugen. But that is not answering my question. If you can point out why he should be discriminated against to this extent, I would like to know. Mr. Teasdale. What do you suppose would have happened if wheat had gone to $7 a bushel ? Mr. Haugen. That is not answering the question. I am trying to find out why this discrimination. Nobody wanted wheat to go to $7 a bushel. The farmers said, "Go ahead; we are satisfied." Mr. Teasdale. I take it it was in their interest and admitted to be a fair price, and it was not going to be a fair price to the consumer if the thang had been allowed to go to $7.- We would have had bread riots. Mr. Haugen. I think they were all for the winning of the war — just as everybody else. But that is not the question. The question is, why the discrimination ? That is the question. Mr. Teasdale. That is the way I view it. Mr. Haugen. You think it ought to be ? Mr. Thompson. Now, this price of $1.50 you fix is purely an ab- stract price ? Mr. Teasdale. That is purely tentative. Mr. Thompson. Purely a tentative price, which you assume would be fixed by the world's price at that time ? Mr. Teasdale. I am not designating any particular price. 88 WHEAT PKICE GUARANTEED BY CONGRESS. Mr. Thompson. You just name that as a tentative price '( Mr. Teasdale. Yes, sir. Mr. Thompson. If that were the worid's price at that time, you would name the same price ? Mr. Teasdale. Yes, sir. Mr. Thompson. And you would fix that price for all time — that one price ? Mr. Teasdale. Yes ; I think it would have to be fixed for the crop period. Mr. Thompson. It would not change — would not be variable at all 1 Mr. Teasdale. No, sir. Mr. Thompson. If the farmer wanted to hold his wheat on that price — namely, $1.50, if it were fixed at that — on the theory it it might advance up to $1.60 or $1.70, that would be the farmer's chance. He would take the chance at it, and he would get 76 cents from the Government at that time. Now, you say the consumer ought to have his flour — ^his bread — in comparison with the world's value of wheat at all times ? Mr. Teasdale. That is desirable, as near as possible. Mr. Thompson. That is your idea, is it? Mr. Teasdale. Yes, sir. Mr. Thompson. That is what you stated awhile ago. Suppose wheat were to go down from $1.50 to $1 a bushel; what would you do then? Womd you still maintain that $1.50 fixed arbitrarliy by the Grain Corporation and make the consumer pay in proportion to that, or would you let him consume food or flour or bread at a dol- lar, in comparison with the world's value of wheat ? Mr. Teasdale. I would say that if the Food Administration made a mistake and fixed the world's price at $1.50 and that was found to be too high, and they found they had to sell their wheat and flour at a lower price for export, oiu* domestic consumer should have the bener fit of the same price that they make to others. Mr. Thompson. Then the Government should take the additional loss which would be incurred by reason of fixing this value at $1.50? Mr. Teasdale. They have got to do it. Mr. Thompson. That would be your idea ? Mr. Teasdale. Yes. Mr. Wilson. Can the Food Administration fix the world's price of wheat ? Mr. Teasdale. No; they can not. Mr. Wilson. You were talking about that, and I was wondering how you arrived at it. Mr. Teasdale. They can ascertain approximately what the world's price is; they can not fix it. Mr. Wilson. I was just wondering why you thought they could fix it. Mr. Teasdale. No; my suggestion was, they would fix a stabihz- ing price in this country at the price they deemed to be the world's price. Mr. Wilson. I perhaps misunderstood you. The Chairman. Now, Mr. Teasdale, do you think it would be ad- visable for the Government to make the same guarantee to the miUer of the flour, based upon a certain price, and if it had to be based on WHEAT PRICE GUARANTEED BY CONGRESS. 89 the basis of a lower price he should have some guarantee against that loss ? Mr. Teasdale. Yes, sir; if he has to buy the wheat at a certain price, he should have the chance to dispose of his flour on the same basis. The Chairman. What do you think of the proposition of the Gov- ernment buying all the flour from the miUers and selling it to the -exporters and exporting it ? Mr. Teasdale. I would prefer to have the millers answer that. STATEMENT OF MR. E. PECK, OF OMAHA, NEBB,., REPRESENT- ING THE OMAHA GRAIN EXCHANGE. Mr. Peck. In Nebraska, of course, we are in favor of the Presi- •dent's proclamation being carried out. We beUeve that the present method, the present agency, is the best one to handle the wheat and ■wheat products, as long as a guaranteed price has got to be carried •out to the farmers. That is practically all I have to say, without the gentlemen wish to ask me some questions. Mr. Haugen. Are you in favor of limiting the Government control of wheat and wheat products ? Mr. Peck. Yes, sir. Mr. Haugen. Why? Mr. Peck. Because at the present time we are able to handle all fii the coarse grains, which go largely into feeds in this country, to :advantage without any governmental control. Mr. Haugen. As I understand, it is not the question of your abil- ity to handle; you could handle with the same law; but the object ,of this legislation is to make good the guarantee. Now, if it should be found necessary to extend Government control over corn, for instance, and other cereals, then are you opposed to extending it in order to control and keep up the price of wheat ? Mr. Peck. But the price of wheat is guaranteed now. Mr. Haugen. Yes; but it is suggested here that that price shall not be adhered to. Mr. Peck. There is no guarantee on any other cereal. %lii. Haugen. No; but if this Government flnds it necessary to ex|§nd its authority over the handling of other cereals in order to maii^tain that price or to carry out the guarantee, would it then be advisable to extend it to them ? Mr. Peck. I can not conceive how that would be — why it would be necessary. There is a guaranty of the price of wheat; but why it would be necessary to handle corn and oats, on which there is no guaranteed price, on the same basis as the guaranteed price of wheat, I can not see that. Mr. Haugeh. For instance, if it were deemed advisable to carry put the suggestions here in the interest of the consumer, if the price of wheat should go up, say, a doUar a bushel, it might be necessary, in order to control the price of other cereals, to hold the price down to $2.26 (it has been done), and vice versa. Mr. Peck. I can't concieve how that would be so. Mr. Haugen. I think the contention of the Food Administration has been it was necessary to have control over aU the cereals in order 90 WHEAT PRICE GUARANTEED BY CONGRESS. to maintain the price of $2.26 for wheat, and for that reason it was necessary to give them control over the exchanges. Mr. Peck. I have not so understood it. Mr. Haugen. What is your reason, then, for limiting it to this one cereal ? Mr. Peck. On account of the guaranteed price of the' CsOivernmeat., Mr. Haugen. Simply to carry out the guarantee? Mr. Peck. Yes, sir. Mr. BLaugen. You do not think it is necessary to extend it beyeing possible to get the tonnage to take it across, or protect that tonnage while it was going across, or to get the insurance to protect it across. Now, Great Britain, by her fleet and by her insurance arrangements, made it possible for American farmers to market their wheat to those countries that needed it so much, and in that way I am not sure but that they enabled our farmers to get a higher price than they would have gotten under other circumstances, and further Mr. Haitgen (interposing). You are getting away from the subject. After all, the fact remains the price of $3.45 that the neutrals offered — f 1 premium, which made it $4.45 — the representatives of our allies came to this country and took charge' of the Food Administration, and the opinion was that wheat would go to $7 a bushel, and that an effort was made to pin it down to $1.50, and then to $1.25, but that the United States Senate would not stand for it, and took the matter in hand, and suggested a minimum basis of $2, denying the farmer then the right of the law of supply and demand. Now, then,' as a friend of the farmer, do you think that the Government shoTild put its iron hand upon the farmer, and say to him, "You produce and you sell at my price of $2.26" — ^which is generally conceded by all to be only half as much as it should be — ^first taxing him with a $1,000,000,000, and now encourage taxing him with an extra billion to make the Government's contract good, and you as a representa- tive and as a friend of the farmer, think that that is a fair deal, do you? Mr. Sager. Pardon me Mr. Hatjgen (interposing). You say you have special connections and friends with the farmers? Mr. Sager. I have, yes; and I think the farmers are perfectly satisfied with the price that they are receiving. I am speaking from what farmers have told me, tHe farmers that I know and I have talked with. As I said before^ Mr. Haugen (interposing). We are getting away from it. The farmers are satisfied with anything that they can get. They said, "We want to win this war; fix prices at$lor$1.25a bushel, and we will not object." They said, "Fix your own price," and they have exhibited more patriotism, but now, after it is all done, to say that we will tax you another billion dollars, does not exhibit very much friendship for the farmer, in my estimation. Mr. Sager. Do you mean that the farmer as an American citizen should be exempt from taxation the same as Mr. Haugen (interposing). No one has raised that question. You are trying to get away from the question. I simply asked the question. ; Mr. Sager. If I understand your question, I do not think the farmer has been wronged. I do think the farmer has received splendid remuneration for his services, and I do not think the farmer will object if you give the people of these United States their bread at a fair price, because he recognizes that he is getting a fair price for his product. Mr. Hatjgen. I do not think the farmers are objecting, as I said. They are submitted to it. I will call your attention, for instance, to one item. For instance, the Steel Trust was credited with net profits of $77,000,000 in 1912 and $478,000,000 in 1917. That trust enjoyed WHUAT PR[CE GUARANTEED BY CONGRESS. 137 the privilege and the right of the law of supply and demand, and the demand materially increased and the price was stimulated. On the ■other hand, we said to the farmers, "You sell.M^heat at $2.26." The price was $2.39^ in New York, but many of them got less than $2. The farmers, as a general thing, got less than $2. Mr. Sager. If you followed my suggestion you would have observed that it guaranteed to the farmer the full price promised by the Gov- ernment and gave him the privilege of getting more if later on he concluded to hold it for a higher price. Mr. Haugen. The gentleman is in the grain business and certainly has knowledge of the way it is conducted; and the guaranteed price was made the maximum. He also knows that mills offered to pay a premium and that they were denied the right to pay a premium, and that the farmer was denied Mr. Sager (interposiag). No, sir; I take issue with that statement. I do not know that the minimum was made the maximiun. I myself as a commission merchant representing the farmer have sold wheat many tinaes as high as 10, 15, and 20 cents higher than the guaranteed price. Mr. Haugen. You are speaking of the present year. I am speak- ing of the year 1917, when the price was fixed. The millers at that time, the first day, offered 20 cents premium, and they Were denied the right to pay it; and on the other hand, the farmers were denied the right to sell it at an enhanced price. The minimum price was made the maxitnimi. Mr. Sager. Are there any other questions, Mr. Congressman ? Mr. Haugen. No. I think he has demonstrated his friendship for the farmer. Ml'. Sager. I think he has, too, Mr. Congressman, for in the final analysis the best friend of the farmer is he who expects the farmer, like other citizens, to bear his proper share of the Government's obligations. Mr. Thompson. You say if Great Britain had not kept open the waterways of the world that the chances are that the farmer would not have been able to have sold in foreign markets. If Great Britaia had not had mastery of the seas, some other country would have had mastery, would it not ? Mr. Sager. Well, certainly some country would have had mastery of it. I think it is fortunate for the American farmer that some other did not. Mr. Thompson. 1 am not talking about whether it is fortunate or unfortunate. You say that if Great Britain had not had mastery of the seas and thereby permitted the farmers of the country to sell their products in the markets of the world, perhaps they would not have secured as high a price as they did secure. I just want to ask you — I am not quarreUng with you about the question of whether or not it was good for the world that Great Britain had mastery of the seas; 1 am just simply trying to direct your attention to the fact that if Great Britain had not had mastery of the seas, some other country would. Mr. Sager. I thmk very likely thev would, and I think they would "have been knocking at the port of New York very soon. Mr. Thompson. That is your opinion ? Mr. Sager. Yes, sir; that is what I am talking about. 138 WHEAT PRICE GTJARATSTTEED BY CONGRESS. Mr. Thompson. Your opinion is that if we had not joined with Great Britain, we would have been attacked by some other country ? Mr. Sagek. I think so. Mr. Thompson. And perhaps would not have been able to sell our products at all ? Mr. Sager. Yes, sir. The Chairman. When we entered this war who, next to Great Britain, had the mastery of the sea ? Mr. Sagek. I The Chairman (interposing). Well, it is a well-known fact that Gerpiany had the second Navy of the world, is it not ? Mr. Sager. Germany? The Chairman. Yes. Mr. Sager. I believe she did. Mr. Thompson. Germany was much in want of foodstuffs at that time, wasn't she ? , Mr. Sager. Well, I rather think, from the way Germany supported her people for a long time after the war started, that she had been a thrifty housewife and provided herself pretty weU with supplies. Mr. Thompson. How is that ? Mr. Sager. I say, I think Germany, anticipating what she was- about to do, had accumulated a very considerable stock of supplies before she entered the war. I do not thiaking she would have ever entered the war unless she thought she had supplies enough to see her through. Mr. Thompson. You do not think the matter of supply, then, had anything to do with German's surrender finally ? Mr. Sager. I do not say that, because the allies had gradually been weakening her after nearly three years' war — probably two years longer than she had expected. Mr. Thompson. You know we did not enter the war until 1917? Mr. Sager. Yes. I am sorry we did not. Mr. Thompson. You are sorry, of course? Mr. Sager. Very much; yes, sir. Mr. Thompson. And at that time you stiU think she had sufficient food supplies ? Mr. Sager. When we entered the war? Mr. Thompson. Yes; when we entered the war in 1917? Mr. Sager. I have no means of knowing that absolutely. Mr. Thompson. This food law was enacted after that time, wasn't it? Mr. Sager. Yes, sir. Mr. Thompson, That is aU. Mr. Sager. I thank you gentlemen for your attention. The Chairman. I think the committee just at this point would be very glad to hear from Mr. Bell, of Minneapolis. STATEMENT OF MR. JAMES F. BEIl., OF MINNEAPOLIS, MINN. My name is James F. Bell, of Minneapolis. I am chairman of a committee representing Millers' National Federation; this committee is composed of Fred J. Lingham, Lockport, N. Y.; E. M. Kelly, Nashville, Tenn.; Mark N. Mennel, Toledo, Ohio; B. A. Eckhart, Chicago, 111.; A. C. Loring, Minneapolis, Minn.; Samuel Plant, WHEAT PEIOE GUARANTEED BY CONQBESS. 139 St. JLouis, Mo.; E. V. Hoffman, Kansas City, Mo.; J. W. Ganong, Portland, Oreg.; S. B. McNear, San Francisco, Cal.; A. P. Husband, secretary, Chicago. Mr. Hoffman is not here, and I thinlc is not in sympathy with the views of the other members of the committee. Mr. Hutchinson. May I ask if you are connected with the Food Administration ? Mr. Bell. Yes, sir; I have been, but in a few days I will be out. • Mr. Anderson. Will you state your position with the Food Administration, so that the committee will understand that thoroughly ? ' Mr. Bell. I am at present chau-man of the sugar administration board. Mr. Anderson. And prior to that time? Mr. Bell. Prior to that time I was the chairman of a board which mobilized the milling industry under a voluntary agreement with the Food Administration. The Chairman. At this time you have nothing to do with the ■Grain Corporation ? Mr. Bell. No, sir. The Chairman. In fact, you have had nothing to do with the Grain Corporation since it became legally a grain corporation ? Mr. Bell. I have never had anything to do with the Grain Corpora- tion. The Chairman. Then you can not speak for the operations of the Grain Corporation ? Mr. Bell. No. The Chairman. Then I think that will clarify the situation a good deal. Mr. McLaughlin. Are you still connected with the Food Admin- istration ? Mr. Bell. I am still a member of the Food Administration; yes, sir. The Chairman. AR right, Mr. Bell. Mr. Bell. Mr. Chairman, we are pleased to have this opportunitj to present to your committee some of the views of the millmg indus- try in reference to the congressional guarantee for the crop of 1919. You have already had opportunity to review with members of the grain trade many of the economic features involved in the situa- tion. We will therefore not elaborate on these essentials, but limit ■our statements to those items which we consider vital. There are two elements of interest involved — the producer and the consumer. Both are entitled to equal consideration. The producer must be protected under the terms of the guarantee. Sufficient funds must be provided for that purpose." The consumer must have equal protection and benefits in the enjo\inent of a price for wheat products at a parity with the balance of the world. The consumer must also be assured adequate supplies of bread and feeding stuffs. The statement of these features is simple — accomplishment is difficult. It would be impracticable, if not impossible, to outline at this time a detailed plan of operation. 140 WUKAT PRICE GtlAEANTEBD BY CONGRESS. Congress has already created an agency to carry out the guarantee of 1918. The machinery of continuing is at hand. It should be utilized to carry out the obligations of 1919. It should be given ample power. Enabling legislation should be formed along broad lines that will permit the controlling agency to effect a commercialized work out to the end that, at or before the termination of the guar- antee, normal conditions of price and commercial activity may be restored. The public interest, however, demands that specific direction should be contained in the enabling legislation to assure that accomphshment. Moreover, it must provide for the fimctioning of industry m furnishing adequate bread supphes.' Outside of specific directions in these principles, trust must be reposed in your agency, who, with its experience and knowledge of the trade, must be relied upon to carry out your wishes. The disturbances brought about by the interposition of an arti- ficial condition devised during a great war emergency are far-reach- ing. The law of supply and demand has ceased to operate by reason of interference. It must be restored, although it will involve losses and sacrifices in its accomplishment. We must pay the price. It is not a question of how great the necessary expense, but that we should secure the most benefits in the expenditure. It would be highly desirable if the losses involved could be absorbed in one operation at the source, and the normal machinery for market- ing, distributing, and manufacturing restored to their usual operations and activities. Unfortunately that may not be possible at once, but the whole plan fails if the, purpose, effort, and expense is not directed to eventual accomplishment along those lines. The provisions of any proposed legislation looking to the fulfill- ment of the obhgations of the 1919 crop should not overlook the transition period from, the crop of 1918 to the crop of 1919. If, in response to an evident public demand, the prices for 1919 are estab- lished on a lower basis than those of 1918, it consequently follows that the manufacturer and distributor of wheat products is placed in the position of piirchasing on a high level and realizing on a low level. Unless means are provided to meet this situation, the pro- duction of wheat products will cease for a period of from 60 to 90 days before the expiration of the 1918 guarantee, and the country will be left without supphes of breadstuffs. In this connection, it must be borne in mind that it takes from 8,000,000 to 10,000,000 barrels of flour constantly in transit to meet- the consumptive demand. It takes an equivalent amount in the form of wheat flowing to the mills to insure such transit stocks. Since the provisions of the guarantee do not extend to the manu- facturer or distributor, both wholesale and retail, it necessarily fol- lows that after the 1st of March the potential, if not actual, risk in- volved, the lack of buying demand, will result in the closing of all mills, as to operate in the face of such conditions would inevitably lead to financial disaster. These are not theories but facts,' and no manufacturer, distributor, baker, wholesaler, or retailer of wheat products would be justified nor would his finances permit him to aaeume the tisks so clearly indicated. The miller is not here to secure benefits, but means which will per- mit both himself and the distributor to perform their proper functions in the public interest. If their services are essential, they must be WHEAT PRICE GUARANTEED BY CONGRESS. 141 afforded relief to effect accomplishment, othersiwe there will be seri- ous interruptions in the necessary supply of breadstuffs. The Chairman. What practical machinery do you have in mind for guaranteeing the miller, the retailer, the wholesaler, and I should add, too, the baker, against this danger which you speak of ? Mr. Bell. It is rather a difficult matter, Mr. Chairman. We have given it some thought. We have a possible plan in mind. We offer it as a tentative suggestion. We believe that in return for a protection, the millers should enter into an agreement with your agency to maintain in flow a certain amoimt of flour; in the fluctu- ation of price, if there was an advance, we would pay to your agency a certain fixed sum per barrel for each cent advance, with the privi- lege of securing that amount from the customer. to whom the goods- were sold. If, on the other hand, the price declined, your agency would pay to the miller a certain fixed sum per barrel for each 1 cent of decliae, which sum would accrue to the benefit of the pur- chaser. The miller neither gains nor loses in the operation. Either the purchaser of the commodity pays the advance or secures the benefit of a decline. The Chairman. I can see how that would carry you to the period when the fixed price expired. Mr. Bell. Yes, sir. The Chairman. When there would not be any special fluctuation, the miller would be prepared to buy, because he is guaranteed against a rise; but what about during the 60 days following the period when the fixed price does expire? Then the agent of the Government would have to pay this decline to the miller — ^isn't that right ? Would not that happen ? Mr. Bell. You mean on June 1, 1920? The Chairman. Yes. Mr. Bell. Well, we are hopeful that the establishment of the world's price to the consumer will mean" that all grain and grain prod- ucts in the hands of the producer to the consumer, and including both, w'ill be on a parity with the world's price, and therefore not subject to fui'ther fluctuations. The Chairman. No; you did not quite understand me. I did not make myself clear, perhaps. Let us assume that peace is going to be declared within a few months, as we all hope it will be — say, the 1st of March. At that time the food-control act expires. Then there will be no fixed prices. We get back to a world-basis price, to a price fixed by world conditions. Now, from that period during this flow — 60 days, I believe you said^the miller is going to find himself loaded with a supply of wheat at S2.26, when the world's price may be $1.'25. Mr. Bell. That is right. The Chairman. So that the agency of the Government must guar- antee the miUer against that loss ? Mr. Bell. Exactly. The Chairman. There is no way out of that ? Mr. Bell. No way, sir. The Chairman. Then let me ask you this: As an average, how long a time do wholesale merchants keep stocks on hand ? Mr. Bell. That varies, of course, at different times in the year. It is customary at the close of a crop year for merchants to reduce their stocks very low; always at the movement of a new crop they 142 WHEAT PEICE GUARANTEED BY CONGllESS. anticipate lower prices, and they load up very heavily at certain sea- sons, particularly in the fall. The Chaieman. How about the stocks of the retail men ? I imag- ine they will not hold theirs very long. Mr. Bell. No; the retail stocks in the big centers of distribution are never more than 30 days. The Chairman. How about the bakers ? Do they buy from hand to mouth, or do they purchase in large quantities ? Mr. IBell. Bakers frequently purchase considerable quantities, due to the fact that the storing of flour, the aging, improves its bread- making quahties. The Chairman. Mr. Bell, in working out the machinery to take care of the situation, I see that it is a very, very dangerous situation. Mr. Bell. Yes; it is. The Chairman. I think anybody can see that. You have to prp- vide a license for the miller, wholesaler, retailer, and the baker, the condition of which license would be to the effect that he should have to do certain things to meet this situation. Is that your idea ? Mr. Bell. Exactly. The Chairman. That seems to be the only sane way of handling it. Mr Bell. Yes, sir. The Chairman. Just one more question, and then I think I am through. Is it your idea, Mr. Bell, that this act should apply to anything else than wheat and wheat products ? Mr. Bell. T^o. The Chairman. You think not? Mr Bell. No. The Chairman. You would not agree to tbe suggestion that it be broad enough to take in foodstuffs and other cereals ? Mr. Bell. We hardly think that is advisable. The Chairman. It seems to me that it has gone far enough. Mr. Bell. Yes. The Chairman. Just one other question I had forgotten. Is it your idea that this biU must be broad and elastic so as to meet neces- sarily changing conditions from time to time ? Mr. Bell. Exactly. Mr. McLaughlin. You spoke of an arrangement by which the mil er would be required to pay something to the Grain Corporation. I presume that would be in case the price of wheat would go up from the price you bought it at ? Mr. Bell. Yes, sir. Mr. McLaughlin. And in case it should go down, then you would receive something from the Grain Corporation ? Mr. Bell. In the first event, we would coUect from the purchaser. In the second event, the receipts from the agency would go to the buyer. Mr. McLaughlin. Then your own dealing would be only in one case in case there was a reduction in price ? Mr. Bell. No; it works both ways. Mr. McLaughlin. I thought you said you would collect from the dealer ? You would pay to the Grain Corporation and then recoup' by charging Mr. IBell (interposing). And we remit to the buyer in case of a decline. WHEAT PRICE GUABANTEBD BY CONGRESS. 143 Mr. McLaughlin. You advise that there be no regulations per- mitted of corn, oats, or barley, or the other grains. Is the price of graia influenced by the price of oats and barley or corn, or is the price of those influenced by the price of wheat ? Mr. Bell. That is rather a difficult question. There is some rela- tive value, and it does not establish itself within a marked differen- tiation. The Chairman. I wish you would press that a little further, Mr McLaughlin, because I am interested in it. Mr. McLaughlin. If corn and oats and rye and barley and so on were left uncontrolled, the prices might be put up or put down abnorm- ally, and would the price of wheat be influenced, if it were left to itself? Mr. Bell. Yes. Ybur price of wheat is established at the Worjd's market price, we will saj. Mr. McLaughlin. No, I do not understand the Grain Corporation is going to establish a world's price. The world's price is going to take Care of itself, is it liot ? Mr. Bell. It is rather a difficult thing to indicate, a world's price. Mr. McIiAUGHLiis . Is anybody going to attempt to indicate it ? Mr. Bell. If we are going to give our consumer the benefit of the world's price, somebody has to indicate it. Mr. McIjAughlin. He has to indicate what it is, but there will be no attempt to fix it and make it a world's price, will there ? Mr. Bell. Not to make it, but to ascertain it. Mr. McLaughlin. That is what I say, to ascertain it? Mr. Bell. Yes. Mr. McIjaughlin. Then the only indication of it is to give broad- cast the views of what it is. Is not that true ? Mr. Bell. To give broadcast what it is, yes; but we assume that the grain will be offered in resale at such a price. Mr. McIiAUGHLiN. Well, I have not very much information on that subject, as to whether or not — ^which influences the others. Does the price of wheat influence largely the price of the other grains, and is it not true that the price of tlie other grains left unrestrained might influence the price oi wheat ? Mr. Bell. I think that is true, Mr. McLaughlin. Then is it altogether inadvisable to refuse con- trol of the other grain ? Mr. Bell. It would complicate the situation very much by adding other grain. Mr McLaughlin. Yes; it would be more work and more compli- cated ? Mr. Bell. We are attempting to restore conditions to normal. We are trying to work out from under one load. Do we want to assume another load in doing so ? Mr. McLaughlin. I have no opinion on that subject. I have thought as little Government control as possible should be exercised. And you think it would be helpful to you in taking care of the wheat to perhaps have no control whatever and exercise no influence what- ever over the other grains ? Mr. Bell. Well, Iwottld not like to answer that question offhand. The Chairman. May I ask a question there, Mr. McLaughlin? 107124^19 ^10 144 WHEAT PRICE GUABANTEBD BY CONGRESS. Mr. McLaughlin. Yes. The Chairman. It seems to me that there is a relationship between the price of all these giains? Mr. Bell. There is a certain relationship. The Chairman. And that relationship, whether wide or close — if you will allow me to put it that way^ — is dependent entirely upon the relative production of oats, as compared to wheat. For instance, if there is a very short oat crop, the price of oats wiU be higher ? Mr. Bell. Yes. The Chairman. And the price of wheat would be low. The farmer will feed his wheat rather thain his oats, and the parity begins to close again. Is that true ? Mr. Bell. Exactly. The Chairman. That seems to be the economics of it. Is that what you had in mind, Mr. McLaughlin ? Mr. McLaughlin. Yes. Mr. Bell. If we can establish wheat at a world's level of price, it is fair to assume, then, that the other grains, if they exist in enormous amounts, will reflect their proper relation to wheat. The Chairman. That seems necessary. Mr. Young of Texas. Let me interject that, in the carrying out of the food regulations, when they issued the 50-50 orders Mr. Bell (interposing). Yes. Mr. Young of Texas (continuing). Or the substitution order, I observed that in the ascendiag prices it was the substitute that ascended in price; that immediately the substitute went up in price to the comparative values, as compared with normal times, and the coarser grains frequently got higher than the finer grains. Mr. Bell. Of course, we introduced an artificial condition there. We created a new field for consumption, because we diverted those products very largely to human consiimption, and before they had not been used for that purpose. Mr. Young of Texas. In northwest Texas last year they made some wheat and no corn. Ordinarily, if wheat is $2.26 a bushel, a man would be a fool to feed it to his horses and hogs and the stock on his farm when he could supply that foodstuff in the way of corn at probably 75 cents Or $1; but a condition was presented that wheat was the cheapest feed he could use, and he therefore used it, because he did not have the corn and could not get it at a price even as low as wheat at $2.26. Mr. Bell. That was one of the difliculties we had in that situation. Mr. McLaughlin. Mr. Bell, do you think that this agency should try to carry on this business so as to make the loss. to the Govern- ment as small as possible ? Mr. Bell. I thmk any plan should be carried on to avoid unneces- sary loss ; but to minimize a loss and to implement that against the consumer, no. Mr. McLaughlin. Well, I have asked several questions along a certain line largely because these other gentlemen have greater experience and my modesty has prompted me to leave those ques- tions to them, but it has occurred to me that there may be quite a large reduction in the price of wheat, the world price may fall con- siderably, and it may be, too, that our agency may be able to keep that price from dropping as it naturally-— keep in mind I say " as it naturally "^ — would. Do you think it would be incumbent upon our WHEAT PRICE GUAEANTEED BY CONGRESS. 145 people to try to stop that natui'al decline so that the people of our cbuntry, the consumers of food, could have the advantage of it? Mr. Beix. We should not attempt to interfere with a natural decline. Mr. McLaughlin. You agree, then, with what Mr. Sager so well said: That it might create a serious condition in this country if the people had reason to believe that they were required to pay a higher price for food products then necessary ? Mr. Bell. Exactly. Mr. Haugen. Yotu" contention is that the miller should get a guaranteed profit ? Mr. Bell. No, sir. Mr. Haugen. I understood you to say so. Mr. Bell. No, sir. Mr. McLaughlin. He should be safeguarded against loss. • Mr. Haugen. Didn't you say something about safeguarding him against loss ? Mr. Bell. No, sir. Mr. Haugen. What do you suggest then, Mr Bell ? Mr. Bell. The suggestion I offered here was that an agreement should be entered into by the mill, or between the mill and your agency, whereby the mill, in return for maintaining in* transit a certain definite quantity of stocks, flour stocks, would be assured against decline. Mr. Haugen. Well, that amounts to a guarantee, doesn't it ? Mr. Bell. No; because the benefits of a decline accrue to the purchaser. Mr. Haugen. What have been the arrangements for the last year — what arrangements were made ? Mr. Bell. Since July 1, 1918, the millers are — you mean in protection ? Mr. Haugen. Yes; protection. Mr. Bell. There is no protection, sir. Mr. Haugen. Well, in the contracts suggested now they guarantee to take the surplus stock of wheat off the nands of the millers. Mr. Bell. That is not the point involved. It is the flow of flour in transit. Mr. Haugen. Well, your suggestion is that the Government should take the flour at a certain price. Mr. Bell. I said that in return for the miller keeping in transit a certain definite amount of flour stocks, that in the event of an advance in price from the price at which purchased he would pay to your agency the difference and collect that difference from the purchaser of the flour. In the event of a decline in the price your agent would pay him the difference, and that difference woiild be remitted to the purchaser. Mr. McLaughlin. Remitted in kind. Mr. Bell. He gets the benefit of the decline of the price, in other words. Mr. Haugen. You mean increase in the price of wheat? Mr. McLaughlin. Eeflected in the flour. Mr. Bell. Reflected in a definite way in the price of flour. 146 WHEAT PRICE GUARANTEED BY CONGRESS. Mr. Haugen. Then if there is an increase it is to be paid to the Government, and if there is a decline then Mr. Bell (interposing) . They pay you in both events. Mr. Haugen (continuing) . The Government pays to this miller Mr. Bell (interposing) . And the miller pays the buyer. The Chairman. There is not much danger of any very serious increase in price, is there, Mr. BeU ? Mr. Bell. That depends upon what basis is adopted at the start. If you concede the principle of a world-price and established that too low and it afterwards advances, why The Chairman (interposing) . I see the point. Mr. Haugen. You mean that guarantee should run for the whole time, or is that at the closing, at 1920? Mr. Bell. It means running through the period. The guarantee gives your protection. Mr. Haugen. Your miU buys wheat at $2, say, and the price advances 10 cents a bushel. The miUer is to pay the 10 cents over* Mr. Bell. No, we don't ask that, sir. We said that in return for the miller guaranteeing to keep in transit a certain fixed amount of flour stocks Mr. Haugen (interposing) . We don't have to guarantee that, that is the miller's business. Of course, he has to keep his stock in transit in order to continue in business. Mr. Bell. It covers just the amount that is in transit. Mr. Haugen. What is in transit. Mr. Bell. In transit. Mr. Haugen. Well, you couldn't do that if the price fluctuated from day to day.' Mr. Bell. If you estabhsh this world basis I do not think there wiU be much fluctuation. Mr. Haugen. Well, that might be if this Government could fix a permanent price for aU kinds of commodities for a certain period of months or years. Mr. Bell. I do not see how you can have a daily fluctuatioit in price imless you ope n you exchanges. Mr. Haugen. Why change it from what it is, then ? Mr. Bell. Well, for the very simple reasons which Mr. Sager just stated. Mr. Haugen. Well, it strikes me the price would be just as uncer- tain as the price fixed here. Mr. Bell. Not if the price is down on parity with the world's level. Mr. Haugex. Well, isn't it now ? Mr. Bell. No, sir. Mr. Haugen. How much is it above or below ? Mr. Bell. That is a very difficult question to answer. Mr. Haugen; Well, can you state whether it is below or above ^ Mr. Bell. I should say that the present guaranteed price is albove the world's level of price. ^Ir. Haugen. How much ? Mr. Bell, Well, sir, that is a pretty difficult question. I would not attempt to. answer it. Mr. Haugen. All right, I will change the question. What is the price, for instance, in Europe ? WHEAT PKICE GUAEANTBED BY CONGRESS. 147 ^i. Bell. Well, your Australian wheat is something like $1.25. Mr. Haugen. Where? Mr. Bell. In Australia. Mr. Haugen. Well, is it not a fact that a number are offering a premium for wheat at the present time ? Mr. Bell. Who ? Mr. Haugen. Well, is not it a fact that some of the neutral nations have made overtures and offered to pay premiums recently ? Mr. Bell. Norway purchased 50,000 tons of wheat, so I am in- formed, within the last few weeks from Australia at' $1.35. Mr. Haugen. Well, we hear so much about Australia; but I take it that the little supply that they had has been pretty nearly ex- hausted by this time if all those purchases have been made. Mr. Bell. We have had no export for eight weeks. Mr. Haugen. I beg pardon ? Mr. Bell. We have had no export for eight weeks. Mj. Haugen. Why not ? Mr. Bell. They are not buying. Mr. Haugen. Well, might not that be due to the lack of transpor- tation faculties ? Mr. Bell. No, sir. And I don't think that they will purchase here untU such time as they have exhausted the lower-priced stocks which they own. Mr. Haugen. You are unable to state, then, what the present world's market value is ? Mr. Bell. I do not think it is possible for any man to state. Mr. Haugen. WiU it be possible later ? Mr. Bell. I think so. Mr. Haugen. Why ? Mr. Bell. To state what the world's price is, with the interposition of a transitory condition, is a very diflB.cult thing. Furthermore, you have got to consider the interposition of Government subsidies and bounties which have reduced the price. No market can reflect the world's price, no one market. Mr. Haugen. How are you going to determine the world's price ? Mr. Bell. The world's price is the price level to the consumer in the principal nations of the world. Mr. Haugen. Yes. We have that at the present time, I take it. Mr. Bell. You have ; yes. Mr. Haugen. Well, why can't it be ascertained to-day as well as any other day ? Mr. Bell. Well, in that price level you have to take into con- sideration our own stocks and the stocks of other surplus-producing nations, and you have to concede a situation of a free movement of grain. It is not the actual prices existing, it is the price that may be established after the removal of restrictions. Mr. Haugen. Well, the guaranteed price in some countries has varied now from $2 to $4.08. Mr. Bell. The guaranteed price is no criterion of the price level to the consumer. Mr. Haugen. I am at a loss to know how you can fix the price on a certaiQ day and make it applicable for the whole year. Mr. Bell. I don't say that we can fix it on any one day. Mr. Haugen. I bog pardon. 148 WHEAT PRICE GUAKANTEED BY CONGRESS. Mr. Bell. I don't say that we can fix it on any one day for all the year. Mr. Haugen. I understood you to say that we were going to make a permanent price for the year. Mr. Bell. No, sir; I didn't make that statement. Mr. Hatjgen. I think that is the statement. Mr. McLaughlin. Stabilize it. Mr. Haugen. You propose to change the price from day to day — is that the idea? If so, what is the purpose in fixing a permanent price ? Mr. Bell. If we put a world's price on it the price may change from time to time. No one can predict whether it will change from day to day or whether it will remain on a more or less steady level. Mr. Haugen. Well, is there any question about its changing. Was there ever a time that the same price prevailed for one we^ at a time ? Mr. Bell. It may have been, yes; for a week at a time, yes; and for longer periods too. Mr. Haugen. I beg pardon ? Mr. Bell. I say it may have. Mr. Haugen. Why say "may" if it never did ? Mr. Bell. That depends upon how large a fraction you say is a change. Mr. Haugen. Well, can you recall a single instance where the price remained the same. For instance, isn't that true in your State ? Mr. Bell. I can not recall the figures. If you talk in fractions; no. Mr. Haugen. Yes; why qualify it by saying "may?" It is a certainty, isn't it, that it wUI change from time to time ? Mr. Bell. It is quite probable that it will change from time to time. Mr. Haugen. Well, it is quite certain, is it not? Mr. Bell. It is quite probable; yes, sir. Mr. Haugen. Well, you represent the millers, do you not? Mr. Bell. I am the chairman of this committee representing the American Millers. Mr. Haugen. Are you in the milling business? Mr. Bell. I am in the milling business; yes. Mr. Haugen. You have done fairly well under the Food Adminis- tration. The arrangements in the past have been entirely satis- factory to the milling trade. Mr. Bell. We were satisfied. Mr. Haugen. Now, you have done better than you ever did, have you not ? Mr. Bell. No, sir. Mr. Haugen. Well, the Federal Trade Commission report of April 18 points out the fact that the operating profits are shown by the records to have increased nearly 175 per cent, and they report that profits on the investment have increased rriore than 100 per cent. Mr. Bell. I am not prepared to discuss that statement. Mr. Haugen. Well, that is the report of the Federal ^rade Com- mission on the 18th of April. Mr. McLaughlin. And the same report says that whereas the flour profit per barrel was 11 cents before the war it is 52 cents under this arrangement. WHEAT PEICE GUAEANTEBD BY CONGRESS. 149 Mr. Haugen. It increased to. 52 cents per barrel. Jobbers' profits increased from 22 cents in 1914 to 55 cents a barrel in 1917. It shows the small jobbers' profits increased from 52 cents in 1914 to 88 cents. The millers' operating profits increased 175 per cent and their investment profits increased more than 100 per cent. Mr. Bell. The statement to which you refer did not obtain durtQg the period of the Food Administration's control. Mr. Haugen. In 1918. Mr. Bell. Eleven cents was not the basis of profit before the war, or 10 years before the war. Mr. Haugen. It says 1918. Mr. Bell. How many mills are covered in that report ? Mr. Haugen. I beg pardon? Mr. Bell. The mills covered in that report are very small in number. Mr. Haugen. I think there are some 5,000. Mr. Bell. No; I think they report on about 40 miUs, in the midst of the highly competitive district. Mr. MdLAUGHLiN. Enough were taken to justify the conclusion, I think. Mr. Bell. Well, I can say, gentlemen, that, so far as I know, during this period the profit was fixed by the administration and, so far as I Imow, was adhered to. In some cases it may have been more and in some cases a little less than was formerly enjoyed. The business is not liquidated. It may come out of this period — I am not sure that it is coming out of this period with a profit, and it is more than probable that it will come out with a very substantial loss for the entire industry. Mr. McLaughlin. I am sorry to hear you say that. Mr. Bell. I am sorry to have to say it, but it is true. Mr. McLaughlin. You lead us to hope that the profits of the millers were handsome. Mr. Haugen. Are we to understand that you are contending now that the same arrangement should be continued, or some new arrange- ment made ? Mr. Bell. That arrangement was discontinued on July 1, last. The millers now are operating without any regulations. Mr. Haugen. I am not entirely clear as to just what is desired. I thought it was the making up of the loss on one side or the othfer. There appears to be a fluctuation of price from day to day. I fail to see how you could incorporate any bookkeeping that would keep any account "that would make it possible to do the very thing that you are suggesting. Mr. Bell. I offered to suggest to the chairman what was a ten- tative plan which is not carried out in detail. It would be im- possible now to give you the details of such a plan, but if the principle of affording sucn releif to the industry as to permit its functioning in supplying the public need for breadstuffs is approved, then your agency should be relied upon to carry it out in so far as it is practicable to do so. Mr. Young of Texas. Now we are hearing the other angle of this thing and we hear of the millman's troubles. After we take the wheat from the farmer on the basis of the $2.26 guaranty, the wheat 150 WHEAT/ PRICE GUARANTEED BY CONGRESS. market goes down, and if he has not a market for his fiour and suffers a loss the Government is to make good to him. Mr. Bell. That does not involve any more loss than it does Mr. Young of Texas. Just a minute, here is the point: The miU men buy their wheat on a basis of $2.26, the price the farmer gets for his wheat. Assuming that he makes the crop that the acreage would indicate he should make, the world price would bfe lower than the amount we pay the farmer. Mr. Bell. Yes. Mr. Young of Texas. And if the mill man pays to the Government $2.26 for wheat, then in putting his product on the market he has to enter the world market for that product, which would be a declin- ing market. Mr. Bell. Yes. Mr. Young of Texas. Assuming that the decline in the market on world wheat would range around $1.50 per bushel instead of $2.26, then the mill man would have suffered the loss between those two values. Mr. Bell. If he bought at that price he would. Mr. Young of Texas. If he bought at that price. Mr. Anderson. He would not buy at that price under those circum- stances. Mr. Young of Texas. Then, if he goes out and does not buy at the Government price df $2.26, but buys at the world price, as shown from day to day, what obligation does the Government have to the mill man to make good ? Mr. Bell. If that is a fixed, or an upset price, and maintained through the year, then there would not be; but if that world's price IS a fluctuating level, why then he is takiiig undue risks. Mr. Young of Texas. The Government pays $2.26 for this wheat. Mr. Bell. $2.26 for the wheat. Mr. Young of Texas. Now, if the Government takes over this wheat it has to sell to the milhuan and to whoever will buy the wheat. Mr. Bell. Yes. Mr. Young of Texas. Well, now, if the Government has to go to the world market and sell it must sell at whatever price it can get; and the mUhnan comes in and buys on the world market from day to day. Now, what obligation is the Government under to make good th£ millman's loss ? Mr. Bell. Well, it is not a question of making good the millman's loss. We are not asking for any protection. Now, if it is furnished at what is reaUy a world's level price and is not subject to violent fluctuations, I agree with you that it is not necessary; but if, in the difficulties of establishing a world's price, we take an upset price, which may or may not reflect relatively the real world's level, then we have to have it. Mr. Young of Texas. Well, is it your view Mr. Bell (interposing). If, however, we can have a real world's price there is no reason why your exchanges should open. A Member. Is it your view that the Government ought to assume that obligation when we are liable to sustain a loss out of the Treasury, not only a very large amount to make good the guaranty to the farmer, but also another large amount to the miUmen ? WHEAT PRICE GUABANTEBD BY CONGKESS. 151 Mr. Bell. No, you have so much wheat; you have a certain fixed, guaranteed price. The difference between that guaranteed price and tne world-level price applies. It is on every bushel. You can not apply it twice. Mr. Anderson. May I ask a question ? Mr. Young of Texas. Go ahead. I see I have gotten into deep water. Mr. Anderson. Now, Mr. Bell, of course, if the exchanges of this countrv and the world were open the miller could protect himself through the ordinary practice of the exchange. Mr. Bell. Exactly. Mr. Anderson. Now, the supposition of your tentative plan is that yom- exchanges will not open. Mr. Bell. Exactly. Mr. Anderson. And, therefore, that the world's price must -be arrived at by some process of deduction based upon what you can sell flour at. Mr. Bell. Certainly. Mr. Anderson. Now, then, on the 1st of July the Grain Corpora- tion, havrug gotten the supply of wheat as it has in the past, comes to the conclusion that the world's level is $1.50 a bushel and that it makes to the miller an upset price of $1.50 a bushel upon the wheat which the miller buys from the Grain Corporation. Mtj Bell. Certainly. Mr. Anderson. Now, then, the proof of whether that was the world's price or not is determined by whether you can sell the flour at that price or not. Is not that it, very largely ? Mr. Bell. Normally; yes. Mr. Anderson. Now, then, if the price goes down you must have some adjustment, or if it goes up you must have some adjustment. If it goes down the consumer will get the benefit of the reduction, and if it goes up the Grain Corporation will be paid back the differ- ence between the upset price and the price at which you sell flour; and your tentative plan is to provide machinery that will enable you to implement that difference either against the consumer or in favor of the Grain Corporation ? Mr. Bell. Exactly. Mr. Anderson. Is that clear now ? The Chairman. It is clear to me. It has been clear all the titne. Let me ask you this, Mr. Bell: Is it your judgment that the price is bound to be more or less of an upset price ? Mr. Bell. In 1919? The Chairman. In 1919. Mr. Bell. I think so. The Chairman. Of necessity it is boimd to be; you can't escape it, and whether it is a correct or an incorrect proposition will depend on the good guessing of the men who fix the price. Mr. Bell. Exactly. The Chairman. At the best, it is nothing more or less than a guess, based on good business judgment ? Mr. Bell. Yes, sir. Mr. Young of Texas. Are you acquainted with an organization known as the Southwest Millers' Association ? Mr. Bell. Yes, sir; I know some of the gentlemen. 152 WHEAT PRICE GUARANTEED BY CONGKESS. Mr. Young of Texas. Are you acquainted with Mr. Topping? Mr. Bell. I know Mr. Topping. - Mr. Young of Texas. He is secretary, I believe. Mr. Bell. I believe so. Mr. Young of Texas. Did you hear Ms telegram read ? Mr. Bell. I only heard a part of it; I couldn't hear it all. Mr. Young of Texas. In that telegram he says that the trade should be left unrestricted in carrying out' the details of this guar- anteed price, or words to that effect. In other words, that we need no governmental agency; do you disagree with him in that regai-d? Mr. Bell. I am sorry to say I do. I wish it were not necessary. Mr. Young of Texas. I am not sure that these gentlemen wUl get here in time to testify. What will be the situation without any governmental agency in carrying out this guaranteed price to the millers if it is admitted that we must keep in transit 8,000,000 or 10,000,000 barrels of flour daily, as you stated? Mr. Bell. That would leave us without any stabilizing influence in the presence of a great surplus, or possible great surplus, which might create a condition whereby values were temporarily depressed, or even destroyed. Mr. Young of Texas. And from a miller's standpoint then, Mr. Bell, you believe that a governmental agency is necessary ? Mj. Bell. I believe that if we have a large surplus we can not get away from it. ' The Chairman. And you think it would be unwise in these ab- normal times to open up the exchanges to wheat ? Mr. Bell. I would say I should think it would be inadvisable, I am sorry to say that, because I feel that they perform normally a very essential function. The Chairman. I very thoroughly agree with you, Mr. Bell. Mr. Bell. But I do believe, Mr. Chairman, in the face of this con- dition which exists here, this artificial condition, that unless you could establish some stabilizing influence which would insure their legitimate operation without a condition of depressed values, I am afraid we will have to put that day off a little while. But our effort all the time must be directed toward establishing normal conditions. The Chairman. The suggestion has been made, and it impressed me rather favorably — ^I referred to it once before — that it might be possible to open the exchanges with very strict regulations with reference to the handling of wheat, and that the Grain Corporation, if any unusual conditions arose, or it was suspected that they might arise or were about to take place, should be allowed to come in and give a stabilizing influence to that situation. Have you given thought to that ? Mr. Bell. Yes, sir; we have given some little thought to that. The Chairman. My idea was, when the suggestion was first made, that that would be the first step in starting a normal condition on the exchange. In other words, you start this baby to walking with the daddy holding its hand. Mr. Bell. Yes, sir. Mr. Candler. If the exchanges were open and to permit only; the legitimate hedging, if it were possible to do that, so that the miller might hedge against his purchases, or contracts, then would you say that a governmental agency would be required from a miller's stand- point to carry into effect the $2.26 guaranty? WHEAT PKICE GUARANTEED BY CONGEESS. 153 Mr. Bell. Yes, sii-; I think you would, because you have to have it as a stabilizing influence. Of course, we are assuming all this with the idea of a large production of wheat in this country. The Chairman. In other words, you can't have a legitimate trade without a hedge at the other end of the market ? Mr. Bell. You have to have. Mr. Lesher. Has Australia had a chance to sell her wheat during the last year ? Mr. Bell. They have sold, I believe. Mr. Lesher. Isn't it true they have not had the chance to trans- port it ? Mr. Bell. Yes, sir; that is true, but they forced the English Gov- ernment to buy it; they bought it as it came along and paid for it; otherwise they would not have had the money to finance the matter and give employment to the agricultural interests of Australia. Mr. Lesher. This wheat that Norway bought at .$1..35 f. o. b. Australia ? ilr. Bell. Yes, sir. Mr: Lksher. What is the freight between Australia and this country ? Mr. Bell. I couldn't tell you that. Mr. Lesher. That is all very essential in finding the price. Mr. Bell. Yes, sir; of com-se that has dropped. Mr. Lesher. I was getting at the price; if Norwa}'' is going to pay $l.o5 f. o. b., it doesn't look like a great slump in wheat and in the wheat market. Mr. Bell. $1.3.5 there brings it up to about $1.95 at Liverpool, as compared with our $2.39^ at New York; then we have interest charges and storage, which bring it up to about ?2.48 or $2.49; so you see we are at a loss with the price. Mr. Lesher. How much did you say it is in Liverpool 1 ilr. Bell. 1 said I believed the Australian price of $1..35 is equiva- lent to $1.95 at Liverpool, as compared with $2.39^ here, plus storage, interest charges, and handling ; that would bring our price up pretty close to $2.50. The Chairman, hi Liverpool ''. Mr. Bell. No; in New York, which makes it about S3 at Liverpool. Am 1 right that the Australian wheat reaches Liverpool at about $1.95? Mr. Randall. Yes, sir. Ma-. Chairman, if you permit me to say what the normal freight rate is on a bushel of wheat from Australia to Liverpool — before the war it was about 60 cents a bushel, $1 per hundred. The Chairman. Sometimes it was as lov/ as 3 cents. Mr. Bell, a t was down as low as 2 cents. Mr. Hutchinson. You made the statement that we have not exported any wheat for two months. , Mr. Bell. We have not exported any flom- for eight weeks — it is in the eighth week; or made any purchases — 1 mil say the Grain Corporation has not made any purchases ol' flour. Mr. Hltchinson. Have you any. knowledge how much wheat, by the bushel, we have sent across, in wheat and flour, since July 1, 1918? Mr. Bell. I could only guess at it. 154 WHEAT PEICB GUARANTEED BY CONGRESS. Mr. Hutchinson. Well, guess at it. Mr. Bell. I should say about 160,000,000 bushels. Mr. Hin'CHiNSON. There has been a statement made here that we would not have any surplus, and we have over 200,000,000 to dispose of now betweeen this time and July 1. Mr. Bell. We have to have some for consumption. Mr. Hutchinson. Figuring on a basis of 600,000,000 bushels cpn- sumption annually, we have over 200,000,000 bushels in this country now. Mr. Bell. Yes, sir; I know nothing about the demand, except Mr. Barnes is very sanguine we will have a call for the surplus. Mr. Hutchinson. With 200,000,000 to dispose of, and an annual consumption of 600,000,000 bushels, he thinks it will be disposed of? Mr. Bell. Yes, sir. Mr. Hutchinson. The statement has been made here we would not have any surplus. * Mr. Bell. I have not seen those figures; I have been off on this other work and haven't followed these figures through. There may be some gentlemen here who have those figures. Mr. Thompson. You do not state that the freight per bushel now is 60 cents from Australia to Liverpool ? Mr. Bell. Yes, sir. Mr. Thompson. Sixty cents per bushel now since the freight has been reduced ? Mr. Bell. Yes, sir. Mr. Randall. One dollar per hundred. Mr. Eainey. I was attracted to the statement of the Federal Trade Commission— to the question of the Federal Trade Commis- sion's report in which it is suggested that the millers made immense profits ; have you read that report 1 Mr. Bell. Yes, sir; I have read it. Mr. Rainey. Do you know how they reached that conclusion? You suggested the millers suffered a considerable losss. Mr. Bell. No; I didn't say that. I said it had not been liquidated yet. We have yet this business to go through. I am not sure where it will land, but I think the business may come from under the gov- ernmental control with a substantial loss. Mr. McLaughlin. The millers are looking forward to it quite cheerfully. Mr. Bell. Not when the business is closing down and the expenses are going pn. wc. Anderson. Are the mills running now, Mr. Bell? Mr. Bell. They are closing down very rapidly. With no export buying in eight weeks and conservation being encouraged by propa- ganda, you can readUy see that the miller's activity is very much restricted. Mr. Anderson. Would you say that so far as the millers are con- cerned that that Federal Trade Commission's report is not very reliable ? Mr. Bell. You are asking me to make rather a swooping answer. I think the Federal Trade Commission report does not show they are conversant with the situation, and it has not brought out the com- plete facts. WHEAT PKIOE GUARANTEED BY CONGEESS. 155 Mr. Thompson. I want to make this statement, that I will submit to the committee before this hearing closes evidence that very much ■contradicts the statement that the freight rate is 60 cents per bushel from New York to Liverpool. Mr. Bell. I did not make that statement. However, I think it is correct, so far as my own loiowledge is concerned. The Chaikman. We are very much obliged to you, Mr. Bell. Mr. Bell. I am very much obliged to you, Mr. Chairman, and all of you gentlemen. The Chairman. Have you any other gentlemen who represent the millers who desire to be heard ? Mr. Bell. No; Mr. Chairman. Our committee was content to allow me to be their spokesman. Mr. Gkiffin. There are two gentlemen here who want to be heard in the interest of the farmer — Mr. McCall and another gentleman, both of Minneapolis. Thb Chairman. We will hear Mr. McCall. STATEMENT OF MR. J. I. M'CALL, OF MINNEAPOIIS, MINN. Mr. McCall. Mr. Chairman, in order to elucidate our situation somewhat, I will say this, that the statement was made here yester- day that we as grain men who were paid by the producer were coming here wholly in the interest of the consumer. Now, I wish to state that the first resolution passed by the grain men was to the effect that the interest of the producer be safeguarded in every way and a guaranty made him. And I want to say that we go still further in the interest of the producer. We say that he is entitled to his price that the Government has guaranteed him at the point of delivery and paid to him as he has been accustomed to being paid for the last 50 years. To my mind there is no reason why we should adopt any of these methods of settling with the farmer that have been suggested. It is very easy for us and has been very easy for us to settle with the farmer; it always has been. So the day he briags his grain to the market he gets his money, as he has been doing for 50 years. The idea of giving him a chance to speculate and fix a time when he would .sell his grain on a market that would suit him so that he might specu- late is not the idea. The idea was to give him $2.26 in Chicago for his grain, freight and other charges deducted. We bave done that throughout the guaranty, and there is no reason why we can not do it now. We will buy it as we have always bought it and sell it to the Grain Corporation, and the farmer is out of the proposition. We will sell it to the Grain Corporation as we have sold it during the period of the guaranty. It may not be known to you gentlemen, but it is said there are 6,000,000 farmers in the United States. We will assume that 4,000,000 of them raise wheat. If you let them sell then- grain there are 4,000,000 men to deal with, and you will have 40,000; or 50,000 different prices to settle by. Why assume such a proposition when it is possible to settle with the Grain Corporation m the future as in the past? We are not asking for any different arrangement than we have had heretofore. We buy from the fatmer and pay him his money when he delivers the grain, and we sell to the Gram 156 WHEAT PRICE GUARANTEED BY CONGRESS. Corporation and get our money, and the Grain Corporation will do with it as may seem best. Now, I can not assume, gentlemen, that the President of the United States is the President of the farmer, or of the grain dealer or of the miller, or even of the consiuner; he is the President of all the people. And I really believe that while the Gram Corporation has some dis- advantages, and has disadvantages to me personally, I believe the Grain Corporation or some similar agency, acting under the direction of the President, will handle this matter in a very much better way than if it were handled in the devious ways suggested, dealing directly with the farmer. We will leave out of the question the freight charges and the matter of handling it in this way; you will handle it by the unit instead of in 40,000 or. 50,000 transactions. Mr. Hutchinson. Does the grain man handle aU the grain that is grown ? What do you do with the miller ? Mr. McCall. He can buy his grain direct from' the farmer. Mr, Hutchinson. Under your arrangement? Mr. McCall. Yes, sir. Mr. Hutchinson. How about the Grain Corporation? Mr. McCall. They can settle with him as they do to-day;' the Grain Corporation has control over all the mills in the country. Mi. Hutchinson. I would like to have your plan. Mr. McCall. The Grain Corporation is now taking the wheat and selling it for less than they pay— we will assume on a large crop; it is also possible for them to refund to the miller the difference between the price he paid for this grain and the price of the grain on the market, whatever it is selhng for; whatever the price the Grain Corporation sells at MinneapoHs, that is fixed; it is fijced in units. Mr. Hutchinson. Who is going to carry the difference ? Mr. McCall. The Government will carry the difference. Mr. Hutchinson. Have you collected from the Government? Mr. McCall. Yes, sir; they pay us every day at the terminal. Mr. Hutchinson. They don't pay you in advance? Mr. McCall. No, sir; the Government takes the grain off our hands to-day and pays for it, or the miller may take it and we settle with the miller and the Government pays us the $2.26 they guarantee. It has worked for two years, and it will work longer. There are some hardships on the man who handles the grain but it is an infinitely better plan than the plans that have been suggested. Mr. McLaughlin. The farmer does not ship much grain direct to the dealer in large quantities. Mr. McCall. Not very largely, I think. Mr. McLaughlin. It goes mostly to the local dealers. Mr. McCall. Yes, sir; I think so, but if he ships direct he will get his price. Mr. McLaughlin. He doesn't do it on a large scale. Mr. McCall. He can do it. Mr. McLaughlin. Isn't this about the way it is working now: A farmer goes to his local elevator, the local elevator rrnis his wheat through and makes up his mind what the grade is and he pays the farmer for that wheat less what the elevator man can get for it at the market to which he is going to ship. Mr. McCall. Yes, sir. Mr. McLaughlin. And a little profit for himself ? WHEAT PRICE GUABANTEED BY CONGRESS. 157 Mr. MoCall. Yes, sir; a reasonable margin of profit. Mr. McLaughlin. So that there is no connection whatever with any governmental agency and the farmer himself ? Mr. McCall. None whatever; and the minute you form that , connection you are going to have 30,000 or 40,000 transactions instead of a few. Mr. McLaughlin. And, ordinarily, if the farmer is told that cer- tain deductions or reductions should be made on account of th& quahty of his wheat not being up to grade he is satisfied ? Mr. McCall. He settles right there; yes, sir; and it is all disposed, of. Mr, McLaughlin. Then he gets a price with the freight deducted from that point to the place where it goes. Mr. McCall. Yes, sir; it is not complicated at all. Mr. McLaughlin. And the farmer is satisfied? Mr. McCall. Yes, sir ; so far as we know. Mr. McLaughlin. And it is practically enabhng him and the ele- vator man to carry it on in a normal way ? Mr. McCall. Yes, sir. The Chairman. We are very glad to have had you make the state- ment you have ; it clears up many matters. Mr. McCall. We would have been glad to have made it long ago- but we wanted to hear what these other gentlemen had to say. There are two other gentlemen here and I would just Uke to have them say whether they agree with what I have said, Mr. Mangusson and Mr. Evey. Mr. Mangusson. Entirely. Mr. Lesher. Do you know about how many mills are in the United States « Mr. McCall. Probably some of these other gentlemen can tell. Mr. Bell. There are altogether about 11,000 miUs. Mr. Lesher. How many grain elevators ? Mr. McCall. Fifteen thousand grain elevators in the northwest alone. Mr. Lesher. That makes 26,000 institutions we have to deal with. Mr. McCall. You would not deal with all of them; you would deal mainly with the terminal markets, is all. You would be dealing with about 200 units; I couldn't see how you could deal with more than 1,000 rather than with 30,000 or 40,000 persons. Mr. Hutchinson. Can you tell us how many mills are less than lOO-barrel mills ? Mr. McCall. A number of them. Mr. Hutchinson. All of them are less than 100 barrels, are they not? Mr. Bell. Out of the 11,000," about 7,000 of them. Mr. Hutchinson. And all of them deal direct with the farmer ? Mr. Bell. Yes, sir; to some extent. Mr. Thompson. That is the most sensible and succinct statement we have had in the last two days' hearing. Mr. McCall. I thank you. Mr. Mangusson and Mr. Evey, both large operators are here and I wish they could be merely allowed to state whether they agree with me in this. The Chairman. We will take their statements. 158 WHEAT PRICE GUARANTEED BY CONGRESS. STATEMENT OF ME. C. A. MANGUSSOIT, OF MINNEAPOLIS, MINN. Mr. MangusSon. I only wish to say that I indorse absolutely without qualifications what Mr. McCaU has presented here. The Chairman. We will hear Mr. Evey. STATEMENT OF MR. 0. F. EVEY, OF MINNEAPOLIS, MINN. Mr. Evey. I want to say I heartily concur in and agree with everything Mr. McCall has stated, and it is founded on 40 years' experience in the grain husiness. (And thereupon the committee adjourned until to-morrow morning at 10.30 o'clock.) Committee on Agkicultuke, House op Representatives, WasTiington, D. C, February 5, 1919. The committee met at 10.30 o'clock a. m., Hon. Asbury F. Lever (chairman), presiding. STATEMENT OF GEN. A. P. PEAKE, OF VAIIEY CITY, N. DAK. Mr. Young of North Dakota. None of the producers have been heard up to this time. I think it might not be out of place to read a, letter received from a grain grower in North Dakota, who writes from Chicago. The letter is dated February 3, 1919, and is signed Tdy Mr. Amson P. Peake, former adjutant general of North Dakota. He says : I shall be here for the next week and am making a close study of the-grain markets Tvith reference to the world's situation now and for the coming year. I hear a great deal here about "back to normal." This is of course impossible, as things willnot be normal from a before- the- war viewpoint for years to come, if ever. I absolutely agree with Mr. Barnes's report as to European needs as arrived atby Hoover and himself. In fact, the iindings of these gentlemen are almost identical -with my guess of last August and confirm the forecast I made to you in November. There are two very important things to remember in the grain forecast for 1919. First, Russia, including the Ukraine, will not raise enough wheat during 1919 to furnish l)read for its people. This is certain, as seed would have to be sent in from Siberia or elsewhere and farm animals are being eaten to prevent the farmers from starving ■this winter. Remember Russia was our greatest prewar competitor in wheat and rye shipments. Second, the before 1914 competitive buying by European countries is not now going on and will not be in evidence for many months, if not years. Why? Largely because instead of being in debt to Europe we are now her heavy creditor. There- fore, before we can sell her any large amount, of supplies a credit must be arranged, and if Prance or Britain arrange the credit they will control the expenditure. If oiir bankers arrange the credit, we should to a reasonable extent at least dictate the price •of the products sold for that credit. There are many other'points to be talked over, but I can not go into them now. Yours, very truly, Amson P. Peake. The CHAifeMAN. Gentlemen, Mr. Glasgow would like to make a brief statement before Mr. Barnes goes on. We will be glad to hear from you now, Mr. Glasgow. WHEAT PRICE GUAEANTEEI) BY CONGBESS. 159 STATEMENT OF MR. WIllIAM A. GIASGOW, COUNSEL FOR THE UNITED STATES FOOD ADMINISTRATION. Mr. Glasgow. I am counsel for the Food Administration and have been siace the 25th of January, 1918. I was born and lived in Viriginia until 1904, and since that time have lived in Philadelphia, practicing law. Mr. Chairman, if the committee will permit me, I just want to put upon the record the facts as to the bill which the committee chairman has in his possession, and a copy of which is also with the chairman of the Senate Committee on Agriculture. When the President left for France, I was informed by the Secre- tary of Agriculture that he had directed him, in connection with the Food Administration, to furnish this committee and the Committee on Agriculture of the Senate a statement of fact as to the wheat guaranty of 1919 and such facts in connection therewith which it was deemed might advise the two committees. The Secretary of Apiculture sent for the then Acting Food Administrator, Mr. Eicha,rd, and myself for a conference, and we prepared a memorandum which could not be completed before the 16th of December, because at that time the Agricultural Department got its reports as to the acreage planted to winter wheat and the then prospects. As soon as that information came in, a memorandum was prepared and a copy of it transmitted by the Secretary of Agriculture to the chair- man of this committee and a copy thereof to the chairman of the Senate Agriculture Committee. After that memorandum had gone in, the Secretary of Agriculture advised me that the chairman of the Agriculture Committee of the House, Mr. Lever, had asked him to draft a bill, the purpose of which would be the carrying out of the Government guaranty on wheat of 1919. The Secretary asked me, as counsel for the Food Administration, to take the matter up with the solicitor of the Department of Agriculture and prepare such a bill. We had a con- ference on the subject, and I was sick for a week, and he prepared a memorandum, and when I got up I got his memorandum and be was sick, and I went on and prepared a bill. The purpose I had ia view in the preparation of this bill was such a suggestion as we coul Country elevators, 521,000,000 bushels; mill elevators, 150,0OO,00G- bushels; terminal elevators, 262,000,000 bushels; total theoretical capacity, 933,000,000 bushels. The Chairman. Just in that connection, you adso have in transit^ don't you, about 60,000,000 bushels at aU times ? WHEAT PRICE GUARANTEED BY CONGRESS. 167 Mr. Barnes. I think that is a rather large estimate. That would contemplate a very active grain business. I prestraie there is that much in transit at the present time. The Chairman. So that would add to the storage facilities ? Mr. Barnes. Oh, yes. The Chairman. Which would bring it up to about a billion bushels ? Mr. Barnes. Yes. Our own detailed records show that, on Octo- ber 31, 1918, there was in storage in all these agencies: Wheat, 290,000,000 bushels; other grains, 184,000,000 bushels; or a total of 474,000,000 bushels. While the aggregate high points reached at any time during the crop season, in each grain, footed together as an aggregate, womd have totaled, had they occurred at the same time, 519,000,000 bushels. The largest actual storage, as compared with the theoretical capacity of these various classes, tmder our record, is as follows: Country elevator, 29 per cent; mill elevator, 58 per cent; and terminal elevator, 68 per cent. It is impossible to use the full theoretical capacity of any elevator; certain working space must be kept not only for wheat but for the other grains, or the commercial life of the community is choked. A careful survey of this has convinced us that the following is probably the maximum capacity of ,the present storage facilities of the United States: Country elevator, theoretical, 521,000,000 bushels; actual, 50 per cent, 260,000,000 bushels; mill elevator, theoretical, 150,000,- 000 bushels, actual, 75 per cent, 112,000,000 bushels; terminal ele- vator, theoretical, 262,000,000 bushels, actual, 75 per cent, 196,000,- 000 bushels; or a total theoretical capacity of 933,000,000 bushels and total actual capacity of 568,000,000 bushels. Actually, approximately 570,000,000 bushels of grain can be stored in the present facilities of the country without interfering with the normal current flow. Since it is evident that at least 170,000,000 to 180,000,000 bushels represents the normal flow of other grains, it is probably true that not exceeding 400,000,000 bushels of wieat can be stored at any one time in all the storage facilities of the United States. The importance of so utilizing storage that the current handUng of other grain is not checked is shown by the figures of the first six months of this crop year. There passed through the elevator facilities of this countrv a total, of all grains, of 2,531,000,000 bushels, while the storage at the high point was only about 480,000,000 at any one time. The disaster that would follow, choking those current train-handling facilities, is well shown in any consideration of these gures. As to the capacity of the ports of the United States to serve an outbound movement, in case buyers for that outbound movement can be foimd, there is less need for apprehension, although the great Atlantic seaports are woefully inadequate in their grain-handling facilities. Our study of the port handling capacities leads us to believe that there can be put through the ports of the United States, monthly, 1,000,000 tons of bulk grain, and 250,000 tons of package freight, such as flour and cereal products, and that by careful supervision and control of the rail fl!ow, so that seaboard raflroad congestion should not interfere, these quantities may be moderately increased. 168 WHEAT PEICE GUAEANTEED BY CONGBESS. During the crop year 1915-16 the records show that there passed through the ports of the United States, of bulk grain, including Canadian grain, a total of 521,000,000 bushels. Our average exports of other grains than wheat have usually run from 50,000,000 to 60^000,000 bushels annually; so that it seems fair to estimate that, with unusually favorable conditions, and with consuming markets to take the movement and carriers to transport it from the seaboard, it might be possible to market through the United States ports 500,000,000 bushels of wheat (besides the necessary flow in other trains), and also the equivalent in form of flour of 150,000,000 ushels further. As to the probable demand to fall on the United States in the season of 1919-20, estimates at present would be the variest guesses, because ungrown crops of Australia, Argentina, India, Canada, and the United States would themselves decide, with the other influences of tonnage and of finance, what call should fall upon the United States alone. As far as such estimates can be made, and subject to all reservation as to changes which crop development may force (and those changes may be very radical, indeed), it seems probable to expect a world demand between a minimum of 15,000,000 tons and a maximum of 20,000,000 tons of bread grains, mostly wheat; and as far as one can estimate the possible yield of crops whose acreage is still unknown, it seems reasonable to expect that other countries than the United States, such as Canada, Argentina, Australia, and India may contribute from 7,000,000 to 9,000,000 tons. Keeping in mind, again, that these estimates are the veriest guesses as yet, it, seems reasonable to expect that there may fall upon the United States in the crop year 1919-20 a demand which mav be as low as 5,000,000 tons, or 200,000,000 bushels, to as high as 10,000,000 tons, or 400,000,000 bushels. With approximately 600,000,000 bushels of wheat required at home for bread and seed, a foreign demand that reached the extent of 400,000,000 bushels would solve the problem of a considerable wheat crop ; while a crop yield in the United States exceeding 1,000,000,000 bushels of wheat (and that is quite probable), coupled at the same time with a foreign demand which has shrunk to 200,000,000 bushels (and that is quite possible), would create a problem ; first, in governing the storage and the flow, so that farmers marketing may be fairly secured at all; and, second, in disposing of a surplus remaining at the end of the harvest ;year in such a manner that even if the National Treasury was prepared to absorb the Joss, its disposal should be made without destroying entirely the marketing machinery of the country. Mr. Chairman, I have endeavored in my statement not to argue for any method of price maintenance. Just to clear the air as to the 1918 crop, because in some quarters there seems to be a feeling we are carrying over an enormous surplus, on that point I want to comment. The fact is we did start to carry a large surplus. We started with the definite policy of carrying over 150,000,000 to 200,000,000 bushels of wheat as a necessary war reserve. But with the termination of the war and the freeing of the seas from the sub^ iriarine, the necessity for that as a protection to our allies was elimi- nated, and the large winter-wheat crop actually sown relieved us of any anxietj' as to our domestic supply . So that we started on the policy of reducing our reserve as quickly as possible, and thereby WHEAT PEICE GUABANTEED BY CONGRESS. 169 reducing the loss on the guarantee ; and therefore we started, before the beginning of the next crop year, what seemed almost a hopeless task of moving and selling 350,000,000 bushels of wheat and finding a market. 1 think we will do it. T have not seen any detailed suggestions made to j our committee or comment on them, other than the short notes in the daily press. But some phases of that I want to comment on very briefly; and if you desire a further study, of that question later, I should be very glad to give you our opinion. I have not had opportunity to study recent suggestions before your committee, and therefore do not feel competent to comment on all such suggestions, while I realize that in reaching a fair solution of this problem every proposed solution should be carefully considered. As to excluding the spring-sown wheat from the guaranteed force as the termination of a war contract, I should point out the practical difficulties even while I say in advance that the proposal appears to me to border too closely on bad faith. If an attempt is made to reimburse producers' actual loss for expenditures made in prepara- tion for growing under that guaranty, the practical difficulties in arriving at fair conclusions as to those damages in several hundred thousand cases, and the scandal sure to follow in a storm of charges of preference and prejudice in determining those claims, would alone condemn it. In the marketing of wheat it would be impossible to segregate spring-sown wheat from fall-sown. Some areas grow both in the same counties. The flow of grain interchanges from one terri- tory to the other, and in any attempt to apply one method of price to fall-sown and another method of price to spring-sown the door is wide open to fraud on a stupendous scale. I have noted a suggestion that the whole price level be reduced an arbitrary step by the outright payment of a stated sum per bushel to the producer from the National Treasury. A decision to do this now in advance of crop determination would be an action based on, perhaps, illusion prospects and is merely substituting now the arbi- trary Opinion of wheat values by Congress or a commission for the J)resent level based on the conclusion of a special commission, after ong and careful study, of fair value between producer and consumer and justified by maintenance for almost two years unchanged at home and abroad. A new survey based on new conditions may justify a change of value when those new conditions are ascertainable with the actual seciiring of a new crop. K legislation should now, in advance of the harvest, pronounce the readjusted value of wheat to be $1.75 or $2 or any lower basis,* instead of $2.26, and if then, by reason of unfavorable crop outcome, we should find the buying world clamoring for our surplus at $2.26 or $2.50, or, conceivably, if we ourselves should, by an almost incon- ceivable but wholly possible crop failure, have to enter the WQrld markets as a buyer and at higher levels, it would make such legisla- tive anticipation look very ill natured indeed. If I couM feel that normal influences could operate so shortly after war's unsettlement; if we could solve international finance so that our merchants could cash their commercial foreign bills; if shipping could be made freely available for private charter; if foreign Gov- ernments abandoned their control of buying by concentration, so that America could bargain fairly for the price of its products; and if any 170 WHEAT PRICE GUARASTTEED BY COKGKESS. fair and practical way could be found to discharge without gross abuse the obligation of the guaranty to the producer, I should greatly favor the elimination of all governmental interference with the wheat- market system and organization, which for many years, I believe, functioned in a sound and efficient manner. Until the progress of the time itself and further careful study and consideration suggests a clearer solution of these factors, I can see no recommendation except in repeating that power wide enough to meet them all should be lodged for use as their necessity is demon- strated. I have prepared for use by the committee certain tables from our records. Our records as to the grain moving to market, as you know, are more complete than it was ever before possible to make, because we have used the licenses there in order to get definite reports from all grain-handling facilities. Sheets 1 and 2 show the positions by States of the crops of wheat> corn, oats, rye, and barley; the total production; the movement of the crops to that date; the amoimts left on farms to be marketed the balance of the crop year; the grind in miUs; the stocks on December 27 in country elevators, miUs, and terminals; and the total stocks in all positions. There are details which I think you will find of value on study. Sheet 3 shows the maximum stocks in the storage facilities of any one State and the date thereof, and the elevator storage capacity, country elevators, mills, and terminals by zones of the Grain Corpora- tion, showing total storage of all kinds in the United States of 933,000,000 bushels licensed theoretical capacity. Sheet 4 gives the details of storage capacity in the United States in elevators and mills, detailed as to States and various cities, made from the license records of the Food Administration. The conclusion as to the high points I have given you in my formal statement. Sheets 5, 6, and 7 show certain records of world production and consumption, by countries, for wheat, corn, oats, rye, and barley, and certain estimates of the production and consumption needs of 1919. These estimates are copies of records prepared for the use of certain divisions of the Commission to Negotiate Peace; but the estimates for 1919, I think, are largely subject to much revision and alteration. Sheets 8, 9, 10, 11, and 12 show the movement of the five grains and will give you some idea of the total movement, 2,500,000 bushels, through storage facilities that carried at no one time more than one- fifth of that. Sheets 13, 14, and 15 show the exports of all grains extended to January 10. The conclusions from these sheets are included in my formal state- ment, and I wiU file the sheets with you. The Chairman. Without objection, those wiU be inserted in the record. Mr. Barnes. Mr. Chairman, that finishes my statement. I am simply at your service for answering such questions as you may desire, to ask. The Chairman. I am sorry, Mr. Barnes, you did not have the opportunity to hear the statements of the other gentlemen. They were very interesting. The discussion here, Mr. Barnes, has revolved WHEAT PEICB GUARANTEED BY GONGEESS. 171 largely around the proposition as to whether or not, first, the powers here conferred should go beyond the control of wheat and wheat products; second, whether the trade should be returned to prewar conditions ; third, whether or not thfe exchanges should be open and allowed to operate with the Government having the power to buy and sell and even to hedge its own contracts. I think that about covers the disputed points, does it not ? Now, ' if you win take up three propositions and elaborate the least bit on them, the committee, I thmk, will appreciate it. Mr. Barnes. The reason I think other foodstuffs than cereals, if you please, wheat or wheat flour and other cereals, should be con- trolled is with the idea it might be a necessary defensive public policy to make combination sales of our products. I think I commented in my statement that the European needs for a meat supply are at least 50 per cent of their requirements. And without expressing an opinion on the soundness of a national policy which would force them to make combination purchases, I think in view of the doubt of the necessity of being in a position to defend ourselves that some one ■should nave such power that they can make combination sales of our pToducts if necessary. The Chairman. The suggestion was made that to hold a big stick over poor little Belgium would be going rather far. What do you think of that proposition ? Mr. Barnes. I confess my first tendency is to rebel against being in a position where these powers can concentrate their buying needs and allocate their purchases of wheat, in which there is competition, to other markets and then be allowed to enter freely for meat products in our markets without competition. I do not like the exercise of the power which that gives them, and it is a power which they are going to exercise. Our idea is to be in a position to say "If you want to purchase our meat products, you should make purchases of a certain percentage of our wheat products also." The Chairman. Is there a larger shortage of meat products in the world than there is of wheat ? Mr. Barnes. Yes; they are more dependent upon the United States for meats ? The Chairman. They are more dependent upon us for meats? Mr. Barnes. Yes. The Chairman. The statement was made here yesterday by some- body that the exportation of wheat flour had ceased two months ago. What is the cause of that ? Mr. Barnes. On that point of wheat flour purchases, when it became evident to the allies that a favorable end to the armistice negotiations was quite probable and that would mean the freeing of certain territories and throwing a new burden of supply on them, they placed with us large extra orders for flour in preparation for larger flour shipments, beyond what they could currently absorb, beyond the current imports of Italy, France, and the Ukraine. Those purchases resulted in a very large purchase by the Grain Corporation, in October and November, of iflour. The fact developed afterwards they had greatly overestimated the food deflcit in those liberated regions, and also those regions were partially supplied from other sources, so that they used the wheat flour which had accumulated to a large extent in reducing their normal current demand on us, 172 WHEAT PEICE GUARANTEED BY CONGRESS. the current demand from the- three regular countries — the Ukraine^ France, and Italy. The Chairman. So that, as a matter of fact, the ceasing of this exportation of flour was not due to the fact those nations were getting wheat from other sources ? Mr. Barnes. Not entirely; no, sir. The Chairman. 1 rather got that idea. Mr. Barnes. Our exports in January of wheat and wheat flour, a large percentage in wheat flour, were over 20,000,000 bushels. That is not a total cessation. That is a very fair export movement. The Chairman. What have you to say on the proposition of going back absolutely to prewar conditions under these circumstances? Mr. Barnes. I think that is all summarized, Mr. Chairman, in the last part of my statement. I do not believe international financial conditions would permit a return to the ordinary commercial pro- cesses. I do not believe you can sell commercial bills against flour and grain sales that our exporters used in prewar times. I do not think they can market them through the regular banking channels. I am afraid they can not. I greatly fear they do not comprehemd the change in finance conditions that' these enormous public debts has • created and the public policies which they influence. I think it is quite necessary that the national treasuries, and our own National Treasury particidarly, will have to inject themselves into every transfer of credit this fall in order to market our products at all. And I am afriad the trade itself does not comprehend that yet. The Chairman. What do you say as to a partial going back to prewar conditions in all the exchanges with the Government a partial buyer and seller as occasion might demand ? Mr. Barnes. I can quite see that is the theory of low price and high ?rice with a free field between, that is very attractive in reasoning, ractically I am inclined to think it could not operate fairly without great abuse. I can not quite see in my mind any machinery to pay the farmer his fair eqtiivalent of $2.26 for wheat except to buy his wheat; I can not see in my mind any way in which that wheat can be resold in domestic markets on a lower basis and stiU preserve the grain markets which still continue to take from the farmer his wheat, his current wheat movement, at a higher price. I can not picture it. The Chairman. On the proposition of storage, it would seem to me this biU might carry the power, and probably would have to carry the power, to contract for stroage, to rent the storage; but would there be a possibility of your organization reaUy building very much storage before the next crop begins to move ? Mr. Barnes. Personally, I do not see any place in which that would be exercised unless it would be at the. seaports and there it is a proper matter for the Eailroad Administration to provide those sea- port facilities, and the matter has been urgently placed before them within the last three weeks. The Chairman. Then you would not recommend that power in the biU? ^ Mr. Barnes. I think it should be in the bill like other powers. The Chairman. To meet an extreme emergency? Mr. Barnes. Yes. Mr. KuBEY. What is the present market price of wheat ? WHEAT PKICE GTJAEAJSTTEED BY COIsTGEESS. 173 Mr. Barnes. You are speaking now of the price abroad or in this country? Mr. KuBEY. In this country. Mr. Barnes. The fact is we are buying, or would be if we had the storage facilities open in the Northwest, where the crop movement is still on, at the guaranteed price of $2.26. Mr. RuBEY. Has wheat sold higher than that price ? Mr. Barnes. Yes. Mr. RuBEY. How much higher ? Mr. Barnes. In the Southwest, the excess has been, in extreme cases, 10, 20, and even 30 per cent ove^- the present price. Mr. RuBEY. Has that prevailed materially to any great extent in the last two or three months ? Mr. Barnes. No; I do not think so. We resold in the Southwest, because of the recognition of that condition, 13,000,000 bushels at 12 cents over the buying price, that being necessary to reimburse us for accumulated interest and other storage charges. Mr. RuBEY. I have before me a petition from some farmers in my State protesting against this. I will read what they say: Almost immediately after the Governmeat regulations were removed, feed ad- vanced nearly 100 per cent; feed which we are forced to buy on account of a short crop. Has that prevailed very generally throughout the country ? Mr. Barnes. Yes. Your letter must be from the Southwest. Mr. RuBEY. It is from Missouri. Mr. Barnes. They had a light feed crop in that section, and there- fore a greater need for it, especially in feed grain or mill feed. Mr. RuBEY. What was tne necessity for this advance in price, if any? Mr. Barnes. The maximum price fixed at the beginning of the crop year was too low; it was below any possible comparison with any other feeding stuffs. And when the maximum price was taken off and the markets made a more natural reflection between feed and flour, the feed responded to the enlarged demand, while the shrinkage came in flour. Mr. Rubey. Do you beheve that in handling the 1919 crop the power should be lodged in the Government to control matters of that kind? Mr. Barnes. No; I do not. Mr. Rtjbey. You think that should be left without any restric- tions and let the matter adjust itself ? Mr. Barnes. I think the play of competition would measurably correct that. This very feed he speaks of has very sharply fallen under pressure of a greater miU output than demand. Mr. Rubey. What does the Government pay now for its storage ? Mr. Barnes. In most of the terminals of this country we pay from one-fiftieth per cent a day to one-thirthieth per cent a day. Mr. Rubey. The reason I ask that question I have a clipping pub- lished in a paper on the 16th of January, in which it states the storage was as high as $1.50. Mr. Barnes. $1.50 what, I wonder? Mr. Rubey. It is considerably more than you mentioned. Mr. Barnes. It works out roughly a cent a bushel a month for storage. 174 WHEAT PEICB GUARANTEED BY COSTGBBSS. Mr. RuBEY. This is about 2i cents per bushel per month. Have charges to that extent been made? Mr. Baenes. Not for storage; but it works out that much when jou add the interest and insurance to the storage. Mr. RuBEY. The interest and insurance and all combined. I think that is probably what it meant? Mr. Baenes. Yes, that is probably what it meant. Mr. Andeeson. Mr. Barnes, I have more difficulty witk the propo- sition of extending the power of this act over other products than wheat and wheat products than with any other feature of this matter. It seems to me the exercise of a partial control over oats and other trains, for instance, the exercise of the embargo power, presents possi- bilities of discriminations and great losses. And for that reason I am very reluctant myself to extend that power. Mr. Baenes. I sympathize with you. In fact, I said in my formaj statement that those powers ought only to be used when their ne- cessity is clearly demonstrated. But I think that they should be present as part of the defensiv« system that could be called on if necessary in our own corporation, as shown more clearly in the faet we have to-day released from the export embargo everything but wheat and wheat flour. Mr. Andeeson. Yes, but jowc proposition now suggests that the "Grain Corporation should be dissolved and an entirely new agency should be created. We do not know in whom these powers wUl be lodged. We might be much more willing to grant them if we knew the peraonnel of the agency which was to exercise them; because, of course, when powers as broad as those are granted the limitations •are then entirely limitations of personal judgment and the matter becomes one entirely of personnel. Is not that true ? Mr. Barnes. I see yom- difficulties; yet I do not see any other course. Mr. Andeeson. The difficulty I have is this; I would be wilhng to give these powers if I knew they were to be exercised all down the line. I think it has been our experience that if you take control at one point you are certain to bring about losses and discriminations unless you extend that control all down the line. For instance, as you said, the exercise of the embargo power would result in very great losses which you might have to go back down the line to correct. Mr. Baenes. My own view. Congressman, is that if these powers and actions are necessary now, that those powers should be delegated to an agency that will only redelegate them or use them in case of absolute need. But I quite conceive that the situation as to that need in the crop production may clear in the next few months to such a point the President may clearly define what powers will be exercised and relieve the trade of any' overhanging fear that embargoes will be placed on other grains. But I do not see how you can decide a clear policy now, and it was in the hope that the President could clearly state to the trade and the business community what powers would be exercised and what not, just the same as this legislation would do to-day if it was possible to make it definite. That is why I make the recommendation that it be intrusted to the President. Mr. Andeeson. Of course, I do not want to go into the legal difficulties of the proposition with you, but it seems to me there are almost unsurmountable legal difficulties in granting a power as broad as is proposed here for exercise in time of peace. WHEAT PRICE GXJABANTEED BY CONGRESS. 175 Mr. Wilson. Have there been any orders placed with you for the purchase of grain, before the war was over, that have been canceled since, in any great quantities ? Mr. Barnes. Before the armistice? Mr. Wilson. Yes; before the war was over. Mr. Barnes. No; I do not recall any. Mr. Wilson. I had-heard that there had been and I wondered if it were true, that as soon as peace had been declared orders had been canceled by other governments. Mr. Barnes. No. The only basis for that, I think, is this, that we had under disfeussion with the alHes a definite form of contract which would settle their liability for storage charges and other phases of our operations, that had been under discussion from some- time in September. And that contemplated, in its final form, just before the armistice, the naming of a definite quantity of wheat and wheat flour which they woiQd take from us in the crop year. Up to that time there had been a kind of mutual trust. Last year we gave all the wheat we could possibly spare from this country, and they would take all we could possibly give. Now it became necessary to realign that in definite quantities and that was under discussion at the time of the armistice. It is quite true they were quite anxious to leave it open as had been done, to allow them to take from us any quantity, or to allow them to take as little as they wanted. That is one point that was pressed abroad, but I am quite) sure this wheat contract will be executed. The phraseology is entirely agreed upon now. Mr. Wilson. Do I imderstand you to say they agreed to take all of the 1918 wheat crop ? Mr. Barnes. No; that was last year's crop, 1917. Mr. Wilson. And, of course, that has all been exhausted ? Mr. Barnes. That was fulfilled without any friction or dispute on their side. Mr. Wilson. Then no positive agreement at all was made lor the 1918 cropi Mr. Barnes. None at all. Mr. Wilson. Are you familiar with the wheat situation in foreign countries ? Mr. Barnes. Not entirely, but perhaps I can answer. Mr. Wilson. I think the conamittee would like to hear, if you have any definite information, what you know about the wheat situation in South America, the surplus they have, and also in Russia, Siberia and those other countries over there. ' , Ml'. Barnes. That is summarized in my preliminary statement, that with the ordinary crop excess, the crops yet to grow, and allow- ing for the stimated carrying over from such cotintries as Siberia and Argentina after they finish this crop year, that those countries, including Canada with its normal crop, can not supply more than 9,000,000 tons of wheat and the countries abroad are estimating they will require not less than 15,000,000 tons as a minimum, and depending on their crop outturn they may require as much as 20,000,000 tons. Mr. Wilson. Then in your judgment, do you think the price of wheat will be very much reduced during the coming year ? 107124—19 12 176 WHEAT PEICE GUARANTEED BY CONGRESS. Mr. Baknbs. Well, to say that would simply be an opinion based on the expectation of the crop outturn in the five countries whose crops are not yet sowed, and that is pretty difficult to base an esti- mate on. The Chairman. Did I understand you to say a moment ago that you had discussed with the allies the proposition of a definite amount of wheat which they could take from the present crop, the 1919 crop ? Mr. Barnes. Not 1919; 1918. The Chairman. You have not discussed the 1919 crop? Mr. Wilson. They quit buying of you as soon as the war was over, did they not ? Mr. Barnes. No ; they actually did not quit buying of us untU the American Treasury served notice on them no further advances could be made. They take the position they can not buy in this country without loans. They are going to complete the contracts which they have, which include 100,000,000 bushels of wheat which they have' still to take. The Chairman. They have to buy their wheat from somebody, that is certain. How long will the surplus of Argentina, Australia and other countries meet the requirements of the world ? Mr. Barnes. Mr. Chairman, perhaps you noticed in the press news yesterday, at least it is in the commercial news, announcement that Great Britain has just succeeded in arranging a loan of $100,000,000 in Argentiaa, to be taken up in Argentina products, wheat, corn, wool, and other products, but mostly in wheat. That was the exact method on which we were selling them wheat, and when the Treasury served notice on them no further advances would be made they began to look for countries where they could get their credit, could pay for the products by credit, because they do not have the money with which to pay for them. I want to explain, Mr. Chairman, I have no advice from the Treasury that is their position. This was a statement made to me by the British authorities, that they could no longer buy products in the United States because they could not get the finances here to pay for them. Answering your question a little further, the amount of grain they , can take out of Argentina is limited now not by the size of the crop but by the shipping facilities of their ports. The amount they can get from Australia is limited not by their supply there, because they will grow a greater amount there than anything they wiU want, but by the tonnage which can transport on that long route. Making due allowance for all they can get from those countries, they will require 100,000,000 tons, which they wiU take from us, until their crop year ends August 31; and in doing that they will probably reduce the Australian sm'plus to not over 2,000,000 tons or 80,000,000 bushels. That wUl take care of practically the entire Argentine crop. Mr. McLaughlin. Is that as to Great Britain alone that you are speaking ? Mr. Barnes. No; I am speaking of the allies — Great Britain, France, and Italy. Mr. McLaughlin. And this crop you speak of is the 1919 crop? Mr. Barnes. Yes; the 1919 crop. WHEAT PRICE GUAEANTEED BY CONGRESS. 177 Mr. Wilson. Then there is not any great surplus of wheat in AustraUa and the South American markets for the allies ? Mr. Barnes. Let me answer another way. At the end of this crop year, there will not be any very burdensome surplus of world's wheat remaininein July, 1919. Mr. Wilson. That includes this country, too ? Mr. Barnes. Yes; everywhere. Mr. Wilson. What I was getting at is this: There would be a sub- stantial surplus in South America, but not in any other country besides this to supply the European markets ? Mr. Barnes. That is even broader than I. would make it. There will not be a very large surplus left in any South American country at the end of next August. Mr. Young of North Dakota. Mr. Barnes, your statement was not only interesting, but was made so rapidly I was not able to get some figures. We may have to wait here for several days to get a trans- script of your testimony. Might I trouble you to let me have the figures by which you get an estimate of the total surplus of the United States of 348,000,000 ? Mr. Barnes. The crop is 918,000,000. We seed 100,000,000 of that. I am estimating the consumption for 12 months at 470,000,000. Mr YoTJNG of Nortli Dakota. Four hundred million and what? Mr. Barnes. Four hundred and seventy million; 570,000,000 from 918,000,000 leaves 348,000,000 apparent surplus. Mr. Young of North Dakota. You are to be congratulated in being able to close up the 1918 crop without any surplus. I under- stood you expect to oe able to close up the 1918 crop year without any carry-over. Mr. Barnes. With a much smaller carry-over than generally expected; yes. Mr. Wason. What would that amount likely be in July— in bushels? Mr. Barnes. I don't think we shall have any larger carry-over than a year ago, by more than 20,000,000 or 30,000,000, and that would not be an unusually large amount between crops. Mr. Young of North Dakota. Well, the carry-over last year was unusually low? Mr. Barnes. Unusually low; yes, sir. Mr. Young of North Dakota. Now, as to this question of the morality of these transactions. It has been hinted that to use any of these powers with respect to the sale of other cereal crops, might be immoral. I want to ask you this : Do you consider that it would be a moral proposition for a buying combination of other countries to force us to take an unreasonably low price for any American product ? Mr. Barnes. I do not, very strongly. Mr. Young of North Dakota. Now, then, as I understand you, you would never expect any agency created by our Government to use any of these extra powers, excepting as the same might be forced by what may be considered immoral practices upon the part of the buyers, or unfair advantages by a combination of European buyers. Mr.- Barnes. Yes; I would liKe to see whatever agency is selected able to say they can do so and so unless they are met fairly on this question. 178 WHEAT PBIOE GUARANTEED BY CONGBESS. Mr. Young of North Dakota. You have no information that any representatives of the United States wotild expect to take unfair advantages of our aUies,, or even the neutral countries that might be in the markiet for our products. Mr. Baknes. No, indeed; but we have had some difference ' Mr. Young of North Dakota. Yes. Mr. Barnes. I think Mr. Glasgow's suggestion is right. I ought to make it very clear about that. When we suggest there should be certain .potential control of other grains, or of meats and fats, that it is not tor the purpose of use except as a last resort in protecting our national policy in wheat, and I can not conceive anything reaUy developing to make it necessary to use those things, t think ttiese things can be fairly decided by negotiation, if you carry a club behind you. Mr. Young of North Dakota. Then this is a purely defensive sys" tem you want. Mr. Barnes. Purely. Our own attitude is shown by the release ot these other grains just as last a,s the trade could pick them up. Mr. Young of North Dakota. Now, in estimating the storage, have you considered the possibility of storing a certain amount of wheat in vessels that put up for the winter in the different ports ol the United States « Mr. Barnes. No; that is an added possible reservoir. Mr. Young of North Dakota. WiU this bill if passed in the form presented here give authority to contract for such space ? Mr. Barnes. Yes; "to transport." Mr. Young of Nprth Dakota. You consider that a necessary, and desirable thing 1 Mr. Barnes. Yes; but I want to say that is a very doubtful storage, because we have now at Buffalo 25,000,000 bushels of graia on such boats. They are contracted to return to lake service April 1, and to serve their purpose of transportation they should be relieved; and at that we ought to start unloading those boats at once, and we have no place to move the grain until we make room in seaboard elevators. We can do it, but it will be a very tight squeeze. Mr. Young of North Dakota. I presume you could load up boats at Duluth, which could not leave for Buffalo until spring. Mr. Barnes. Yes. Mr. Young of North Dakota. It might work out better at that end ? Mr. Barnes. Yes. Mr. Young of North Dakota. Now, may I ask you another ques- tion ? How do you think that the policy as you have outlined it will affect the milling industry ? Mr. Barnes. I don't see why it should affect sound milling at all. I think there is a percentage of the milling fraternity who have depended for their profits in the past— and several other grain dealers — on fluctuations, buying their grain at low points, and waiting for an advance. These people will not be pleased with it aiiy more than they have with any stabilized price; but the big mills, and the sound naUling operators, I think they could operate on the fixed level and get their current milling toll. Mr. Young of North Dakota. Now, as I understand it, your present plan — plan for the 1917 crop and 1918 crop — require quite a large amount of machinery to work it out. WHEAT PKICE GUAKANTEE-D BY CONGEESS. 179 Mr. Baenes. Well, no, I wouldn't cadi it large machinery, Con- gressman. Mr. Young of North Dakota. Well, it was not large compared with the other proposition here that would mean settlements at the farmj or settlements at the country elevator with respect to the guaranty to the wheat growers. Mr. Barnes. No; I think that contemplates a very great exten- sion of machinery, in order to verify these payments properly against abuse. We do not attempt to do that. We have a general control over practices, and we do undertake to say the country price shall reflect the terminal price, less freight, less a fair unloading margin for his facility; and in that way we have kept the country price a fair reflection of the terminal price, if bought in the terminals them- selves. That has been the simplest machinery I can conceive. Mr. Young of North Dakota. And you have found it to be a workable machine ? Mr. Barnes. Yes; we have had very little abuse that way. Mr. YouT^G of North Dakota. I understood you to say you thought the other plan would be either unworkable or subject to abuses that could not very well be guarded against ? Mr. Barnes. Yes; I can not picture in my own mind a machine which could make payment in settlement at country stations to millions of growers, and do it in such a way as to guard against fraud and abuse. I just can not do it yet. Mr. Young of North Dakota. The understanding is you returned recently from Europe; and so the statements you have made here partly reflect what you learned over there personally, as well as what you have been able to get through the ordinary avenues of statistics ? ' Mr. Barnes. Yes; that is the conviction I reached from whatever source of information I have had. Mr. Wason. As I understood your statement, Mr. Barnes, the conclusion drawn from it, from a consumer's standpoint, would be that.the price of flour to the consumer has to be about what it is now in the next year, probably. Mr. Barnes. Well, I think all my suggestions were made very clear, being based on the crop outturn, and the policy which the crop outturn itself should dictate. It may be that there can be evolved a workable plan, with very large crops; that there can be demonstrated the need for revulsion in the price level; and that a workable plan can be made to pay the farmer. I can not see it. If it can be, the powers recommended there are wide enough to perform that part of the operation, too. Mr. Wason. But in the light of past experience about the hazard of crops, especially wheat, and in view of world-wide conditions, as you have outlined theni in your statement, if we should have a short crop, which of course we can only guess on, as you say, now the con- sumer can have at this time little or no encouragement for lower bread from the 1919 crop, unless the Government functions in some w&y to take up the slack, so to speak. Isn't that true ? Mr. Barnes. Well, he has much the same chance for lower bread as he would have without any governmental control at all. That is, his chance for lower bread depends on a very large crop yield. Thexe is 180 WHEAT PRICE GtlABAKTEED BY CONGRESS. no prospect for lower bread in the present crop situation as I see it for 1918. Mr. Wason. 1918? Mr. Barnes. The crop of 1918; up to July 1. The Chairman. You are speaking of 1919, Mr. Wason. Mr. Wason. Yes. Mr. Barnes. That is mostly a matter of crop estimates and crop yields, and I have never been able to see how they can be discounted in advance. The Chairman. Suppose you go on the assumption we are going to have a very large crop, Mr. Barnes, say a billion and a quarter bushels. I think all of us wiU agree that the price of wheat under those circumstances would be lower than the guaranteed price. That being true, would it be your judgment that this Government ought to maintain through its power of control of exports and so on the guaranteed pi k-c or sliomd it maintain what would be a fair price both to the consumer and to the pm-chaser of wheat? The conten- tion here has been from some that the price of bread should be based on what they term the world price, but I think we all see the difficulty in arriving at what the world price is. I have a diffi- culty, too, in my own mind of allowing somebody else to determine what the price of our wheat should be. It seems to me we ought to exercise some control over that, in view of the fact we are' the largest producers of wheat and the largest exporters of wheat. I'd like for you to give the committee the benefit of your reasoning on that propo- sition. Mr. Barnes. Well, treating our domestic production as a whole, we have always conceived it to be good national policy, if we have a siuplus to sell, to get as much for that sin-plus as is possible, even though the balance of it went from the pockets of consumers to the pockets of producers on the same level. If you recognize as sound the principle that wheat shall not be sold abroad any lower than the domestic purchaser is paying, and if you can market that surplus abroad on the high price level, I think you enter on very dubious national economics when you contemplate forcing a lower price level than necessary, because you are a seller. The Chairman. That is very true, Mr. Barnes, but I have always thought that the price of the exportable product, or the exported product, fixed the price — ^fixed the domestic price. Mr. Barnes. It does. The Chairman. So that as a matter of fact this grain corporation or agency would have to exei cise some authority in fixing the price on export. The question is just what would be your pohcy in that regard. Would it be to try to maintain as high a price on exports as possible, or a fair price so the domestic consumer would get the benefit of that policy ? Mr. Barnes. Again I am driven back to the fact that that is a policy which shomd onlv be definitely worked out when you get the material on which you Iiave to work; that a policy which would be sound as to 1,200,000,000 would not apply at all on 600,000,000. The Chairman. That is true. Mj question is asked on the as- sumption you are going to have 1,200,000,000. Mr. Barnes. There are many other factors — other countries, Mr. Chairman. This year we had a good wheat yield in the United States, WHEAT PRICE GUAKANTEBD BY CONGRESS. 181 and Canada had a very big one. Perhaps the same thing would be true as to France or Italy or as to Argentina. Even though we did raise 1,200,000,000 bushels of wheat they all interlace, so I don't see how you can definitely build a policy. The Chairman. Until you have acquired the facts ? Mr. Barnes. Yes. The Chairman. I beg your pardon, Mr. Wason. Mr. Wason. That is all right. Following along the lines of the chairman's suggestion, I think we all realize the difficulty of antici- pating conditions for the future with much certainty: but in the light of your experience and your activities recently during this trial period, could you answer, or would you be willing to, without em- barrassment, what your own personal ideas are about getting our cost of bread to our people at the lowest possible price, even if we did what I miderstand England did, resort to a subsidy ? Mr. Barnes. Well, I am opposed to that form of subsidy. I think the American people want to pay their way. I think in England they are sorry they ever embarked on that policy, and so is France. It f resents. innumerable difficulties, besides the drain on their treasury, t is the one thing that will prevent their trade taking up their normal accoimting to business in those lines. Even if they can solve the problem of paying it out of the national treasury, the practical diffi- culties of returning it are enormous. I do not think we should em- bark on that policy, and I don't think it is necessary. It seem^ to me there are certain very clear principles. Fiist, the farmer must have this price. Seqond, if we have a surplus to seh we should make, an effort to get every cent for that surplus in this country possible by every legitimate means, and if we then fail to market that surplus at this price level, then' there should be authority vested in such a way that a readjustment can be worked out, if the practical diffi- culties can be overcome. Mr. Wason. I noticed you answered in response to Congressman Anderson's inquiry that the personnel of this agency might make a great difference in exercising the powers which you suggest here. Would there be any difficulty in perpetuating the Grain Corporation if Congress in its wisdom thought best? Then we would have some guide as to the judgment Mr. Barnes (interposing). Yes; there would be a great deal of difficulty. As to the present personnel, I must get back into private enterprise. I feel I have discharged my public duty. I think the 19 men, who, as I say, are volunteers with me, who have sacrfficed their own business, and served without compensation, feel the same way. I do not think any of us can imagine any persuasion that would keep us in this service longer than to complete the present values; but that does not mean that the Grain Corporation can not be continued, in your wisdom, and its personnel changed, although I should like to see the Grain Corporation ended. It was an instrument of the Food Administration. Mr. Glasgow. When you say present values, you mean 1918 crop ? Mr. Barnes. 1918 crop. Mr. Wason. Continumg your thought, we all recognize you men have been serving at a minimum salary, not commensiirate with the ability displayed, and work performed. I ought to have put in my question, '^to change the conditions surrounding the salary question 182 WHEAT PRICE GUARANTEED BY CONGRESS. of the personnel of the Grain Corporation," and I suppose you men could be induced at fair compensation to remain a year longer. Mr. Barnes. No, Congressman. There are very few of our men that have not sacrificed very much more than any salary possible in that, and it is not right to ask longer service of them. Some of them sacrificed a business which had been buUt up by perhaps 15 or 20 or 30 years of activity. They went out of- it so their decisions should have no possible reflections as being tinged with self-interest in any way. They have been most loyal, and I can not ask for their service. , Mr. Wason. I take it you speak of the grain business, and if the Government is going to exercise control of the grain, would there be much opportimity for them to reestablish the business until the law of supply and demand again operates, and we get back to prewar conditions, or as near as they can rehabilitate themselves in the business activities of this country ? Mr. Barnes. You are quite correct as to wheat. If this control continues the opportunity for private operation wiU be somewhat restricted; but the field is now open in other grains, and I should hope conditions would continue to keep them open. Mr. Wason. If I understood your statement you asked us or advised to extend that authority over other grains as a matter of national self defense? Mr. Barnes. Yes. i Mr. Wason. And if the occasion requires that that power shoidd be exercised would not the opporttmities of these men be absolutely null and without any benefit ? Mr. Barnes. It would be largely limited, but you will recall I also said these powers, in my conception, would never be used, except for the purpose of negotiatmg a fair treatment on wheat, and that is the feeling I have. Mr. Wason. And right on that line, if granted upon that basis by Congress, and upon that theory, the personnel of the new agency, if one was created, might not entertain those sound views that the present organization apparently had, and instead of using it as a club, or a big stick, as we have heard in days gone by, in time they might use it as a base ball bat to win the game with, but it is necessary to make a strike. Mr. Barnes. I have had the feeling if these powers were granted to the President, in redelegating those powers he would be very apt to select agents of similar temperament. That, I think, is the great security of business against these powers. Mr. Wason. I concur in that. Mr. Barnes. I think I ought to make that clear, that tmdoubtedly there are men of character and ability in the trade who would be very glad to have their turn at public service, on a salary, which should be paid. Mr. Wason. That leads me to ask, Mr. Barnes, if you do not think experience is a great teacher, and for the short period that this authority would have to- be extended, if extended, would it be wise to give these men — or ask them to become experienced for that short period ? Mr. Barnes. I think you are taking me at an unfair advantage. WHEAT PRICE GUARANTEED BY CONGRESS. 183 Mr. Wason. All right. I won't ask you to answer that. These powers might bfe distributed among different agencies by the President, if granted, might they not ? Mr. Barnes. Yes; I have felt that the dissemination of authority is always a little handicap to efficient operation. Mr. Wason. I agree with you. The Chairman. Mr. Barnes, do you know whether or not the War Department has enough flour on hand to see them through, or will they have to make further purchases ? Mr. Barnes. That I don't know. Mr. Hutchinson. Mr. Barnes, you have answered most of the ques- tions I have had in my mind. If we have to create a new agency, it would be necessary to modify this food control bill to a certain extent ? Mr. Barnes. My conception is, to try and patch that food admin- isia-ation bill of August 10 would require almost as much new phrase- ology as a new bill and almost as much discussion, because it is not satifflactory in so many sections. Mr. Hutchinson. Now, for the information of the committee, will you give us what your idea is about buying from the farmer in case, for instance, they have so much wheat they have to sell it at less than the fixed price? Mr. Barnes. I must say I don't see now a practical way to pay a difference in price to the farmer, yet if it should be necessary I think that Americans are resourceful enough to work it out. Mr. Hutchinson. All grain is bought on grade, is it not ? Mr. Barnes. Yes. Mr. Hutchinson. Does that grain lose its identity in the transac- tions at the elevator ? The Chairman. Mr. Reporter, can you hear the questions ? I suggest that you talk a little louder, Mr. Hutchinson. Mr. Barnes. The question is, if grain is bought from the farmer, whether it loses its identity, and. of course, it does more or less. It is mixed with similar grains in the economical handling of it. But after his grade is tested and payment made to the farmer at the right- ful price for that grade, he no longer has any interest in it. Mr. Hutchinson. As I imderstand it, the Grain Corporation has made money out of it. Mr. Barnes. If it succeeds in finishing the year without losing on present operations, then moderate earnings are indicated on its cap- ital. Mr. Hutchinson. Now, for instance, where a man in the East pays $2.48i for No. 1 Northern, and the price is fixed in New York at S2.39i, does the Grain Corporation get that profit ? Mr. Barnes. No, no. The Grain Corporation's position simply is, it is ready to buy at various markets of the country any wheat ten- dered to it at certain prices, which axe covered in the Executive order of the President; If anybody wants to pay any more than these prices, they are perfectly at liberty to do so, and they are doing so in m some markets where the movement of wheat is not sufficient. Mr. Hutchinson. That goes to the grain man ? Mr. Barnes. That goes to the farmer if he sells it, or to the grain man if he resells it. Mr. Hutchinson. Under the Executive order, Mr. Barnes, you are limited to sell wheat, flour, meal, beans, and potatoes, are you not ? 184 WHEAT PBICE GUAEANTEED BY COKGEESS. Mr. Barnes. That was all we were instructed to buy and sell in, yes. Mr. Hutchinson. Are you handling other conunodities ? Mr. Barnes. Yes. We are doing that under another section of the bill, which allows us to trade in other commodities for the pur- poses of the national defense; and under the opinion of the Attorney General we are doing that for the purpose of supplying our allies and Mr. Hutchinson (interposing). Does the Grain Corporation own any rye at the present time ? Mr. Barnes. Yes, considerable. Mr. Hutchinson. Was that bought at a fixed price by the Grain Corporation ? Mr. Barnes. Yes. Mr. McLaughlin. A moment, ago you answered Mr. Hutchinson, I think, that grain buyers were paying more than the guaranteed price, freight, etc., if they wished to pay it. There was a time when that was not permitted by the Grain Corporation, wasn't there ? Mr. Barnes. Not on this crop. Las-t year we did assume the direction of every bushel of wheat in this country to every mill, in order that all mills which had entered into contracts with us should have a fair proportion of the milling activity of the country, and in return they agreed with us to maintain the recommended price basis, the Government basis. Mr. McLaughlin. The result of that was that the guaranteed price became the maximum price, as well as the minimum-, didn't it? Mr. Barnes. That is right. Mr. McLaughlin. Aud that was not the intention — not the spirit of the law, was it ? Mr. Barnes. I don't know; what the spirit of the law was. The wording of the law apparently authorized that. Mr. McLaughlin. I don't know what was in the minds of the others or all the others, but I heard the opinion generally expressed that the law was intended only to insure to the farmers a minimum price and tha,t the Government would not permit it to get below a certain price, with the idea that if market conditions justified a higher price and a higher price would prevail, the farmer would have the benefit of it, but the action of the Grain Corporation took that opportunity away from the farmers. Mr. Barnes. On the contrary, the Government price basis was not fixed by statute. It was made by Executive order of the President, on the recommendation of a price commission that investigated the wheat situation and made a recommendation of a fair price between producer and consumer, protecting the con>iumer as well. Mr. McLaughlin. Yes; but at the same time the law carried a guarantee, a minimum price, without any idea an attempt would.be made to make that also the maximum price. The Chairman. As a matter of fact, they did make it a maximum* Mr. Barnes. No, Mr. Chairman; the law specified $2 as a guar- anteed price. The recommended price between producer and con- sumer was $2.20, and that was maintained as being the exact holding of the balance between producer and consumer in this country as a fair basis. WHEAT PRICE GUAEANTEED BY OONGRBSS. 185 Mr. McLaughlin. There has been no action of that kind by the ■Grain Corporation as to the crop grown in 1918? Ml". Barnes. Similar action. First, there was a readjustment ^rom the $2.20 basis to the $2.26, reflecting the freight advance, so the producer should not stand that freight advance. Then there was a restriction of maximum flour price based on that $2.26, and its proper application, to protect the consumer in the flour price. That was kept in effect to the armistice and thereafter until the commercial conditions were such as to promise a fair flour price by competition, and in those cases at that time the maximum flour and wheat prices were canceled, and to-day, except for the underlying support of the Orain Corporation as a buyer, the price of wheat in this country is uncontrolled. i Mr. McLaughlin. What was the prevailing price for wheat in this ■country at the time of the action of the authorities fixing it at $2.20 ? Mr. Barnes. In the 60 days which preceded the action of $2.20, TPheat had sold below $2 and as high as $2.60, I think, in the Chicago market. Mr. McLaughlin. Something has been said here to the effect that it was as high as $3.45. Was Si at true ? Mr. Barnes. It had reached $3.45 in the early part of the month of May; yes. That was some four months before the price basis was put in. Mr. McLaughlin. How long did that highest price prevail ? Mr. Barnes. About two hours and a half, I thiak, or three hours. Mr. McLaughlin. And at the time the price was fixed, what was the market price? Mr. Barnes. I don't know, except that the quotations on the black- Tjoard showed thosfe figures. Mr. McLaughlin. What figures ? Mr. Barnes. $3.45. Oh, at the time the price was fixed? Mr. McLaughlin. Yes. Mr. Barnes. I beg your pardon. There was then no open trading activity on any of the exchanges of the country. That had been termioated by action of the exchange authorities sometime before. Mr. McLaughlin. Was there a prevailing price up to Jime ? Mr. Barnes. No; there was not. It was not only not prevailing but there was such pessimism in the wheat trade, such dangerous occasional prices made, that the flour production of the country had -sunk to a very dangerous level, and it was necessary at once to clarify the situation, or we should have had a flour famiae. Mr. McLaughlin. What created that dangerous condition you speak of, the submarines ? Mr. Barnes. Dangerous condition in flour Mt. McLaughlin (iaterposing) . Wheat. We are taJkmg about wheat and its products. Mr. Barnes. I think you will have to clarify the question for me a little. Mr. McLaughlin. You spoke of a dangerous condition prevadmg at that time. Someting must have caused it. Was it the diSiculty of shipping wheat abroad, and the possibility that there might be no opportunity for wheat owners and wheat shippers reaching a foreign market? . . Mr. Barnes. That was imdoubtedly one factor m it, which resulted in shrunken wheat and flour buying in this country; yes. 186 WHEAT PKICE GUARANTEED BY CONGBESS. Mr. McLaughlin. What other conditions that you think of? Mr. Baknes. Credit conditions entered into it. Bankers- were afraid to advance the usual credit facilities on securities whose market value was not ascertainable, and, of course, similarly, mills themselves were afraid to risk their own credit. Mr. McLaughlin. Very large authority iwas given by the food act, and large authority was exercised. Some, however, thought that authority was exercised that was not carried by the act^ and some have unkindly said that authority was exercised which should not have been exercised. My attention was called to one thing. I have been told that for a long time each miller and buyer of wheat was required to pay the grain corporation 1 per cent of the amount in- vested in the purchase of wheat. Is that true ? Mr. Barnes. That was a clause in the contract, which they exe- cuted voluntarily with the Grain Corporation,* yes. Mr. McLaughlin. Was there any authority carried in the act for the Grain Corporation to exact that payment ? Mr. Barnes. Is it to exact it to have a voluntary contract by which that is one of the terms ? Mr. McLaughlin. Oh, I will speak of that in a moment. But, in your opinion, did the act carry any authority to the Grain Corpora- tion to exact that ? Mr. Barnes. I can see no prohibition in the act. The Chairman. The very first section of the act gives that au- thority. Mr. McLaughlin. Evidently the gentleman himself did not know that. The Chairman. "A voluntary contraict." The act itself specifies that. Mr. Barnes. I thought I made it very clear we made voluntairy contracts authorized by the act. Mr. McLaughlin. As to voluntary contracts, under the circum- stances, the dealers in the country were hardly in a position to make a voluntary contract, and I am not charging that advantage was taken of them. I was just speaking of that with this in view, that where large authority is given by a blanket statute there is practically no limit to which those who execute that statute may go, and it may be advisable — some may think it advisable to put some restrictions in the law, if they can find the words properly to exprpss the restric- tions. Mr. Barnes. I want to again make it clear, I am not urging or favoring any legislation at this time. I am answering your inquiries as to our experience and the convictions based on that experience. Mr. McLaughlin. I wish to say this in the proper spirit. I don't want to be misunderstood. One gentleman says that this act, or this suggestion, was prepared with the idea of including everything possible, and it was not an, expression of opinion of those who drafted it or might have to execute it. Now, it has occurred to me from yoiu- remarks that you favor all these things, and that this does express just what you think ought to be written into the law. Mr. Barnes. Let me repeat Mr. Glasgow (interijosing) . Mr. Chairman — (to Mr. Barnes:) wait a moment. I don't thiak you get what I said. Mr. McLaughlin. I don't want to misrepresent you. WHEAT PRICE GUARANTEED BY CONGEBSS. , 187 Mr. Glasgow. I said I had put into the act as I had drawn it every power which I had been advised by men of experience might be pos- sibly necessary to exercise. That, I think was my statement as made, and Mr. Barnes, as I understand him, has commented upon certain specific powers that are in that omnibus statement of powers. I want to make it perfectly clear, sir, that anything put in there was put in upon advice from people of experience in connection with it and not upon any suggestion I had as to what should be granted. Mr. McLaughlin. That everything was put in as suggested to you, and you presented it without any recommendation ? Mr. Glasgow. Exactly, sir. Mr. McLaughlin. Now, following that, Mr. Barnes comes, and, if I understand him, he approves and urges the adoption and the enact- ment into law of everything there is here ? Mr. Barnes. I say it is impossible to forecast at this time a sound national policy, which depends on crop development, which can only come with time ; and if you want to legislate now in anticipation of a policy which can not be decided on for months, you must make these powers fully provide for any alternate plan that seems necessary at that time, or any emCTgency that may arise. Mr. McLaughlin. We have to legislate now, and we wish to legis- late properly, give all necessary authority; but I thought I saw a con- flict between the statements of you two gentlemen. Mr. Glasgow. The difference is this: I am a lawyer. I don't know anything about a crop of wheat, or how to raise it, although I have helped to harvest it, and all that kind of business in my younger days. But when it comes to the question of handling grain I can merely draw an act by putting in such powers as it might be neces- sary to exercise. That is the difference between us. There is no conflict, as far as I can see, between the two attitudes in which we approach it. The Chairman. Mr. McLaughlin, permit me to interrupt. The language about voluntary agreements is in section 2 of the act instead of section 1 . I will read it so it will be in the record. (Reading :) Sec. 2. That in carrjdng out the purposes of this act the President is authorized to enter into any voluntary arrangements or agreements, to create and use any agency or agencies, to accept the services of any person without compensation, to cooperate with any agency or person, to utilize any department or agency of the Government, and to coordinate their activities so as to avoid any preventable loss or duplication of effort or funds. Mr. McLaughlin. I have no criticism of the work of the grain cor- poration. I have some appreciation of the size of the work and the difficulty of it, and in addition to that I may s^y I have a great deal of information on those matters, and I have trusted those in whose hands that duty was placed. But many of our statutes have con- ferred large powers and the widest discretion. Much of that was necessary during the war. I have conceived it, however, to be the duty of Congress to place limitations where they can properly be placed; that Congress has that function, and it can not perform its lull duty by writing a broad statute, signing a blank check, and calhng upon officials to exercise discretion, without any limitation whatever. Now, it occurs to me that if this should all be incorporated into law it would come pretty near giving authority to these agencies to exercise absolute control over the entire wheat and flour business. 188 WHEAT PKICE GUARANTEED BJ CONGRESS. and the entire business, large and small, from beginning to end, in wheat products; might, give authority to control dealers of all kinds, shopkeepers, wholesale and retail, and even the consumers, and to do what was wisely or otherwise done, but I thiak without authority, practically to ration the people during a portion of the war. Now, it may be necessary, and if it is I am willing to give the authority, but am I right in sajong that the language here would confer that authority ? Mr. Barnes. The language certainly confers very broad powers, without question. Mr. McLaughlin. That is as far as you are willing to go in answer- ing my question ? Mr. Barnes. Yes. I think that is as far as I could go. Mr. McLaughlin. Of the present visible supply of wheat what amount is now owned by the Grain Corporation ? Mr. Barnes. We own 143,000,000 bushels, of which 13,000,000 is resold for delivery Mr. McLaughlin. And you have said this work has been taken care of so nicely there will be little, if any, surplus by the 1st of July? Mr. Barnes. Yes. ^Mr. McLaughlin. Now, as to elevators in the country. It seems to me I have heard that the elevators around the Great Lakes are rarely taxed to their capacity; that they have been able to get so little grain for storage that their business has not been at all profitable. Mr. Barnes. I think that is largely true until this crop year; yes. Mr. McLaughlin. Conditions were different in 1918, or are they different now ? Mr. Barnes. They are different in 1918. We had a very large crop to care for, and the elevator is. a surplus facility. It prospers in years of surplus production. Mr. McLaughlin. Well, if authority were given for the construc- tion of elevators, would it be reasonably possible to construct them to take care of the crop of 1919 — grown in 1919, I mean? Mr. Barnes. It could be done. Mr. McLaughlin. Would you expect to be able to do it ? Mr. Barnes. Well; I hope I won't have the decision to make, but it could be done to help the storage of the 1919 crop, in time. Mr. McLaughlin. My idea is Congress would be perfectly willing to grant authority to construct elevators, if necessary, but not u the money can not be properly expended. Mr. Barnes. I think I get your point, which is that care should be taken in not creating unnecessary competition for the established facilities, and any reasonable-minded body of men having the au- thority of that nature, and authority to construct, would take that very carefully into consideration. There is no question that at the seaports — ^f or instance. New York, Baltimore, and Philadelphia — addi- tional elevator space should be constructed immediately by some- body, which is properly a matter for the Railroad Administration to do. Mr. McLaughlin. It has been suggested that this elevator ques- tion, and the storage capacity question, might be satisfactorily settled if this agency were authorized to carry out a plan of paying something to the farmers, perhaps 1 cent a bushel, above the guar- anty price, to haVe them hold the grain and deliver it as caUed for. Would you think it would be feasible to have a plan of that kind ? WHEAT PRICE GUARANTEED BY CONGRESS. 189 Mr. Barnes. The bill carries authority to do that. I can conceive where it might be a very sane policy to ao that very thing. Mr, McLaughlin. You had that in mind in drafting the bill ? Mr. Barnes. Yes; I have particularly commented on that in my statement. Mr. McLaughlin. Do you think it reasonably could be carried out between the corporation and the farmers ? Mr. Barnes. I thmk it could. The Chairman. I w^^nt to read a telegram which I have just received here, and put it in your hands, so you may digest it during the lunch hour, and comment on it when you come back. This is a telegram from Garret, Ind., dated 12.50 p. m. yesterday, addressed to Mr. H. A. Foss, New WiUard Hotel, Washington, D. C. (The chairman read the telegram, which in mU is as follows :) United States Government as wheat merchant faces following: Wheat stocks — 350,- 000,000, United States; 175,000,000, Argentine; 250,000,000, Australia; 50,000,000, Canada; totaling 825,000,000. India harvests new crop April, May; and 1st June or 116 days Texas begins harvesting. Largest amount wheat Europe ever imported 580,- 000,000 during year, but Agricultural Department estimates this year's European wheat requirements 725,000,000. Using latter figures as basis you will perceive there exists sufficient wheat to-day to supply Europe's maxin^um yearly requirements without calculating Indian, United States, and Canadian crops harvested coming seven months. Latest Russian information indicates they are raising largest wheat crop since 1914 ; in fact high prices stimulated wheat production world over. Further- more, United States as wheat merchant and exporter must compete with United States visible nearly 20,000,000 bushels rye, selling 80 cents per bushel under wheat price; our surplus 100,000,000 barley, selling $1.25 under wheat price, and out com selling $1 under wheat price. Continental Europe always favors substitutes at these differences without reference sociological or psychological effects, but as arithmetical proposition you will perceive only practical way handle wheat extant and growing is by getting it consumed, stimulate its consumption at home, and abroad letting it flow through natural demand and supply channels, Any legislation or restrictions which arti- ficially maintain prices in this country with free trade existing in and between all other parts of world will lead to disaster and hopelessly complicate an otherwise simple problem. Let wheat exporter function just as cotton, copper, coal, steel, and other exporters are fimctioning. Let Government pay farmer directly, thus satisfying its obligations in most direct manner. Suggest feasible direct plan settling as follows: Let com^ mittee composed of local bureau, markets, representative local grain merchants, local banker, decide daily fair market value of wheat in each market having fixed price established by President's proclamation, said fair market value to be used as settling basis by all farmers settling on that day. Let farmers establish their loss by certifying before proper local authority, preferably county agent, representing De- partment Agriculture, their acreage and thrashing returns furnished by licensed thrashers about 10 per cent for seed and bread for farmer and settle direct through Federal Reserve Banks for balance. J. Ralph Pickell. Mr. Eainey. I'd like for you to instruct the stenographer to- prepare copies of Mr. Barnes's statement for the committee as soon as possible. The Chairman. Yes. (Whereupon, at 12.50 p. m., the committee adjourned to meet at 2.30 o'clock p. m.) 190 , WHEAT PEICE GUAEANTEED BY COIfGEESS. AFTER RECESS. The committee reassembled at 2.30 o'clock p. m., pursuant to the taking of recess. The Chairman. The committee will come to order. Mr. Mc- Laughlin, had you finished your examination of Mr. Barnes ? Mr. McLaughlin. I have another question or two I would like to ask. Before the recess, Mr. Barnes, I asked if you had thought of the idea of paying a Uttle additional to the farmers to induce them to hold back their wheat, and you said that had been talked over. Are you prepared now to say whether you would favor that plan? Mr. Barnes. No; I would not want to say definitely. I think that might be of great use in distributing the marketing of the crop fairly. Mr. McLaughlin. In speaking of this proposed bill, you said this morning it would be very broad, and in commenting upon it, I said that it would authorize the agency to exercise control or influence over everything, from the purchase of the wheat down possibly to the rationing of thq people. Do you think it carries authority to go that limit ? Mr. Barnes. I would hardly think so. Mr. McLaughlin. Where do you find words of limitation ? One of your answers this momiijg indicated that sometimes gentlemen in your position do anything that they are not positively forbidden to do. Where do you find words of limitation? Mr. Barnes. If the words of limitation are in there, they were put in after it left our hands. Mr. McLaughlin. That is what I thought; they had not been put in. Possibly you did not understand my question or I did not under- stand your answer. If there are words of limitation that would forbid the interference or exercise of authority all the way down the line, as I have said, what are those words ? Where do you find the limitation in the act or the draft of the act ? Mr. Barnes. I do not know. I have reported before this com- mittee certain powers that I think should be delegated. I assume that the bill provides for those powers to be exercised if necessary. If, on closer scrutiny, there is a limitation that would not allow the full exercise of those powers, then it would be against my recom- mendation that the bill should be adopted at all. Mr. McLaughlin. Do you think there should be no limitation; that the power should extend clear down to the rationing of the people ? Mr. Barnes. To do exactly those things which I said in my state- ment might be necessary. I did not include in the statement the rationing of the people. Mr. McLaughlin. How far down would you go ? May we not have some idea ? Mr. Barnes. I do not know. I say you should leave this so broad that almost any development of crop conditions and world conditions that may afterwards be demonstrated can be handled under the authority of that act. Mr. McLaughlin. You would have broad authority for dealing with the millers, I presume. Mr. Barnes. Certainly; that is contemplated. WHEAT PKICE GUAKANTEBD BY CONGRESS. 191 Mr. McLaughlin. You would have broad authority in the rnatter of exportations, certainly. Would you have authority respecting retail dealers ? , Mr. Barnes. That was not contemplated. Mr. McLaughlin. Would this give the authority ? Mr. Barnes. I do not think, Mr. McLaughlin, that that is quite a fair question. I do not know how far those authorities would reach, under necessity. I think they would reach as far as the necessities which I outlined in my statement as being what I believed the irre- ducible minimum to provide for at this time. Mr. McLaughlin. Some gentlemen who have to do with legislation are willing to write into the law a very broad authority, with the idea that it will not be exercised. I am not one of those who think that authority ought to be written into a law if I felt positive that it ought not to be vested in any official. I may be wrong about it, but if this draft that you have prepared would justify the control over the retail business, for instance, I certainly should want to know it before I would consent to have it written into the act. The Chairman. What would you say to that, Mr. Glasgow? Mr., Glasgow. I have not the slightest doubt there is any such Sower under that act. I did not have it in contemplation when rawing it. The food control act gives no authority over the retail dealer, as far as fixing the price is concerned. The food act gives no authority to ration the people of the United States, as far as we can find it. Mr. Haugen. They were exempted under the law. Mr. Glasgow. Yes, sir ; but, of course, I do not know reallv whether Mr. Barnes has analyzed the different provisions of that bill. There was no contemplation of putting authority in there for rationing the people of the United States or for controlling the retail dealers of the United States. Mr. McLaughlin. Mr. Glasgow, you said you would put in any- thing you could, and if there wiis anything you left out you would put it in. Mr. Glasgow. Mr. McLaughlin, you did not get me exactly right on that. I did not mean to- say that- 1 would put in anything that I could in that way. I said I would put in everything that was necessary to give the powers that it might be necessary to exercise. There were a good many things that I could speak about that I could have put in that bill, but I did not beheve they would have anv pertinency to the subject matter. That is the same, both with reference to the retail dealers and as to the rationing of the people of the United States. You understand the situation with regard to that ? Mr. McLaughlin. I tliink I understand. Mr. Barnes, you spoke of having authority to enforce a plan that would protect our national pohcy as to wheat, etc. What, may I ask, is that national policy? Mr. Barnes. I tried to outhne in my statement certam policies that I thought would be acceptable without question— that is, that we should not sell and export the surplus of wheat at a lower price level than our own people were paying at home, and there are a few broad principles of that sort that I think we agree on as a sound national policy underlying the matter, but the particular policy governing the enforcement of the 1919 guaranty I have definitely 107124^19 1» 192 WHEAT PKICE GUARANTEED BY CONGRESS. stated again and again can not be instantly decided until think it of the crop and the compass of the world's needs are known. If it is attempted at this time to outline any national policy I think it would be disastrous. Mr. McLaughlin. Yesterday and the day before I asked some questions along a certain line. I would like to ask your opinion as to some of those matters. There is a very general belief that the market price and the world price of wheat will be below the guaran- teed price. If that lower price can be reached in an ordinary, unobjectionable way, it would be a natural price, but it might be reached by violent means, or by manipulation. Suppose it were reached or would come as the natural result of conditions. Do you think that the Grain Administration would be justified in doing anything to keep that price from reaching its natural point, even if it involved a large loss to the Treasury ? Mr. Barnes. Again, Mr. McLaughlin, my statement is very clear in showing the difficulty of reaching any conclusion as to what is a natural price. More than that, I have grave doubts whether a natural price, in the sense that the trade generally accepts it, is at all possible now, or for the next 12 months; because of the influences of international finances, which must be governmentally controlled, and of transportation, which is largely governmentally controlled, it was more than the price than between different points of origin. Now, I do not see how you can see, anything any clearer than that. If there is no fair means to arrive at a world price, than that world price is fixed," if fixed at all, by manipulated means, by governmentally manipulated means, and I have expressed to you quite clearly how it is possible to fix in Liverpool, by the close association of the three allies, a world price which, if you recognize it as a world price, is a manipulated price for the benefit of their purchases in this country, without representation in fixing that price. Mr. McLaughlin. Well, that might be unfair and work an in- justice to the United States. I can see that. But if the Grain Corporation should be able to determine what a reasonable world price is, would that justify, in your judgment;, making an effort to raise that price for the purpose of saving the Treasury of the United States ? Mr. Barnes. Again I say, I believe that it is a sound national policy, that if you have something to sell, a surplus to sell, to get just as much for it as you can. Mr. McLaughlin. What would be the result in this country if the people, the consumers, were to believe, and they would have reason to believe it, from the very last words you said, that they had not been given the advantage of a fair, reasonable, honest world price, but were charged more than a foreign country. Mr. Barnes. I presume the consumers would like to have a lower price level, and if it can be demonstrated that our stock of wheat was unsalable at the price at which it is held, reasonably demonstrated, I presunae national policy would make some adjustment for the benefit of the consumers. Mr. McLaughlin. No; pardon me; you have not answered my question. You spoke about saving money, and I asked you what you thought would be the condition of mind of the consumers of this country if they felt, and had reason to feel, that the Grain Corpora- WHEAT PRICE GUABANTEED BY CONGRESS. 193 tion had not followed the reasonable world price, but had. itself forced a higher price for the purpose of saving money to the Treasury. Mr. Barnes. Well, the sole difference between your question and my answer is the question of having forced such a higher price, and I again say that if there is any influence an American agency can make to get for American surplus products a higher price level, it is per- fectly legitimate to make that effort. That answers your, question, surely. Mr. McLaughlin. Do you think anything could be written into the law to prevent that ? Mr. Barnes. Undoubtedly. Mr. McLaughlin. Not whe her it should be or not, but do you think words could be put in there that could prevent the exercise of such power on the part of the grain commission ? Mr. Barnes. Undoubted y y u could do tha . Mr. McLaughlin. Have you any suggestion to make as to what the words should be ? Mr. Barnes. No ; my sug'gestion is that you do not write anything of that kind in there. Mr. McLaughlin. You would give the Grain Corporation, then, authority arbitrarily to maintain the price of wheat and its by- products in this country above the prices that would be justified by a reasonable, honest, world market price? Mr. Barnes. No; I do not think that is a fair question. Mr. McLaughlin. That was involved in my question or I in- tended it. Mr. Barnes. Well, let me see if I can answer it a little differently, then. I think the powers now delegated by the legislation which you gropose should be broad enough so that if it develops that the Grain orporation, or any other agency, taking this grain from the farmers at a guaranteed price can, by holding it off the market a reasonable length of time, force the foreign consumer to pay more than the guaranteed price, that is a perfectly soimd policy, I mean as a national policy for the United States, and the legislation should provide for that. Mr. McLaughlin. To force the world's price above what it would be under reasonable and honest conditions. Mr. Barnes. No; that is not the clear statement of it. The world's price will come to your level if they can not supply their needs elsewhere. That does not mean that the reverse of that is true, that you must enter into direct competition with your products with some one else, and sell it on the first drop or breakdown for his price. Mr. McLaughlin. That would be an unusual and unjustified con- dition and process, but I was supposing that by reasonable and fair means and methods and condition the world's price was inclined to be low, involving a large loss to the Federal Government. In that case would the Grain Corporation be justified in doing anything to force a higher world's price 1 Mr. Barnes. I think that is only a shade of meaning you question, which I think I have fully answered, Mr. McLaughlin. Mr. McLaughlin. Well, I do not want to pursue it to your annoy- ance, but I wish to suggest that, in my judgment, if anything is done 194 WHEAT PKICE GUABANTEED BY CONGRESS. later to fo"ce a higher price than the natural, honest, world's price, there will be serious trouble in this country on the part of the con- sumers of the country. In my judgment, they are entitled to a fair world's price, even though in involves a loss to the Treasury of the United States. The Government must take its medicine. The Chairman. Let me interject, Mr. McLaughlin, this idea':. I assiune that the method of controlling the foreign situation would be through the exercise of control over exports. If you came to the conclusion that the offers from foreign governments or from foreign places for grain were too low in price, would you simply put an embargo on exports ? If so, the result of that would be to dam up the supply of wheat on the domestic market, with the consequence of the natural result of forcing the price to the domestic consumer down. Would not that follow naturally, so that you reach the proposition of getting the highest price through your plan for your exports, and at the same time giving the lowest price to your domestic consumers. Is that a fair statement of the proposition ? Mr. Barnes. It would be, if the domestic price structure was hot maintained by continual daily buying at the Government-guaranteed price. The Chairman. Illustrate that to a novice. Mr. Barnes. That is, if we should be directed in the enforcement of this guaranty to buy at a certain price, $2.26, at Chicago and relative markets, and buy every day anything so that the farmer can at all times get his guaranteed price, that wUl, of itself, maintain the level of the domestic price. The Chairman. Have you figured on any plan by which the result of my own reasoning could be brought about ? There is a good deal in Mr. McLaughlin's suggestion. We do not want the consumers here to pay more for bread, pay more for wheat, than foreign con- sumers are paying if we can prevent it, and I was thinking that there might be some plan worked out by which you could control exports and get the highest price for the exportable stufif, and at the same time, under well-known economic laws, reduce the price to your consumers. If that could be done, I think it would be very well to do it, dD you not, Mr. McLaughlin? Do you see the point I am trying to bring out ? Mr. McLaughlin. Yes. There are certain legitimate influences at work by which the world's price is reduced, and there are improper influences at work sometimes. My idea is that this Grain Corporation ought not to interfere with those proper and legitimate influences on the world's price, even if it is carried away down and a large loss is involved to the Treasury of the United States. Mr. Barnes. I would be inclined to agree with Mr. McLaughlin if there were proper and natural influences at work. Just at present, as I quoted, in France they are paying $3.90 for their home grain while here we are p^jdng $2.26. In Great Britain the farmer last year got for it $2.28. In Australia you could buy it for $1.35 or $1.30 f. o. b. vessel, yet at the same time the Dutch sent their vessels in here and paid us $2.26 for our grain, taking into consideration other influences. There is no longer tne interplay which usually runs free between markets of supply and the markets of demand and the sources of supply, and you must get out of your mind the feeling that those influences, which ordinarily operate, are free to operate now, or will be within the next 12 months. WHEAT PEICE GUAKAHTEED BY CONGRESS. 195 Mr. McLaughlin. A great many plans have been suggested here for payijig the farmers the guaranteed price. Have you any sugges- tion or plan or machinery for that? Mr. Barnes. No; I have not, because I feel again that the method in which that is made effective should soundly be based on the extent of the problem, and that problem respresents, again, the crop need, that is often sold and wholly sold. Mr. McLaughlin. Some gentleman has suggested that in some way the Government learn the amount of wheat thrashed through the thrashing machine by a certificate to be issued, and that some kind of payment be made on the basis of that at the time, or later, but on that certificate. Would that be feasible ? Mr. Barnes. I should be very much afraid of any payment based on thrasher's certificate. Mr. Young of North Dakota. That plan also involved holding the wheat on their farms in the meantime and receiving a bounty. Mr. Rainey. Mr. Barnes, following Mr. McLaughlin's line of thought or suggestion, somebody expressed the opinion here yesterday or the day before that a crime had been committed by the Government in interfering with the natural law of supply and demand, and that as a violation of that law the Government was to be punished and fined approximately a billion dollars. They advocated the Government paying the fine and permitting the wheat to resume its normal flow, opening up the markets and establishing a world's price. I hstened with considerable pleasure to your statement this morning, and it opened up an avenue of thought that had not hereto- fore presented itself to me, but I was wondering whether your state- ment or suggestions were based on your desire to prevent the Govern- ment from paying this fine of a billion dollars now — that is, paying the farmer the guaranteed price — or whether the Grain Corporation would be instrumental in earning the fine that we must eventually pay, because eventually we must get back to the law of supply and demand. Were your suggestions based on a desire to prevent a ' loss to the Treasury ? Mr. Barnes. No ; not whoUy. I disMke to see the position taken that the Treasury must face a loss until it is demonstrated by the development of the crop and the demand. I am quite free to say that if our Government, through its Treasury, could solve the ques- tion of international finances, so that our merchants could be assured of cash from commercial dealers, if we could obtain the assurance of transport freely for private charter, as might be done with the Shipping Board, if we could settle this gaurantee to the farmer fairly to him, and completely, by the expenditure of almost any sum from the National Treasury, and return this business to its natural, private administration, I should favor doing it. It would allow the price to seek its own level if we can restore those trade influences. Mr. McLaughlin. Do you feel as some, Mr. Barnes, by the con- tinuance of the Grain Corporation, or any agency that might be decided upon, eventually the loss to the Government would be greater than it would be now if we discharged our obligation to the farmer ? Mr. Barnes. I can not see any other way to discharge your obli- gation to the farmer. I can not picture the machinery which would 196 WHEAT PRICE GUARANTEED BY CONGRESS. represent the farmer, except to fix the price of wheat at the price guaranteed and estabhshed by the Government, in order to get wheat. That is all I can say now. Perhaps, as the crop progresses, that problem may simphfy itself. If, instead of the guaranteed price per bushel, a bonus per acre had Iseen adopted, which was my recommendation, if you will excuse me, you could settle with the farmer to-day by checks on the National Treasury, and be discharged of the whole burden of it; but that was not given any consideration at all at that time. The Chairman. I beg your pardon, I did not quite catch what you said. Mr. Barnes. I do not know, Mr. Lever, whether that recommen- dation ever reached you. The Chairman. I did not catch it. Mr. Barnes. I recommended that the attraction to sow wheat, the inducement to increase the acreage of our wheat, should be in the form of paying a bonus per acre sufficient to return the farmer his expense on his risk and seed; $3, $4, or $5 an acre would have produced the same acreage, you could have gotten the same acreage sown, and drawn your checks, and gotteii through with it. The Chairman. That suggestion was made in Mr. Hoover's state- ment, the first statement he made here. Is there anything further, Mr. Eainey? Mr. Eainey. There was one other question. It was suggested here that the farmer, not having sown his spring wheat, and consequently not having suffered any loss, whether or not the Government could in good faith suggest to him that he do not sow spring wheat at this time, that the $2.26 guaranteed price was offered to stimulate productioii. Now, the. farmer, not having sown the wheat and not having suffered any loss except that loss that you suggested this morning in your statement, but in anticipation of the guaranteed price of $2.26, possi- bly having tried to sow a bumper crop, the question is whether the Government could in good faith suggest to the farmer to not sow spring wheat. Your idea is that on account of the innumerable demands from the millions of farmers that would be made for anticipated losses or for investments or for expenses that they had contracted as a result of a desire to grow spring wheat, that it woidd not be feasible ? Mr. Barnes. Yes, the practical difficulties- of segregating in any marketing system the spring-sown wheat from the fall-sown wheat, and one price basis to one, and perhaps another price basis to another, are insurmountable, in my judgment. Mr. Glasgow. May I ask you a question, Mr. Barnes? Mr. Barnes, do you think that anybody is in a position now, in the present condition not only of this country but of the world, to suggest that there should not be any amount of production that is contemplated of foodstuffs made? Mr. Barnes. I should dislike to take the responsibility of recom- mending a contraction even of the wheat acreage. Mr. Glasgow. Especially is that true, is it not, when the outcome of the present winter wheat can not yet be determined? Mr. Barnes. Yes. Mr. Glasgow. It would be a decided risk for anybody to make that suggestion, would it not ? WHEAT PRICE GUARANTEED BY CONGRESS. 197 Mr. Barnes. Yes. This winter wheat acreage, while the conditions are very promising, will hardly produce, under favorable circum- stances, any more wheat than we need at home. Mr. Glasgow. May I ask if you do not recall that Mr. Hoover, yourself, and myself considered that question before either of you went to Europe, going through it thoroughly and reaching the con- clusion that there were practical difficulties in the way of it, and that even if the practical difficulties were removed in handling it, that it should not be done without sacrificing our good faith to the producers of wheat to whom this guaranty had run ? Mr. Barnes. That was our conclusion, yes, and it still is my opinion. Mr. Glasgow. I may say, Mr. Chairman, that I did the best I could to try to study some way of doing it. The Chairman. I think it ought to be said, or made clear, at least, that I do not think there is any disposition on the part of this committee — at least I have heard no suggestion of it — that we should disregard the guarantee on spring wheat. Mr. Young of Texas. We could not do that. Mr. Glasgow. I have heard some suggestions of that on the outside from men of real importance. The Chairman. Well, we will make them look unimportant when we get through. Mr. Glasgow. Yes, sir. Mr. K.AINEY. It has been suggested, and that is why I asked his opinion of it, and he stated it precisely. Mr. Glasgow. I have examined it carefully, and I can not see how it is possible to make any suggestion to" the producers of spring wheat in the United States, how it is possible to make that a sug- gestion, even, without laying us liable to the charge of acting in bad faith. I can not see how we can avoid a criticism of that kind. The Chairman. Mr. Barnes, when is the land for spring wheat prepared? Is it being prepared now or in the fall? Mr. Barnes. Much of it is prepared in the fall. The Chairman. I assiraied so, and much was prepared before the armistice ? Mr. Barnes. Oh, yes. The Chairman. There is no question about it, that we have got to keep good faith with those people. Mr. Haugen. Mr. Barnes, the cancellation of the contracts with the spring-wheat grower would involve a tremendous task, would it not? Mr. Barnes. Yes. Mr. Haugen. There are probably a million farmers who grow spring wheat? Mr. Barnes. I should think so, Mr. Haugen. Mr. Haugen. And that matter would have to be taken up with each individual? Mr. Barnes. Yes. Mr.' Haugen. And in the cancellation of the contracts the same policy would have to be pursued as in the cancellation of other contracts, paying the profit, whatever might have been agreed upon ? I understood you to say that the prevailing price of wheat for 60 days prior to the fixing of the price by the Government ranged from, i think, $2 to $2.50. 198 WHEAT PRICE GUAEANTEED BY COKGKESS. Mr. Baknes. I think I gave the range in Chicago. Mr. Haugen. And that four monuis prior to that the price was $3.45. Mr. Baknes. It touched that on one day. Mr. Hatjgen. In quoting that price, did you .have reference to cash price or future price? Mr. Barnes. My first statement in regard to 60 days would be the cash price. The $3.45 refers to future trading. Mr. Haugen. Well, at the time the price was quoted at $3.45, is it not a fact that wheat was sold at a premium^that is, the cash price was far above the future price ? Mr. Barnes. Well, I do not think that any cash wheat sold for any higher than $3.45 in Chicago, which was the price the Chicago future touched. Mr. Hatjgen. My recollection is that an exporter said it had closed there, I think, for $3.48, and that price, I think, was somewhere aroimd 40 cents above the future. Mr. Barnes. That might have been at one place. Mr. Haugen. And the statement was also made that the neutral nations had offered to pay a dollar premium, which would make the price $4.45. Mr. Barnes. Well, I think that is a rather incomplete statement, because at the time any neutral nation might have offered to pay a dollar premium; perhaps the Chicago future was on contract. Mr. Haugen. That was at the particular time when this matter came up for consideration. Mr. Barnes. If the statement is clearly, then, that any neutral nation was willing to pay $4.45 outright for wheat, I am very much inclined to doubt it. Mr. Haugen. I recall the statement made by Mr. Hoover that the price might go to $7 a bushel. Now, there was a sudden drop in the price of wheat during the four months prior to the fixing of the price. How do you account for that drop ? Mr. Barnes. Well, one big factor was the fact that the new crop had matured and came on the market between those two dates. The first high price was made on the tail end of the exhausted crop and the other price was made on the new crop of wheat. ilr. Haugen. Is it not a fact that the statement given out by Mr. Hoover to the press that his task would be to supply the consumer with $6.50 flour a barrel had something to do with it ? Mr. Barnes. That I do not recall. Mr. Haugen. And that if your policy had been carried out the price to the farmer would drop about a dollar a bushel ? Mr. Barnes. Well, is not that rather an academic question? It was not done, and I do not recall ■ Mr. Haugen. Well, it was suggested and it was believed that it would be done, and, of course, nobody would go on the market and pay $3.45 if the price was to be advanced less than a dollar a bushel. Mr. Barnes. In all the discussions in the National Congress and in all the newspapers and trade journals it was stated that there would be some effort made to control the inflated price of wheat and flour, and undoubtedly the purchaser calculated that there would be some control exercised over the price that we would pay. WHEAT PRICE GUARANTEED Bt CONGRESS. IQQ' Mr. Haugen. It was generally understood that the legislation suggested was for the purpose of keeping the price of wheat down. Mr. Barnes. There is no question about that. Mr. Haugen. And the price was brought down through this legis- lation and through this corporation. The price would have been much higher in the absence of legislation. Mr. Barnes. I think so. Mr. Haugen. That is conceded. Now, then, the question is, speaking of the injustice of forcing the price up, if it was fair and just to nammer the price down to the farmer, would it not be equally fair now to maintain the price the Government is under contract to pay ? Mr. Barnes. I think you might well argue from that standpoint. The Chairman. I do not think Mr. Barnes quite caught that. Mr. Haugen. It is just as fair to one as to the other. The Chairman. There is no disposition or suggestion here that the farmer is not to get his guaranteed price. The only suggestion made here is that the consumer be given the benefit of a reduction in price that cain be fairly and reasonably made. The farmer is out of the equation now, as I understand it. Mr. Haugen. Mr. Chairman, there are two thoughts. One is the sociahstic idea, or paternalistic idea, that the Government should go into the Treasury and furnish the consumer with cheap wheat at the expense of the Government's Treasury and at the expense of the people. That is socialism and does not meet with my approval. If I were to take it, I would take it in small doses, and fix it at .30 cents or 40 cents a bush,el, rather than at a rate of $2.26. The Chairman. I see the gentleman's point. Mr. Haugen. My understanding is that your suggestion is that the wheat proposition shall be handled in a fair way, or as under normal conditions, that is, so far as the guaranteed price can be maintained, and if the price falls below that, the purpose then of the Government is to step in and see that the contract is made good. Mr. Barnes. Tnat is one of the methods of making it effective. Mr. Haugen. Well, that is your plan, is it; your suggestion ? Mr. Barnes. I have not any definite plan. Mr. Haugen. That would meet with your approval ? , Mr. Barnes. That is one of the plans. Mr. Haugen. Would you contemplate, then, that the Government should organize and take control over the matter, or wait for further developments ? Mr. Barnes. I think you must wait for developments. Mr. Haugen. Sd, as long as the trade takes care of the proposition, there would bs no need for the Government interfering, but the machinery, of course would have to be set up and to be made use of in case of emergens or necessity ? Mr. Barnes. Yes; I think that is a fair statement. 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Table 13. — United States exports {official), July 1 to January 10. WHEAT AND WHEAT FLOUR. [Exports lO-day periods official, 1918-19. Comparisons for last year one-tlurd of months total.] Month. Wheat. Flour. 1918-19 Wheat. Flour. July August-.'. .- September.. October November.. December. . . Jan. 1-10.... Total. Equal, Bushels. 5,059,242 5,169,649 2,612,762 5, -HI, 579 4,877,9.53 4,488,672 637, 878 Barrels. 747,333 1,015,349 1,01.5,293 1,347,478 1,274,770 2,340,584 775,946 Bushels. 225,381 15,119,873 28,658,316 21,319,377 16,091,393 25,083,543 4,312,468 28,260,735 66,586,123 8,616,753 110,810,351 148,451,857 BaTrelsJ^i 2,43^,656 972,720 340,749 , 713, 3133 1,167^114 1,879,(»S 857,812 8,364,779 Oyeiseas exports of flour to American Expeditionary Forces and relief programs not included in the above 2,790.416 barrels, making tdtal flour exports of 11,155,194 barrels and a grand total wheat and flour of 161,028,724 barrels. EYE AND BYE FLOUK. Month. Hye. Rye flour. Bye. Bye flour. July , August September., October November.. December. . . Jan, 1-10..., Total. Equal Bushels. 367,016 97, 749 136,858 1,248,128 2,918,421 2,787,2,56 609,805 Barrels. 11,999 7,678 4,040 3, 177 65,870 88,327 19,033 Bushels. 213.466 212,243 306,649 466,100 1,094,142 1,099,038 1,423 8,165,231 9,065,794 200,125 3,393,261 6,994,051 Barrels. 290,438 254,636 86,463 S5,68C 19,739 12,654 648 720,168 Table 14. — United States exports {official) July 1 to Jan. 10. COEN AND CORN MEAL. [Exports 10-day periods official, 1918-19. Comparisons for last year one-third of month's total.] Month. July August September., October November. . December... Jan. 1-10 Total. Equal. 1917-18 Com. Com meal. Bushels. ,3,146,394 2,669,519 980,074 1,601,790 1,622,206 2,344,422 637,049 13,001,454 17,119,409 Barrels. 125,317 206, 199 239, 145 160,949 81,926 83,086 18,479 916, 101 1918-19 Com. Com meal. Bushels. 2,009,159 1,850,412 2,469,466 2,334,746 1,705,292 990,922 358,380 11,718,377 16,661,857 Barrels. 300,667 164,334 91,784 56,814 32,669 35,009 117, 459 788,696 STATISTICS OW MOVEMENT AND STORAGE OF GBAIN CROPS. 257 Table 14. — United States exports (official) July 1 to Jan. 10 — Continued. OATS AND OATMEAL. Month . 1917-18 Oats. Oatmeal. 1918-19 Oats. Oatmeal. July August September.. October November. . December. . . Jan. 1-10.... Total. Equal. Bushels. 5,373,642 12,522,268 4,644,413 11,344,818 11,592,113 10,414,412 2,862,684 Pounds. 24,988,507 41,994,321 27,169,026 34,711,686 36,730,971 31,339,876 5,819,245 Bushels. 15, 296, 141 11,523,349 14,951,862 7,503,148 7,660,444 8,564,963 3,536,759 Pounds. 30,575,712 33,790,940 31,193,619 19,861,780 25,792,870 9,780,059 6,430,690 58,754,350 70,018,440 202,753,631 69,036,666 77,782,536 157,425,670 Exports of oats to the American Expeditionary Forces have been 13,992,000 bushels in addition to the above, making total overseas sliipments of 91,774,536 bushels. BARLEY AND BARLEY FLOUR. Month. 1917-18 1918-19 Barley. Barley flour. Barley. Barley flour. July... , Bushels. 761,775 1,455,530 1,559,856 3,924,921 2,134,641 1,319,652 422,691 Barrels. Bushels. 1,934,767 587,148 154,315 577 260,480 793,711 700,270 Barrels. 229,684 65,438 30, 620 August 12,052 16, 402 56 December 515 Jan . 1-10 7 Total 11,579,065 11,591,377 12,052 4,431,268 6,967i410 342,722 Equal . * . . . . 1 Wheat Export Co. RURAL SANITATION 259 KURAL SANITATION. House of Representatives, Committee on Agricultuee, Washington, D. C, February 17, 1919. The committee met at 10.30 o'clock a. m., Hon. Asbury F. Lever (chairman) presiding. Present: Members of the committee; also Dr. W. S. Rankin, of Raleigh, State health officer of North Carolina and president of the conference of State health officials; Dr. J. W. Schereschewsky, assistant surgeon general of the United States Public Health Service, and Assistant Surgeons General B. S. Warren and L. L. Lumsden, of the United States Public Health Service. The Chairrean. We have met this morning, gentlemen, to hear statements with reference to H. R. 14185, a bill to provide that the United States shall cooperate with the States in promoting the health of the rural popiuation of the United States and for other purposes. STATEMENT OF DR. W. S. RANKIN, RALEIGH, N. C, STATE HEALTH OFFICER OF NORTH CAROLINA AND PRESIDENT OF THE CONFERENCE OF STATE HEALTH OFFICIALS. The Chairman. In your own way, tell the committee what you 'think about this bill and its purposes. Dr. Rankin. Mr. Chairman and gentlemen of the committee, I come from a rural State and from a rural section of the country. I have been a health officer for about 10 years, dealing largely in rural health matters. My State is about 90 per' cent rural. From the point of view of the rural popidation (I believe the rural population represents the larger part of the population of our country), *and especially from the viewpoint of health officers working in States largely rural like mine, this will be, if it passes, one of the greatest pieces of Federal health legislation that was ever enacted. If the bill passes it will secure an objective from which the whole field of rural sanitation may be developed, just as other legislatio-n based upon this Federal aid extension principle of the Government, relating more particularly to good roads and farm life demonstration work, and vocational education has given a tremendous stimulus and a,n effective stimulus to the development of roads, farming, and domestic science. I believe that the Federal aid extension principle of the Govern- ment is based upon the recognition by the three prime units of Gov- ernment (the Federal Government, the State government, and the county government or the local or parish government in some States) of a certain common interest for which the three governments pro- vide financiallv as partners and the funds appropriated by the three 261 262 RURAL SANITATION. governments (Federal, State, and local) are expended upon a plan of work, a plan subject to frequent checking, that has the approval of the three partners, the three participating governments, Federal . Government, State government, and county government. This legislation, of course, is along sirnilar lines. If the biU passes, the appropriation which it carries with it will be sufficient to stimulate State general assembhes to make supplemental appropriations just as the other three acts to which I have referred have been sufiicient to bring about cooperation on the part of the States. Then with the State and Federal fimds available to the counties, parishes, and townships, the financial inducement wiU be sufficient to cause the counties, parishes, or local governments to again participate by putting up supplemental amounts in order to get the amovmts apportioned under this act from the Federal Gov- ernment and apportioned under special State legislation by the State governments. In the counties, as you gentlemen perhaps know, the rural popular tion of this country is scattered and, with a much lower per capita wealth than the urban population is not able, or at least it thinks it is not able (and that amoimts to the same thing) to appropriate suffi- cient funds now to materially reduce the death rates of the rural people. But with the funds provided in this act and the funds pro- vided further through supplemental State appropriations, the counties could be persuaded to put up enough money to effect health condi- tions materially among the rural people. In addition to providing the means of aiding rural sanitation, I think one of the great advantages of this piece of legislation would be its effect in bringing about a standardization of the plan of con- ducting rural sanitation work. If I may illustrate: A county wants some of the money provided imder this act and imder supplemental State legislation for rural sanitation. The county agrees to put up so much in addition to the amount secured from the State and Federal Governments. Now, the county must submit a plan of health work— a plan on which these joint funds are to be expended — that will have the approval not only of the county authorities and of the State board of health or the State department of health, but of the United States Public Health Service as well. In other words, the plan has to be so well drawn that it will pass muster by three different authori- ties. That goes a long way in guaranteeing efficiency. A part of any such plan would be a checking system so that there would be frequent reports from the different counties to the State offices, then from the State offices to the office here of the United States Pubhc Health Service. And those reports would be so arranged, or in such form, as to enable the Public Health Service here to compare what the different States were getting for a given expend- iture, and in that way to see what State was falling behind in spending the money without getting an average of results; just as in the States the reports from the coimties on the standardized plan, such as would result from this bUl, would enable the State authorities to compare the Vrork of the different coimties and check each coimty by the average of the results which the total number of counties were getting. We have in North Carohna about nine counties that are working on a standardized plan of health M^orkj^and I have brought along a letter RURAL SANITATION. 2C3 here which we -wTote to one of the county health officers the other day, and this letter will indicate how easy it is for the State department of health, with a standardized plan of work, with all the counties foUow- mg the same plan and reporting on the same forms, to check one county by the others and to make the weaker counties puU up or automatically eliminate the health officer in charge of their work. This letter is from the state supervisor of health work to bne of the county health officers. In it he says : ' ' The following table shows the amount spent from the soil-pollution unit (item No. 3) funds, the number of privies built, and the , average cost per privy built in each county." The Chairman. He is writing to a local health officer 1 Dr. Rankin. Yes. In Rowan County they built 1,615 privies, at an average cost of 79 cents; in Robeson County they built 956 privies, at an average cost of $1.45. Then he goes on down by counties to the county to the health officer of which this letter is -wTitten. That county built 178 privies, at a cost of $8.19 each, as against the lowest cost of 79 cents for Rowan County. The Chairman. I wish you would tell me how you can build a privy for 79 cents. Dr. Rankin. That does not mean the privy was built for 79 cents; it means the administration cost of persuading the people to build their own privies cost that amount per privy built. I am using those figures simply to show you how a State, working with a number of counties following the same standardized plan of work, can check up inefficient county health work and eliminate the inefficient county health officer. This report goes on with other items, but I illustrate with that one. This standardization plan wUl be one of the principal advantages of this bill, and it will not only apply through the State officers to the individual counties in the State, but it wiU apply through the United States Public Health Service to the individual States, because the United States Public Health Service will get those reports monthly from the States as to how they are expending this money, and there will be a very great degree of uniformity of plan among the various States, so that the United States Public Health Service would bear the same relation to the individual States that the State does to a county. So that, as I see it, the two principal advantages that would come from this legislation are, first, it furnishes sufficient funds to stimulate the counties and the States to put up additional amounts sufficient to insure effective rural health work; second, the participation of the three agents of government, the Federal Government, the State gov- ernment, and county government, in such way as to bring about a ' standardization of rural health work, so that you can compare the results in one county under one local government with those in other counties, and the results in one State with those in other States in drawing conclusions as to the effectiveness of the work. And, of coiuse, if those reports are made pubUc, the people back home wiU see that they have efficient men in charge of the county health depart- ments, and also of the State health departments. I might refer briefly to the possibilities of county health work Mr. Young of North Dakota: What do you mean by county health work ? ■ 264 RURAL SANITATION. Dr. Rankin. Kural health work. Mr. Young of North Dakota. Rural health work? What do you mean by that ? Dr. Rankin. I think I can answer that in just what I was going to read here from an official report. We have nine counties in North Carolina doing what we call rural health work. These nine counties have been operating — one county has had a whole-time county health officer only for about 4 months, and the others for about 24 months, and the nine counties have been at work for a total of 120 months, or an average of 14 months each. The health officers of those nine counties are men, with but one exception, who had no no previous training in pubhc health administration. They were taken right out of the ranks of practicing physicians and put in charge of this work, so that this work represents the first 14 months of administration by 9 raw men, and during the past 3 months those men had no time for public health work, because they devoted their entire time to relief work during the influenza epidemic. Taking those conditions into consideration, I am going to read you what was accompUshed, on an average, by each one of those men. I think this is the most substantial statement that can be made on the whole situation; and I know of no other statement of facts, based upon nine counties working on the standardization plan of health work, wliich'would better illustrate what is intended to be done under this bill. In each county, taking the average county, during the past 14 months, there were eight public lectures given each month, with a total average attendance of 829 people. That is out in the counties where smaller audiences are naturally to be expected than in the cities. That is for each month. A great many of those lectures were illustrated with lantern slides, educating the country ' people as to the meaning of sanitation and proper' hygiene. Most of the lectures were given in the schoolhouses. In each county, for each month, there were seven health articles published in the county paper. Most of the counties had weekly papers or semiweekly papers. Each month there were 61 rural homes which constructed privies, in each county; that is, two homes a day put in sanitary privies. Each month there were 171 people examined for hookworm disease — that is one of the prevalent diseases down South — 171 people were examined for hookworm disease in each county each month. There were 330 people treated each month. That is the treatment of over 10 people per day. Four schools were visited by the health officer in each county each month. That is one a week. Three hundred and twenty-five children in each county were exam- ined each month by the doctor working with the county health offi- cer; 126 children were personally examined by the public health officer, and of the children found defective, 51 were treated; that is, the parents took them to a physician to be treated. We do not treat them, and it is not compulsory, but is entirely optional with the parents. Thirty-two children were given physical examinations by the health officer of the county each month, and their parents were advised as to their general condition and advised whether more thorough treatment by a physician was necessary. BURAT. SANITATION. 265 Three hundred and thirty-one people were vaccinated each month against typhoid fever; 54 people were vaccinated against smallpox. In county quarantine work, which is provided for by statute, 143 cases of infectious diseases were given attention b}^ tlie county health departments. That indicates some of the possibilities of what may be done and what constitutes, as we regard it in North Carolina, rural health work. Of course that term would be construed differently by the United States Public Health Service under this act for the different States. One State would have one plan and another State another plan. The States certainly in the North and far West would have one plan; and the States in the South with their big malarial and hookworm work problems, would have another. There would be four, five, or six different plans for the States throughout the country, but there would be sufficient uniformity to permit a checking up of the work under the different plans. There is one more thing I would like to leave with you to show what has been accomplished in the way of a direct reduction of dis- eases. Here is a table of death rates from typhoid fever during the years 1914, 1915, 1916, and 1917 for those nme counties I have re- terred to. In those four years before we had any health departments in those coimties there was a total of 478 deaths from typhoid fever in the nine counties, which gives an average death rate per 100,000 of population of 35.3. Diu-mg 1918, in which there was a county health department ia most of those counties (one or two of the counties had a health department for only part of 1918), there were only 24 deaths as against an average of 119 deaths per year for the previous four years, or a typhoid death rate last year of 7.8 as against an original death rate of 25.3. (The statement submitted by Dr. Rankin will be found at the •close of his remarks.) Mr. Young of North Dakota. For four years ? Dr. Eankin. Yes. Now, gentlemen, I rather congratulate the men appearing before you to day in that we are appearing before the Committee on Agriculture instead of the Committee on Public Health. If we were to appear before the Committee on Public Health, I would think it necessary to take up in considerable detail the question of death rates and tables. But you gentlemen have had a great deal of experience and given a great deal of study and thought to this question of disease prevention as applied to 'plants, and you know you can affect the vigor of a plant and the fruit that it produces by proper environment, proper food, proper care, and you know you can prevent diseases among animals — horses, chickens, cows, and sheep. You laiow you can not only do the negative side of preventing diseases among stock, but you can also perform the positive side of this health question; that you can promote their health and make them more vigorous and make them worth more when they are at work. And with your experience in disease prevention and health promotion in the Department of Agriculture, as applied to plants and as applied to horses, pigs, chickens, and sheep, I do not think it is necessary to argue here with you gentlemen the funda- mental importance of this question of health. If it is iniportant to plants and if it is important to horses, pigs, and sheep, it is vastly more important to men, for how much more is a man than a sheep ? 266 RURAL SANITATION. Mr. Chairman, if there is anything I have not covered that any- one would like to ask, I woxild be glad to try to answer. Mr. Haugen. About what do you estimate would be the cost to- carry on this work throughout the United States ? Dr. Eankin. Dr. Schereschewsky can give you the exact figures on that, stating the amoimt that would be apportioned to the various States under the terms of this act. Mr. Haugen. What is the amount you think would be required; just an estimate ? Dr. Rankin. The act provides, of course, $250,000 for this fiscal year and runs on up to $1,000,000 four years from now, I believe. Mr. Haugen. That is when the plan matures. Dr. Rankin. Yes, sir; when the plan matures. Mr. Haugen. And that amount to be met by the counties. Dr. Rankin. This act provides that this money shall be only expended — $1 for each dollar contributed by the States. Mr. Haugen. On a 60-50 basis ? Dr. Rankin. On a 50-50 basis; yes. In my. State, in. North Carohna, this would be done — it would be done in a gxeat many States — we would get at least $2 for every dollar apportioned from this part of the money. And in many States the same thing would happen. In fact, in the counties in my State in which we are now working they are putting up $2 for every doUar from the State. Mr. Haugen. But your suggestion is a 50-50 proposition. Dr. Rankin. Yes; I think that is about right, because some of the States would not be able to put ur) more than that proportion. Mr. Young of North Dakota. You mentioned the fact that your State is 90 per cent rural. I see that this bill regards as rural any town not. exceeding 5,000 population. Dr. Rankin. I was speaking in the terms of the census definition of rural. Mr. Young of North Dakota. What is that? Dr. Rankin. Twenty-five hundred. Mr. Young of North Dakota. So that if you were to use the defiinition in this bill, there would be more than 90 per cent of your State rural. Dr. Rankin. No; there would be less than 90 per cent rural if you use the, definition of this bill. The Chairman. No; it would be more, because you would increase your rural population by using the definition of this bill. Dr. Rankin. Yes; it would be more. Mr. Young of North Dakota. And you would also go back to the last census each time. Dr. Rankin. That definition of rural, I presume, would be based upon the definition of the census. Mr. Young of North Dakota. Do you find the need for this work in towns of 5,000 almost as great as it is in the rural communities ? Dr. Rankin. The town of 5,000 has practically the same conditions as are found in the rural communities. Very few towns of 5,000 have public water supplies and sewage. A few of them have, but a great many have not. Mr. Young of North Dakota. They have a lot of privies that are not sanitary ? RUEAL SANITATION. 267 Dr. Rankin. Yes; and they constitute more of a menace than in the purely rural communities, because the privy in a town has a fly range of 300 yards, whereas the same privy in a purely rural community would have a fly range of only one home. Mr. Young of North Dakota. And it would also affect the water supply ? Dr. Rankin. Yes. Those small towns are more in need of this work than the purely rural towns. This does not apply to the large towns, because most of them are adequately equipped with health departments, pubHc water supply, and public sewage. Mr. Young of North Dakota. This is rather a new thing in your State, is it? Dr. Rankin. We have been at work doii^ county health work in North Carolina now for about six years. We have 28.5 per cent of the total population of North Carolina, about 680,000 people, now living under some whole-time health officer, or local form of health government. Mr. Young of North Dakota. You are acting now as the State official in charge of that work? i)r. Rankin. I am speaking as the health officer of North Carolina, and also as representing the conference of State Health Officers of the Union. The State health officers have a strong organization which has been strongly behind this bill. They have been working on it, and I do not know of a single man who is not supporting the bin and who has not written to his Representatives in Congress urging its passage. Mr. Young of North Dakota. You are giving your entire time to this work ? Dr. Rankin. I am giving my entire time to this work. Mr. Young of North Dakota. How about the county official. Does he give his entire time to the. work ? Dr Rankin. These county officials that have charge of the health work reaching the 28.5 per cent of the population do. Mr. Young of North Dakota. In each of these nine counties, you have a doctor who gives up his private practice and devotes his entire time to this rural health work ? Dr. Rankin. He gives his entire time to it; yes, sir. He has a rural health nurse as his first assistant, and a clerk in his office who is a stenographer. Mr. Young of North Dakota. What is the appropriation by your State annually ? Dr. Rankin. The appropriation by North Carohna now for these nine counties — we have some counties working independently of the State, some counties that have gone ahead with the work without waiting for the State. We had a county in 1912 which put in a whole-time department of health, and we have three counties working with the State government, and I included their populations in the 680,000— the appropriation for the nine counties to which I referred is 16,000 per year per county. Now if this bill were passed Mr. MgKinley. Does the State appropriate $54,000? Dr. Rankin. No; the State only appropriates $1,500 of that $6,000. The International Health Board of New York appropriates 11,500, and the county appropriates $3,000. We have been working with the International Health Board of New York. 268 BUEAL SANITATION. Mr. McKiNLEY. Will they have a place under this scheme ? Dr. Rankin. No; they will not have a place under this scheme. Mr. McKiNLEY. Why ? Dr. Rankin. Because they can not handle the United States ia. the first place, and they can not go much over $15,000 in North Carolina. If they could, I would not find it necessary, so far as my own State is concerned, to come to the Federal Government. But, gentlemen, in this matter of health, just to get back to what we have- gone through with, the United States called out the healthiest part of its population, about ten million men, between the ages of twenty and thirty. It put them through a thorough physical examination, and what was their finding ? Thej^ found that 38 per cent of those- men were not fit for military service. Now if men are not fit, for military service, there is much of the work of this nation in times of' peace (war is onlv incidental) for which they are unfit too. Mr. Young of North Dakota. About that 38 per cent. Were they found mostly in the rural districts or in the cities ? Dr. Rankin. About the same, sir. The Chairman. And that is a very strange situation; you would- not think it. Mr. McKiNLEY. I would like to have the gentleman tell us how much his State appropriates. Dr. Rankin. $15,000. The Chairman. He means the total amount. Dr. Rankin. My State is appropriating about $150,000 for public health work now. And my appropriation committee meets to-morrow and unless I am a bad guesser, they will appropriate about $250,000- to-morrow evening. The Chairman. That is in North Carolina ? Dr. Rankin. Yes, sir. Mr. Young of North Dakota. Is that work given general support now from the people ? Dr. Rankin. Yes. I do not know of any public-health work hav- ing been repealed. Yes; I do know of one county that put in a whole- time health officer in 1913 and later rescinded their action; Mr. Young of North Dakota. You are not anticipating the States will haggle on the expenditure ? Df. Rankin. No, sir.' Mr. Young of North Dakota. The sentiment of the States sup- ports it. Dr. Rankin. Yes; and the sentiment of the States is getting stronger- and stronger all the time. Mr. DooLiTTLE. You stated that the average town of 5,000 people does not have a public water service. Do you mean in North Caro- lina, or in the United States, or what do you mean ? Dr. Rankin. That is a matter of opinion. I could not give it to you for the United States, because I do not know the fact about that. Mr. DooLiTTLE. 1 think you are wrong about that. 1 think the- average town of 5,000 people does have a water system, and also a sewage system. The Chairman. I assume you were speaking of North, Carolina anyway ? Dr. Rankin. I was referring more particularly to my own State.. RURAL SANITATION. 260 Deaths, by counties, from typhoid fever during the years 1914-1917. (Death rate per 100,000.) County. Total deaths lor 4-year period. Yearly average ol deaths. Death rate lor average year. Davidson Fqrsyth Lenoir Nash Northampton. Pitt Robeson Rowan Wilson Total... 478 11 20i 13t lOi 3i 15i 16J m 119J 33.7 37.7 52.9 27 15.2 , 40.1 30.2 34.7 46.1 35.3 Deaths from typhoid during 1918. County. Popula- tion. Number deaths. Death rate. Davidson 33, 171 23,732 25,365 32,913 23,061 39,769 64,223 41,579 31,207 O 4 2 1 «2 5 4 6 (1) 16 Lenoir 7.8 Nash 3 Northampton (1) Pitt . . 5 9.2 Rowan 9.6 Wilson 19.2 Total 305,016 24 7.S 1 None. STATEMENT OF DR. J. W. SCHERESCHEWSKY, ASSISTANT SURGEON GENERAL OF TJNITED STATES PTJBIIC HEALTH SERVICE. Dr. ScHERESCHEWSKY. Mr. Chairman and gentlemen, Gen. Blue desired me to represent him at this hearing. Because of previous engagements it is impossible for him to be present. I presume the committee would like to loiow how this bill, in gen- eral, impresses the United States Public Health Service. I may say that the Public Health Service has been engaged in studying this question of rural health at least for the last four or five years; and the more we have gone into the matter the more we have found an urgent need for improving rural health conditions. It is evident, so far as rural health conditions are concerned, that these are somethmg which not only concern localities themselves, but concern the State govern- ments, concern the Federal Government, and concern every man, woman, and child in the United States. The reason is because the rural sections produce all the food which is consumed in this country or is exported. So our existence therefore, is dependent, in the last analysis, upon the food production of the rural sections. For this reason the status of the rural health is not a status which siinply affects the rural people, but inasmuch as rural health conditions affect 270 RURAL SANITATION. national production, it inevitably follows that the conditions of rural health are intimately related to the prosperity of the entire Nation. At the present time we find certain areas in the rural sections which could be made abundantly productive almost uninhabitable because of the unhealthful conditions. We find rural sections aU over this coun- try constantly strugghng; against the handicap of diseased conditions which do not obtain in the city. Take, for instance, such a disease as malaria: That is a disease which is practically negligible in most urban centers. Typhoid fever, as Dr. Rankin has shown in his State, is essentially a condition of rural centers. It used to be a disease which affected the urban communities as much as the rural districts; but because of the fact the large urban communities can take collec- tive health action better than the rural sections, we have seen typhoid fever in the process of being eliminated in cities. It is almost entirely eliminated in many large urban centers, but it is stiU one of the chief scourges of the rural districts. And a disease like hookworm, which is so little prevalent in the cities, is largely prevalent in the rural dis- tricts. We therefore find a special reason for sohcitude for the care of the health of rural districts, far in excess of that in health conditions in urban centers as contrasted with rural districts. In the past the Public Health Service has been engaged in rural health work somewhat along the lines proposed in this bill. Since 1918 we have had a small sum which could be allotted to the various States and counties wliich would meet our allotments with similar sums., And the result of this work has been so extremely encouraging, that if its being carried out on a broader basis, such as provided m this bill, could be secured, I feel sure it would mark one of the most pro- gressive steps which has been made in health legislation in the history of the Federal Government. Our appropriation began in 1918. It was only $150,000. Out of that sum we are supposed to carry on all of our investigations in rural health conditions and raalarial vs^ork; and, at the same ijrae to make allotments to counties, which would specifically appropriate or otherwise set aside a similar amount. Under that appropriation we allotted $47,310 in 1918; and so far, this year, we have allotted $80,000. And if we had a great deal more money we could allot that with ease, because the counties are so pleased with the results obtained with this kind of work, that we are overwhelmed with requests with which we are unable to comply bscause we have not the money to do so. The Chairman. What is the present appropriation ? Dr. ScHERESCHEWSKY. The appropriation this year is $150,000.. The Chairman. What is the estimate for the next fiscal year ? Dr. ScHERESCHEWSKY. $500,000. The Chairman. Has that been passed on? Dr. ScHERESCHEWSKY. I do not believe it has been reported, but the results have been so encouraging, and there has been such a desire on the part of the counties to avail themselves of this means of promoting their own health conditions that the request made of the Appropriations Committee for the increased allotment for that purpose was amply justified. Of course, if a bill like this were passed, that request could be withdrawn, because this specifically provides for permanent aid and provides for a permanent progression in the amount of money appropriated as the plan matures and as, RURAL SANITATION. 271 this matter of PBderiil aid extension in health work spreads and is taken up. The CHAiRilAN. Have you made any statement before the Appro- priations Committee on your estimates ? Dr. ScHERESCHEWSKY. Yes, sir. The Chairman. Those are printed, are they not ? Dr. ScHERESCHEWSKY. Thev will be printed. These statements have been made and they will of course be printed in the hearings as soon as they come out. The Chairman. Is there anything further ? Dr. ScHERESCHEWSKY. I may say this bill has been carefully examined by the department, and with the exception of one or two minor amendments, which simply improve the bill from an adminis- trative standpoint, it meets the thorough approval of the Surgeon General of tne Public Health Service and of the Secretary of the Treasury. I can only repeat what I have said, that the enactment of a bill of this character will constitute a new era in health legislation and I firmly believe the means it will give us for improving health con- ditions will be so effective that we wiU be able to regard in the future, as medical curiosities, eventually, many of the diseases which are now so prevalent in this coimtry. Moreover, the bill is very broad in its plan. It does not limit one necessarily to any particular plan of health work, but enables the most effective plan to be adopted which will cope successfully with the type of health conditions and the type of diseases which are prevalent in a particular county or State availing itself of the advantages of this act. The Chairman. You mean by that that you attack the problem as it is most important in each State ? Dr. ScHERESCHEWSKY. YcS. The Chairman. In South Carolina you would likely take up the work on malaria. Dr. ScHERESCHEWSKY. We would take up the work in South Carolina on malaria; yes, sir. The Chairman. And in Ohio — ^I do not know what that would be, hut whatever the problem is, you would take that up. Dr. ScHERESCHEWSKY. Ycs, sir. The Chairman. And in Texas a different problem might present itself. Dr. ScHERESCHEWSKY. You would take up whatever problem presented itself; as the conditions varied in the various States, you would have to vary your work according to the conditions that were present. This bill' gif es fuU latitude in that respect and permits the carrying out of the" most effective plan of healtJi work according to conditions that are present. The Chairman. Out of this appropriation of $150,000, what amounts have been allotted by the States, counties, or local govern- ments to match this fund ? Dr. Scheeeschewsicy. Equal sums. The Chairman. Equal sums have been allotted ? Dr. ScHERESCHEWSKY. Equal sums have been allotted. The appropriation says they must provide at least 50 per cent. In some cases they have allotted more than we have allotted. 107124—19 18 272 RURAL SANITATION. The Chairman. Have you any figures you can put in the record showing that ? Dr. SoHERESCHEWSKT. Yes, sir; I do not happen to have them with me, but I can put them in the record following my statement, showing the allotments at this time under the act. The Chaibman. I wish you w^ould do so, together with the con- tributions that have been made by the various States. Dr. ScHBRESCHEWSKY. Yes, sir." Mr. Thompson. That statement will give the counties, will it? Dr. ScHEBESCHEWSKY. It wiil give the counties, too. Mr. Thompson. And it wUl also give the amounts allotted by the Federal Government ? Dr. Scheresohewsky. Yes, sir. Mr. Thompson. And of course the amounts that are matched by the States « Dr. ScHERESCHEW^SKY. Yes, sir. Authority to make allotments for demonstrations in rural sanitation in cases where the State or locality meets half the expenses of the demonstration has existed only during the fiscal years 1918 and 1919. In 1917, $25,000 was appropriated for studies and demonstrations in rural sanitation, but States and localities were not required to meet part of the expenses of the demonstrations. For the fiscal year 1918, $150,000 was appropriated for studies and demonstrations in rural sanitation. Under this appropriation cooperative demonstration work was carried on in 16 counties, the various health organizations of which appropriated $47,310. Out of this appropriation of $150,000 expenditures were made for (1) coopera- tive demonstrations, an amount being spent which was practically equal to that spent by the localities; (2) surveys of malaria conditions in the vicinity of cantonments; (3) sanitary surveys of rural health conditions for the protection of the military forces; (4) surveys in rural counties on request of health authorities. The total amount expended was $137,799.64. For the present fiscal year $150,000 was appropriated for studies and demonstrations in rural sanitation. Under this appropriation $89,254.06 has been allotted for demon- strations up to February 21, 1919, an equal or greater amount having been appro- priated by local authorities. A number of other counties are sending in requests for demonstration work. It will be impossible to comply with these requests out of this appropriation, because of the importance of carrying on studies of malaria, which are also paid out of it. Allotments for demonstrations in rural sanitation during the past and present fiscal years were as follows: Fiscal year 1918: Bibb County, Ga $3,000.00 Chesterfield County, Va. 1 Dinwiddie County, Va ■ 2, 260. 00 Prince George County, Va. DeKalb County, Ga 2, 000. 00 Fulton County, Ga 5, 000. 00 Elizabeth City, Va.,\ qnn nn Warwick County, Va / ^""- "" Hamilton County, Tenn 3, 000. 00 Catoosa County, Ga 250. 00 Walker County, Ga 500.00 Jefferson County, Ky 6, 000. 00 Mason County, Ky 6, 900. 00 Montgomery County, Ala 2, 500. 00 Polk County, Iowa 9, 000. 00 Pulaski County , Ark 6, 000. 00 47,310.00 RURAL, SANITATION. 273 Fiscal year 1919: Cumberland County, N. C |4, 000. 00 DeKalb County, Ga 4, 000. 00 Hamilton County, Tenn 5, OOO. 00 Harris County, Tex, ($31,500 ') 2, 400. 00 McLennon County, Tex 5,000.00 Madison County, Ala 7, 500. 00 Mason County, Ky 5, 978. 75 Muskogee County, Ga 5, 000. 00 Norfolk County, Va 1, 835. 31 Orange County, Tex 1, 500. 00 Talladega County, Ala i 5, 000. 00 Tarrant County, Tex 7, 040. 00 Virginia ($45,000 1) 15,000.00 Wake and Durham Counties, N. C 10, 000. 00 Walker County, Ga 2, 000. 00 Charleston County, S. C.^ ; 3, 000. 00 Glynn County, Ga.^ 5, oOO. 00 89, 254. 06 Mr. Thompson. Can you give offhand, from memory, just about the average amount allotted to each county? Dr. ScHERESOHEWSKY. Unlcss I am very much mistaken, the aver- age allotment in 1918 to each county was somewhere in the neighbor- hood of $2,950. Mr. Thompson. The average allotment to each coimty? Dr. ScHEEESCHEWSKY. Ycs, sir. It is slightly under $3,000 to each county. Mr. Thompson. Do those counties extend all over the United States? Dr. SoHEREscHEWSKY. They are distributed over the United States yes, sir. Mr. Haugen. How much money will be required to carry out the plan you have in mind; to cover the whole country? Your plan is to cover the whole country, is it not ? Dr. ScHERESCHBWSKY. The plan is to cover the whole country. Ultimately it wUl require, I would judge — if we wanted to put a health organization in every county in the country, is that what you wish ? Mr. Haugen. Whatever your plan is. Your plan is to put one in each county, ultimately ? Dr. ScHEEESCHEWSKY. That would be the ultimate purpose, of course, if the county needs it, unless the county has only a very few inhabitants. There are about 2,500 counties in the United States which would come within the definition in this bill, and under this bill $1 would do the work of four, you see, because the State would allot an equal amount, and then we would get an equal amount allotted from the counties. Mr. Haugen. The bill does not read that way. It reads it shall, be matched by the county, State, municipality, or whatever it mS,y be. Dr. ScHEEESCHEWSKY. Of coursc, but our plan would naturally be to get as much money put up from local sources as we could. Mr. Haugen. That would be. the plan, but how much do you think would be required % • Amount of local appropriation; elsewhere amounts appropriated locally equaled those appropriated by the service. 2 Department authority not yet given. 274 RURAL SAWITATION. Dr. ScHEEEscHEWSKY. I think, ultimately, if the Federal Govern- ment were to put up about $4,000,000 annually, we would be able to put a health organization in every rural county in the country. Mr. Haugen. Wliat do you estimate would be the cost for each county ? Dr. ScHERESCHEWSKY. The average cost for each county would be somewhere in the neighborhood of $6,000. I mean the total cost for each county for one year would be $6,000. Mr. Haugen. For 2,500 counties that would be $15,000,000, and if 10 per cent is added for our charges, then $16,500,000. Dr. ScHEEESCHEWSKY. $15,000,000; yes, sir; but you were talking about what the Government would have to put up. Mr. Haugen. You said we would operate under a 50-50 plan. Dr. ScHEEESCHEWSKY. Yes, sir. I think we could operate under this bill so that the Federal Government would only have to meet one-fourth of the expense eventually; because, you see, if the Federal Government allots a certain sum to a State, and the State matches that, that gives a 50-50 basis to begin on. Now the State goes to the county, and the county matches the Federal and State money Mr. Haugen. We started out on the same plan with the county agents, and now instead of asking the Federal Government for 50 per cent they are asking that the Federal Government put up 80 per cent, and I presume eventually they will ask the Federal Govern- ment to put up all of it. And this might not work out as you are planning. Dr. ScHEEESCHEWSKY. It would be to the interest of everybody to make it work out as I described; because, after all, the effective protection of the health of the citizens also depends on the develop- ment in the county of a sense of health responsibility. Mr. Haugen. I think we all agree as to the importance of the work; but, after all, one wants to know just about where he is going to land and about what the expense is going to be. Dr. ScHEEESCHEWSKY. It should be based on the Federal Gov- ernment paying only a part. I think the citizens ought to pay some of it; but what we ought to do is to stimulate them to bear a part of their own responsibility where the Federal Government and the State come in. Also the entire country is interested in the health of the rural sections, because, in the last analysis, they de- pend on those sections for their food. Mr. Haugen. Under the bill as written it would require about $800,000 from the Federal Government to carry out the plan. . Dr. ScHEEESCHEWSKY. If you went on a strictly 50 per cent basis. But I might say, sir, we would not think a naval program was unduly exorbitant if it provided simply for the building of one battleship each year. And a battleship costs about $15,000,000. For the price of one battleship we -can put a public health organiza^ tion in every rural county in the country, at a total cost of that amount. Mr. Haugen. As far as I am concerned, I would rather spend the money for this than for surplus battleships. But what I am trying to get at is the ultimate cost of carrying out the plan you have, in mind. Dr. ScHEEESCHEWSKY. I think it would be about $4,000,000. EUBAL SANITATION. 275 Mr. Haugen. That would only carry out half of the plan. Dr. ScHERESCHEWSKY. Yes. But I am figuring (and it would be our business so to develop the work) that it would not cost any more than that; because we want also to develop a sense of respon- sibility in the local governments for their health conditions and for the necessity of also themselves providing to take care of their own health conditions. Mr. Haugen. But also realizing the importance of their work, you might want to change your mind and suggest, as the Depart- ment of Agriculture has suggested, 80 per cent instead of 50 per cent contribution by the Federal Government. Of course, you do not know what you are liable to do, or with what response this proposition may meet. Dr. ScHERESCHEWSKY. Judging from the response to the small amount of work we have done in the past, I would say it was going to meet with an instant and hearty response. I know every btate health oflBcer with whom I have talked was enthusiastically in favor of this legislation ; and they will all hail such legislation as this as a new era Mr. Haugen. After all, the people would have to pass on it, and they do not always act on the suggestion of their health officers. Probably it is unfortunate that they do not. Dr. ScHERESCHEWSKY. Our objective, of course, is the demon- stration work, and enough of them will give it a trial, and there will be enough counties in some of the States which will give it a trial sufficient to show how successful this work is and how important it is to the prosperity, health, and happiness of the various rural districts. Mr. Haugen. I think we all agree as to the importance of the work and that it should be done. All I am interested in is getting at how much it is going to cost the Federal Government ultimately. Dr. ScHERESCHEWSKY. I was merely giving you what I think. Of course I am not a profit, but I would say instead of the Federal Government having to give more money, I think as the work de- velopes we will find it possible to have the Federal Government pay a lesser proportion rather than a greater proportion. Mr. Haugen. You would not be in favor of writing in the bill that the Federal Government should only put up 25 per cent? That would only be $4,000,000. Dr. ScHERESCHEWSKY. No, sii; I think it is better the way it is. Mr. Haugen. You say there are about 2,500 counties altogether, which would come under the provisions of this bill. And you esti- mate that it would cost about $4,000,000; that is, the average cost would be $6,000 a county. Dr. ScHERESCHEWSKY. Yes, Sir; the average cost; but then the contribution by the Federal Government would be only $3,000, assuming they put up on a fifty-fifty basis. Dr. Rankin. I would like to answer the question as to how much it would be necessary to put up for the individual counties. There are many counties with eight or 10 thousand people. In them the work is just as necessary. And we intend, in North Carolina, to put up a budget of $6,000, and in those counties where we intend to put up a budget of $6,000, some of our counties have a population of 276 RURAL, SANITATION. 28,000. But it is necessary to do something in the smaller counties, and where they have a budget and plan to do the work on a basis of $3,000 per county. And a great deal of the work can be done in the smaller counties on a budget of $3,000 (and in a great many of the counties to which Dr. Schereschewsky refers, they are smaller coun- ties), that would not be such a heavy frain on the Government. On the $3,000 budget, we can use a public health nurse in the county as our chief health officer. That nurse's salary would be about $1,500 a year. She will have a machine and her traveling expenses will be about $60 per month, or $720 a year. Postage and stationery will be $150 a year; office equipment, $150; supplies and stocks, $180; contingent, $300; that makes a total of $3,000. Now, what can that nurse do ? She can see that the State quaran- tine laws are properly carried out. She can see that the anti-toxins, which nearly all of the States of the Union provide, are made easily available to the people and are being properly distributed, and can see that the people are notified where they can get them. The mat- ter of quarantine and distribution of anti-toxins would be carried out according to the rules and regulations of the State Board of Health, and all of that is carefully supervised and well planned. That is one thing that our nurse could do. Another thing she could do is to take care of the contagious disease work by visiting the homes and see to the work of placing the placards and get together the heads of the families at the school houses and go over the matter with them of preventing the spread. Another thing she could do. There are public vaccines which are supplied, and on certain days and at certain places she could vacci- nate the people of the county against typhoid fever. A nurse can vaccinate just as well as a doctor. She could do all the vaccinating work. And in the future, there is going to be a tremendous amoimt of vaccinating to do. She can vaccinate against typhoid, she can vaccinate agamst smallpox and pneumonia. And against pnemnonia, which is one of the diseases which has caused 7.7 per cent of all the deaths in this country, it is pretty well assured that we have an efficient vaccine. And if we get an influenza vaccine, and I hope we will some day, as well as a vaccine against every other disease, a nurse can vaccinate as well as the doctor. Still another thing the nurse can do is to carry out the county tuberculosis work, consisting of public lectures in the schools to the children and parents, on the subject of tuberculosis, and have them illustrated by lantern slides, showing how it appears, the first symp- toms. And she can conduct the tests not only to determine tne health of the child, but advise how to keep them healthy. Another thing, the people could meet the nurse and consult her about tuber- culosis and she could make out forms gotten out by the State sani- torium. She could take that form and fill it out for a tuberculosis suspect and submit that form, together with the temperature of the person, to the tuberculosis authority of the State health sanitorium ; and if he finds a man or woman with the symptom^ of incipient tuberculosis at a time when it is curable, when he gets 8 or 1 suspects he can have them all come to the county seat and he can give them an expert examination, and in that way an immense amount of KUEAL SANITATION. 277 antituberculosis work can be carried out intelligently and an effective amount of work can be carried out by the nurse on the smaller budget. Mr. Haugen. You assume all this can be done by one person. That is foreign to anything we have ever heard of heretofore. If that work was carried out by any other department, it would take about a half dozen people. Dr. Rankin. I am assuming this work is done in a county of about 250 or 300 square miles, with no large cities, no towns in it hardly, with a population over 8,000 or 12,000 people — in the smaller com- munities. Mr. Haxjgen. The different activities suggested in your remarks would require the services of at least a half dozen people in another department. For instance, one or two people are sent to instruct how to make cottage cheese and two or three to instruct how to make some other kind of cheese; and not only one bureau, but half a dozen bureaus send people into the same county, riding on the same train, going in the same direction, livin^ at the same hotel, and doing the same kmd of work. I find the heads of the departments'are very enthusiastic and they would not be worthy of consideration if thej were not enthusiastic over their work, i admire them for their enthusiasm in doing their work; but you would have to take that into consideration m arriving at where you were going to land ultimately. Dr. Rankin. I was trying to give you some of the things that could be accomplished. I do not think for a great many of the comi- ties it is going to take $6,000 a year for a county. I think a great many of them can get along very well on $3,000. Mr. Haugen. Of course, some counties would require more; bnt I am just tryidg to get at the average. Dr. Rankin. This work could be done along with other activities throughout the United States, which is what the Public Health Service wants to do. Mr. McKiNLEY. If your department. Doctor, only expects to fur- nish one-fourth of the money, why do you want to put in the bill a provision to give you half ? Dr. ScHERESCHEWsKY. Of course, that would be an' ideal. I was merely indicating a development by which only one-fourth of the money would have to be supplied by the Federal Government. I mean that one doUar would bring three other dollars to work with it. But, of course, there ,is no means of guaranteeing that. At least dol- lar for dollar should be available to start the work. Part of the work would be to try to develop a local sense of responsibility for health conditions. It is best, of course, in order to meet conditions, in order to start health work, to have a more liberal authorization to begin with. Mr. YoxNG of North Dakota. As I understand it, this bill piovides that the work is to be done by the Secretary of the Treasury, through the Public Health Service ? Dr. ScHERESCTTKwsEY. Yes, sir. Mr. YoT-NG of North Dakota. And before this, you have been going to the regular Appropriations Committee for your appropriations? Dr. ScHEiiKscHEWSKY. Yes, sir. 278 RURAL SANITATION. Mr. Young of North Dakota. Now, what has the Secretary of Agri- culture to do with this legislation ? Dr. ScHEEESCHEWSKY. The bin here states that the Department of Agriculture is authorized to cooperate. Mr. Young of North Dakota. What section ? Dr. ScHEKESCHEWSKY (reading). "In carrying out the work au- thorized by the act, the Public HeaHh Service shall cooperate with the Department of Agriculture." That is section 9. Mr. Young of North Dakota. Should not this bUl go to the Com- mittee on Appropriations, if they are not reaUy to do the work, or is the Department of Agriculture simply to cooperate ? The Chairman. Let me answer that question. The Committee on Appropriations has no legislative powers at all — absolutely none., It is purely an appropriations committee. The only other committee to which this bill might go is the Committee on Interstate and For- eign Commerce. They have heretofore assumed jurisdiction over public health matters. Mr. Young of North Dakota. In what way is the Department of Agriculture going to cooperate ? Dr. ScHERESCHEWSKY. The plan of cooperation has not yet been worked out, except they are intimately interested, of course, in aU matters affecting rural health. Mr. Young of North Dakota. How would they cooperate ? The Chairman. If you will permit me to answer that question myself, because I am more largely responsible for this bill than for any other biU to which my name has ever been attached. My idea is that the county sanitary officer and the county nurse can join with the county agent or farm bureau and have pubhc lectures, and things of that kind, and in the course of time so interest the county agent in the fundamentals of sanitation and health that he himself, as he goes around from farm home to farm home, impart much fundamental sanitary information. Dr. ScHERESCHEWSKY. I might say the Public Health Service does not derive their authority fiom the Committee on Appropriations to do health work. Our authority to do the investigating of rural health conditions and to do the cooperative work with the rural health authorities is derived from general legislation. We go to the Appro- priations Committee for our funds to carry out the work. Mr. Young of North Dakota. Were you here when they passed the law under which the Health Service began 1 How long has that been organized ? Dr. ScHERESCHEWSKY. It has been in existence since 1798. Mr. Young of North Dakota. I mean this particular legislation you speak of, wliere you cooperate. Dr. ScHERESCHEWSKY. The law of 1893 allows us to cooperate with the State and local health authorities, and the law of 1912 authorizes the Public Health Service to study diseases of men and conditions influencing the propagation and spread thereof. Mr. Young of North Dakota. Where did that bill go ? Dr. ScHERESCHEWSKY. 1 bclicve both of those bills were passed on Defore the Committee on Interstate Commerce in the House — referred to the Committee on Interstate Commerce in the House and to the Committee on Public Health of the Senate. RUEAL SANITATION. 270 Mr. Young of Texas. You say there are 2,500 counties in the Uuitbd States 1 Dr. ScHERESCHEWsKY. No; more than that. About 2,500 rural counties. Mr. Young of Texas. It occurred to me a great many of those counties M'-ould be so sparsely settled that the expense account would not be very great. In my State, Texas, we have 262 counties, and the western part of the State is very sparsely settled. Probably in some of those counties there are not more than 250 to 300 people. It would not be necessary to have very many people at work in those counties. Dr. ScHERESCHEWSKY. No; it would not. Mr. Young of Texas. But you could have several of those counties under the care of one man. Dr. ScHERESCHEWSKY. That is the idea exactly. The idea would be to do the work where it would do the most good. You do not have to put in a health organization in each county, if the conditions in the county do not justify it. It would not be economical to do it. What we want to do is public Health work, and we want to do it where it is going to do the most good. There is no obligation to go in a county where the county is so sparsely settled as to make such a course inadvisable; but it might be possible, as you suggest, to com- bine two or three counties. Mr. Young of Texas. That would have to be worked out. Dr. SoHEKESCHEWSKY. Oh, yes; that would have to be worked out. The bill as drawn gives that flexibility and latitude which wmld enable one to suit the plan to meet the conditions. That is what I referred to before, that it does have that flexibility. You are not bound by any established rule; but what you do is to work out a plan which will meet the conditions in the best and most economical way. ilr. RuBBEY. Are you acquainted with the Rankin bill that has been reported ? Dr. ScHERESCHEWSKY. Yes, sir. Mr. RuBEY. There is no conflict between this bill and the Rankin bill, is there ? Dr. ScHERESCHEWSKY. I would be inclined to believe that in a bill like this it could include, if necessary, work such as the Rankin bill contemplates. At least, that is a public-health work and this is a public-health bill. Mr. RuBEY. The idea I have of that is that it would have to do with a special line of disease, maternity and things of that sort, whereas this bill covers the whole field of health. Dr. ScHERESCHEWSKY. This covers the whole field of health, and I might say, so far as my own opinion is concerned, I do not recognize any age group in public health. There is only one age group, and that covers the whole span of human existence. I do not see how any one can differentiate between age groups in public-health work. 280 RURAL SANITATION. STATEMENT OF DR. 1. I. LUMSDEU, ASSISTANT SURGEON GENERAL, UNITED STATES PUBIIC HEALTH SERVICE. The Chairman. Doctor, give your name, position, and so on. Dr. Ltjmsden. I am an officer of the Public Health Service, with the grade of assistant surgeon general. Mr. Chairman and gentlemen of the committee, I have been in immediate charge of the field operations of the Public Health Service in rural sanitation since we began especial work and especial studies of this subject in 1914. The importance of the matter, from every standpoint, county, State, and national, we felt justified the Public Health Service, as a national governmental agency, in taking part in the study of this big important problem, and in determining, or assisting in the determination of, the best ways and means of improv- ing the sanitary conditions in the rural districts of the United States. It takes only a very casual observation to determine that the sani- tary conditions of our rural districts generally are bad. I say "bad" without any qualification. In the last 10 years I have had personal opportunity to study more or less intensely the sanitary conditions in the rural districts of 38 of our 48 States. In order to ascertain in detail from accurate, first-hand observa- tions just what are the sanitary conditions in the rural districts of the United States, we began — and I mean by "we" the Public Health Ssrvice — in 191 4, in cooperation with State and local health organiza- tions, an intensive study of rural sanitation. The. counties — and counties were the units for this intensive study — were selected for no particular reason other than they represented from a sanitary standpoint, as nearly as we could estimate in advance, the sanitary conditions of the rural districts of the counties generally in different sections of the country. In other words, we endeavored to conduct this work in counties which were typical. We have made an intensive house-to-house study of rural sanitation conditions in 18 counties in the United States, distributed in 16 States. In two States we made the studies in two counties instead of one. We did that because each of those two States presented widely varying general conditions in the two main sections of the State. From these studies we have determined definitely what are the conditions in respect to the most salient, fundamental features of home sanitation in the rural districts. There has recently been published a report covering in detail the findings and results from these studies in 15 of the counties. The reports on the last three counties have not yet been published. The Chairman. What is the number of the bulletin ? Dr. LuMSDEN. It is Public Health Bulletin No. 94, issued by the Public Health Service. The Chairman. I think if you will be kind enough to furnish each member of this committee with a copy of that it would be very enlightening. Dr. LuMSDEN. I shall be very glad to do that. The Chairman. It is a very interesting report, gentlemen. I have read it myself. Dr. LuMSDEN. Among the striking findings in these studies are the data on conditions which are most important in the everyday RURAL SANITATION. 281 life of our rural people, from the standpoint of keeping them in physical trim, free from diseases which we have proven are unnecessary, are preventable, are calamatous, and which people bring upon themselves through carelessness, recklessness, or ignorance — most commonly ignorance. Of 51,544 farm homes in these 15 counties only 1.22 per cent were equipped with sanitary toilets; that is, toilets which were of such construction that they could possibly be kept clean, so as to prevent the waste matter from the bodies of the persons living at the home, or visiting the home, from being scattered about by chickens dogs, cats, pigs, and other agencies which usually had access, to the toilet, such as it was. In some of the counties between 50 and 75 per cent of the homes, including all village, town, and country neighborhoods, had no toilet of any Idnd. At these homes lived grown men, grown women, good people, people intelligent about most things that concern them importantly, people making good progress in recent methods of farming and in many other respects, people whose children were going to school — and at the schools the sanitary conditions as a rule were about upon a par, if not a little worse,' due to the larger number of persons affected, than at the liomes from which the children came. I make that statement, gentlemen, with sorrow. It is a very significant fact. Mr. Hatjgen. Do you contend that this is the situation throughout all the country, or only in certain communities ? Dr. LuMSDEN. Generally throughout the country. The unsanitary conditions vary in type, but the actual protection from the spread of potentially infectious matter varies little in the rural districts in different sections of the country. Mr. Haugen. Would you mind going into a little detail as to what you consider a sanitary toilet ? Dr. LuTviSDEN. A sanitary toilet is one so constructed and main- tained that the matter deposited in it will not be scattered about by any agency or through any channel so as eventually to be likely or almost certain to reach human mouths. The Chairman. All right, Doctor; tell us something more of your findings. Dr. LiTMSDEN. We found, in regard to water supplies used at these fifty-one and odd thousand farmhouses, that 68 per cent of these homes were using water for drinking and culinary purposes which was obviously polluted. It was not necessary to have chemical or bacteriological examinations made of the water, but just common sense observation showed beyond doubt that polluting matter in more or less gross quantities was getting into the well, spring, or cistern which was used as the source of water supply for drinking purposes. Sixty-eight per cent of the home water supplies were polluted, and in connection with that a startling fact was that the head of the house, as a rule, said that the water supply for his hom.e was the best water in the county, and believed it. He did not know the conditions until they were pointed out to him, and then, in practically all instances, he could see and would see that that water was not what 'it should be. For instance, a common finding was a dug well, no casing, no.lining, a hole in the ground reaching down to a water-bearing stratum: over that well a loose board platform, the bucket being set on the 282 KUEAL SANITATION. platform when not in use, cracks in the platform; persons going to the well carried on their feet matter which went down through tha cracks in the platform into the water. Dogs came, chickens came, the chickens immediately after scratching in the manure heap or in the privy, if there happened to be a privy on the place, and deposited about the mouth of the well the matter which they had on their feet,, and this matter would drop or be washed into the water in the well. When we would call the attention of the intelhgent owner of the property to the condition, he would say, "You know, I never thought of that before; that is something that I had never had occur to me. I see it now and I am going to fix the well." That was frequently the reaction, and in many instances he would fix it. In some instances he would put it off; that is human nature. We found that of these farm homes only 32.88 per cent were effec- tively screened to prevent flies coming from whatever sources of filth were in the immediate vicinity — and as a rule there were some — from entering the dining room, and the kitchen, crawling over -whatever foods were exposed and contaminating the food with whatever matter they carried in and on their bodies. Those are some of the fundamental facts that we determined from this investigation. The Chairman. Now, Doctor, if you wUl permit me to ask you in that connection to mention some of the preventable diseases that are traceable to the conditions which you have described here. Dr. LujiSDEN. Among the diseases most common in this country, which have their origin entirely in human waste matter, are typhoid fever, hookworm disease, and the dysenteries. Asiatic cholera is a disease which is spread from exactly the same sources and through the same channels and in the same ways as is typhoid fever. This disease becomes of serious concern to us at this tune, on account of the amount of travel there will be from the European countries back to the rural districts of this country. There will be a special need for the next year or two of having in our rural districts some properly trained health officer or health machinery to look out for suspected cases of cholera and other exotic diseases which may be brought into our rural districts from Europe. The Chairman. You overlooked malaria, didn't you? Dr. LuMSDEN. I said of the excretal diseases. The Chairman. I beg your pardon. Dr. LiP-.iSDEX. Malaria is almost entirely a disease of rural origin. It is a mosquito-borne disease. The infection is carried by mos- quitoes, which breed as a rule in natural collections of water. There- for these mosquitoes have their breeding places mainly in rural dis- tricts, and malaria is largely, or almost entirely, in this country now a disease of the rural districts. Mr. Haugex. What do you suggest doing for the mosquito outside of screening? Dr. LuMSDEX. The most effective way of preventing malaria is to control the breeding of the mosquito. Mr. Haugex. Yes, but that is not a small proposition, is it? Dr. LuMSDEx. It is not a small proposition. We have to consider the economics of the business all the time in doing antimalarial work, whether there are enough people affected, whether the disease is economically of sufficient importance to justify carrying out the work, EXJKAL, SANITATION. 283 to control it, nearlj^ to the point of eradication. A great deal can be done at little co&t if the people themselves know about malaria, if they know in what kind of places the mosquito breeds, and that the itiosquitoes as a rule do not travel very far from their breeding places to get human blood. Very frequently I have known of instances in which just a little work, an hour's work, to cut a little ditch to drain away a useless pool of water was sufficient to free a family from constant exposure. Mr. Haugen. It is largely a matter of drainage, is it not? Dr. LuMSDEN. Drainage and oiling. We can put a film of oil over the water Mr. Haugen (interposing). That makes it a big proposition, dees it not? Dr. LuMSDEN. It is very cheap. It costs very little to do that in many instances. Mr. Haugen. It has to be applied frequently? Dr. LuMSDEN. It has to be applied so as to keep a film over the water all the time. About once a week it is necessary to put on the oil. Now, gentlemen, from such studies as I have had an opportunity to make personally and from such data as have been collected by all the agencies workmg on this great problem of rural sanitation, includiag our State health organizations, our county health organi- zations, our philanthropic organizations, such as the Rockefeller Foundation, I believe the State health officers, the county health officers, and all others informed on this subject, are inianimous in the opinion that this bill now before you for consideration presents the logical conclusion about the methods to be pursued in work on the problem of rural sanitation. Mr. Haugen. Are you cooperating with the Rockefeller Foun- dation ? Dr. LuMSDEN. No, sir. We have been cooperating with the State and county health organizations. Mr. Haugen. You are not expecting to use any of his money ? Dr. LuMSDEN. No, sir. The Public Health Service, in its work, has not conducted its rural sanitation work in any counties in which the Rockefeller Foundation was already operating. We wanted to distribute the work as much as we could. Mr. Haugen. A good deal of this work is being done by the Rocke- feller fund ? Dr. LuMSDEN. Oh, yes. But their program is not going to be enlarged, so they state. In fact, they expect to contract it. They have done their work to bring to the attention of the governmental authorities the need for the work and the feasibility. The work done by the different agencies has demonstrated very clearly the feasibility of getting people in the rural districts to provide sanitary improve- ments once the facts are brought to their attention in the proper way. The Chairman. Will you tell us the number of typhoid cases in this country and what are the number of deaths therefrom ? Dr. LuMSDEN. According to the available statistics it may be esti- mated that there have been on an annual a-Verage in the last decade in the United States about 300,000 cases and about 25,000 deaths from typhoid fever. The •Chairman. Now, teU us about malaria. 284 RURAL SANITATION. Dr. LuMSDEN. The estimate for malaria, new cases The Chairman (interposing). It is in the bulletin there. It is- 2,000,000 a year. Dr. LiiMSDEN. That is the estimate. It has to be an estimate. Many persons with malaria, though half sick and only half efficient,, do not think they are sick enough to call a doctor. They go to the store and get some quimne or something else and take it, and as soon as they stop having chills they stop takmg quinine, and a few months later they begin to have chjlls agaia a^d take some more quimne. Those cases, not coming under the care of a doctor, as a rule, are not reported. So the number of cases in the United States can only be estimated roughly. The Chairman. How about the hookworm ? Dr. LuMSDEN. There are estimated to be between two and three milUon cases of hookworm in the United States. The Chairman. Are you sure of that ? I thought it more than that. Dr. LuMSDEN. That is a conservative estimate. The ChairMzIN. There is no question about it being traceable to human excretion, is there ? Dr. LuMSDEN. None whatever. I do not think that theie is any fact in nature that we are more sure of than that. We know how the disease is spread and we know the measures necessary to prevent it. The Chairman. Do you make the same emphatic statement as to typhoid fever? Dr. LuMSDEN. Yes, sir; and as to malaria. We know how to prevent these diseases. It is a question of ways and means, of getting into operation the necessary machinery, and then the big question, how it can be done most economically, and the frequent question the gentleman raised, who should do it. Those are the big questions with which we are confronted. The Chairman. If the pommittee will permit me, as I am rather more familiar %vith the subject, I will lead with questions. Mr. Haugen. Of course. The Chairman. Let we ask the gentleman to give the benefit of his work in Greenville County, S. C. Tell what you did and what you found, , and tell what you have there now as a result of that work. I think the committee will be very much interested in your statement, and that, of course, is a typical line of work. Dr. Lumsdex. The work in Greenville County is covered in detail in a section of this report, Bulletin No. 94. The work in GreenviUe County was begun in 1916. We sent to that county a force of Public Health Service officers — a sufficient number to cover the county within a reasonable length of time. It is a large county. We had at the beginning of this work several pubhc meetings in different neighborhoods in the county, the first one in the county seat and principal town in the county, Greenville city. At this meeting ad- dresses were made by the State health officer, by the Public Health Service officer in immediate charge of the work, and by prominent local citizens. The newspapers discovered that there was news in this business, and they gave the work excellent publicity. So at the- very outset the attention of the people of the county was attracted to the work. BUEAL, SANITATION. 285 Tiien a circular letter signed by the Surgeon General of the Public Health Service and by the State health officer was sent to every home in the county of which we could obtain the name and address of the individual head of the household. This letter explained what the work was for, and that such benefits as might come from it de- pended entirely upon the cooperation of the property owner or the occupant of the premises. The county was diAdded into districts for convenience, and one or two of the workers were assigned to each district. He made a house-to-house visit to and a sanitary survey of aU the homes in that district. Usually before beginning the house- to-house canvass the officer conducting the work in a district would address a public meeting held by the citizens and explain to the people that he was coming to their homes and what he was coming for; that he was coming without any authority to order them to do anything, but he was coming in a spirit of friendliness and helpfulness to get information from them, and if possible to give information to them; that he was coming there as a representative of the National Government and the State government to be of use to the people whom he was engaged to serve. After completing the house-to-house canvass and surveys usually there would be another public meeting. The interesting thing was that the attendance at these meetings increased as the work went on. The work in GreenviUe County covered a period of about seven months. At the last part of that period the citizens generally were intelligently interested to a remarkable degree in the subject of sanitation. Mr. Lever, whom we had the honor of having with us for a visit, knows something of the popular sentiment which pre- vailed. One could drive down the road and stop a man from his plowing and ask him what he thought of that sanitation work, and get in practically every instance a very enthusiastic opinion. The people of that county, after having the salient facts of home sanitation brought to their attention, behoved them saw th6 sense in them, and in a large proportion of cases applied them. Thereby they reduced the hookworm disease and reduced typhoid fever almost to the vanishing- point in the most thickly settled sections of the county. There were in that county 22 or 23 cotton mill villages. In every one of these cotton mill villages the most salient lines of sanitation which we recommended were carried out. The work in the cotton mill villages furnished sanitary protection immediately to about a fourth of the population of the county. Greenville city, a city with a population of about 18,000, is the only town up to 1916 that I had ever visited that had not a home, not a place of human residence, which was not equipped with a sani- tary toilet, either a water-closet connected with the sewer or a sani- tary privy, and every priv^^ kept sanitary by an adequate scavenger service under the direction of an efficient health department. We made a complete saitary survey of that town and did not find a grossly insanitary toilet in the whole city. The Chairman. I do not suppose you were surprised at that. South Carolina is first in most things. What effect did your work have out in the country ? Dr. Ltimsden. In the country neighborhoods the owners or occu- pants of properties carried out, at about 25 per cent of the country 286 RURAL SANITATION. homes, the measures which were recommended. They put in, in the place of OTossly insanitary toilets, sanitary privies — ^real sanitary privies. They frequently screened the house, which previously had been unscreened. They frequently fixed the well, putting a cement curb around the mouth of the well or a cement platform or a tight board platform over the well, replacing the old bucket with a pump, or having a shelf attached to the box over the well for the bucket to rest upon, and so be kept off the ground or the platform when not in use. They did those simple and common-sense things to protect themselves. "That was an immediate result of the work, and ithas continued to improve since we left there. They have maiatained since we left there a whole-time health officer of the county. They have recently added to their county health organization, maintained entirely at the expense of the county. Greenville County gave bet- ter immediate results from this survey than did the average of the 18 counties. Greenville County is a fairly prosperous county. The people, as a rule, were readily able to do the little things which cost a few dollars but which mean much for human welfare. Those of you who are interested in the details about the different counties will find them in this bulletin. I do not know that I should be -justified in going very much into the details about the different counties. There is a summary on page 44 of this report which gives succinctly and briefly in tabulated form the findings and the imme- diate results of the work. The Chairman. I would like to ask you this question in that •onnection. You say you did this survey work in 15 States. Were those States confined to any one section of the country ? Dr. LuMSDEN. No, sir. The Chairman. Will you mention the States that you have there? Dr. LxjMSDEN. We took fair samples. This map [indicating] shows the location of the counties: Maryland, West Virginia, North Caro lina, S6uth Carolina, Alabama, Georgia, Mississippi, Oklahoma, Texas, Kansas, Missouri, Illinois, Iowa, Indiana — those are the States in which the counties are located. Mr. McKiNLEY. Nine southern and six northern. Dr. LuMSDEN. Yes, sir. The Chairman. I was just trying to bring out Dr. LuMSDEN (interposing). And the State of Washington. Th^at is as far north and west as we could go. Ml-. Candler. What county in /Mississippi ? Dr. JuMSDEN. Union County, Miss., was the county surveyed. New Albany is the county seat. Mr. Candler. You say you began this intensive work in 1914? Dr. LtJMSDEN. Yes, sir. Mr. Candler. How many counties in all has this Vork covered m the United States ? Dr. LuMSDEX. You mean by the Public Health Service? Mr. Candler. I mean in cooperation with the Public Health Service. Dr. LuMSDEN. Eighteen. We have engaged in cooperative work in thirty-odd counties in addition to those in which this intensive survey work was done. This survey work was really a Study, a study of the sanitary conditions. Incidentally, under the head of studies, though, rather than of demonstration, in making the in- BUBAL SANITATION. 287 quiry, the attention of the owner of the propertj would be brought to the conditions needing correction, and it is significant that in so many instances after just one visit to a home radical sanitary im- provements would be found upon a return visit a month or two later. Mr. Candlee. And the work was done in 18 counties in how many States ? Dr. LuMSDEN. There were two States in which two counties were taken and 14 in each of which one coimty was taken — ^making 16 States. Mr. Candlee. Sixteen States and 18 counties? Dr. LuMSDEN. -Yes, sir. Mr. Candlee. What is the total amount of the funds you had to do this work ? Dr. LxjMSDEN. There was appropriated for the present fiscal year for rural sanitation work $150,000. When the war came the plan ot rural health work which we were carrying out was interrupted and, along with almost all of the other field activities of the Public Health Service, the rural sanitation work was concentrated in areas imme- diately around the national camps. We did that for two reasons, of course. One was to protect the soldiers who were brought in. In each of these areas there was suddenly established what was practically a city of thirty or forty thousand people in a rural district. We put into these areas a, force to cooperate with the State and local health authorities in cleaning up a zone around the camp. We did there intensive and highly effective antimalarial work, and this was exceedingly important in many of the camp areas. We would take a zone about 5 miles wide around the camp and try to get that zone in excellent sanitary condition. We succeeded in every instance. The citizens in these zones cooperated in a highly gratifying manner. The sanitation of wells and the privies in these zones was done largely or almost entirely at the expense of the property owners. Mj. Candlee. What was the appropriation you had last year ? Dr. LuMSDEN. It was also $150,000. Mr. Candlee. Two years ago I remember it was $100,000, and I am glad to know that it has been increased. AH of the appropria- tions you have had so far for this work were obtained through the Appropriations Committee ? Dr. LuMSDEN. Through the Appropriations Committee, yes. The work was done under authority of the act of 1912, and the appro- 'priations were secured tlirough the Appropriations Committee. Mr. Candlee. And that was sunply done under the general authority of the work of the Pubhc Health -Service ? Dr. Lxmsden. Yes, sir; the appropriating item is for "special studies of and demonstration work in rural sanitation" under the general authorization. Mr. Candlee. Do you get additional funds from the towns, counties, and communities where you do this work ? Dr. Lumsden. We have had cooperation in every place we have gone, excellent cooperation. We have had cooperation from the State health department. The work has been done at the request of the State health department' in every instance. We have not gone to a county until requested to do so by the State health depart- ment. We have left the selection of the county m the Stkte m 107124—19 ^It 288 RUBAIi SAZSriTATION. which the work is to be done largely to the State health department , or after conference and mutually agreeing upon which was the best county for the survey. The same thing applies to the counties in which we are doing demonstration work on a cooperative basis. Mr. Candler. So you believe, from the experience which you have had in the past, that legislation of this character should be enacted, and there would be no difficulty, but on the contrarj^ there woxild be an anxiety on the part of the people to extend this work to their counties, ? Dr. LuMSDEN. From my observation and all I have heard I am satisfied that would be the case. Mr. McKiNLEY. What percentage of the cost do the people pay of these surveys which you have made ? Dr. LuMSDEN. These surveys were made under the head of "studies," and it was not necessary under the law to have any appropriation made from local sources. In practically all of the States in which the surveys were made, however, the State health department furnished a part of the working force, and worked with the Public Health Service force. The Chairman. Any questions, Mr. Haugen? Mr. Haugen. Spea&Lng of malaria, what remedy do you suggest ? Dr. LuMSDEN, For the prevention or for the cure ? Mr. Haugen. Cure. > Dr. LuMSDEN. Quinine is the stock remedy generally used. Mr. Haugen. Is that the most efficient ? ■ , _ Dr. LuMSDEN. For the vast majority of cases quinine is an effective remedy. Some cases are resistant — are not cured by treatment with quinine alone and in these, usually chronic cases, various prepara- tions of arsenic are used. Mr. Haugen. Is Fowler's solution good ? Dr. LuMSDEN. It is used quite frequently. Mr. Haugen. In how large doses ? _ Dr. Lumsden. It is given in increasing doses, beginning with a few drops a day. For most adults 5 to 20 drops is the limit, accord- ing to my recoUeetion; but in experience I am not much of a prescribing doctor. Dr. Rankin. It begins with 1 drop and goes up to 10. Mr. Haugen. I went to 11. That is as far as I would go, or would care to go. Dr. Lumsden. I am glad I said I am not much of a doctor. Mr. Haugen. I understood you to say- that malaria is found only in the rural districts. ' Dr. Lumsden. I would say it is practically a disease of the rural districts. Mr. Haugen. Is not there a lot of it here in Washington ? Dr. Lumsden. There is very little in Washington. There is some brought in by persons who get infected while they are away from Washington. There is some, perhaps, in the outer edges of the city. In the Anacostia Flats anopheles mosquitoes have been found. Mr. Haugen. Isn't there a lot in the heart of the city? Dr. Lumsden. In the heart of the city I do not think anybody contracts it. ■ Mr. Haugen. I have noticed many people half asleep part of the time. I thought that that was caused by malaria. RUEAL, SANITATION. 289 Dr. LuMSDEN. Malaria does make people sluggish. They are sluggish, they are anemic, their spleens become enlarged, and they are below par in every respect. Malaria is not mucn of a killing disease directly, but it makes one more apt to succumb to other diseases. Mr. Haugen. It is a slow process ? Dr. LuMSDEN. It is a slow process. It is an incapacitating disease. Its prevention is tremendously important to the agricultural interests of tnis country. A man with chronic malaria, though able to keep going, only goes at half speed. He is physically down to about 50 per cent of what he should be in efficiency, and which he would be without his malarial incapacity. There have been various estimates of how much malaria costs in the way of decreasing producing power in the infected districts. The annual economic loss in this country from malaria and typhoid fever alone has been estimated at $900,- 000,000. The Chairman. What do you say as to hookworm ? Have you estimated that ? Dr. LuMSDEN. It is difficult to estimate the economic loss from hoolcworm for the same reason that it is difficult to estimate that from malaria, There are so many cases we do not know of. Persons are affected, a little below par, pulled down a little, anemic, incapaci- tated, but able to keep going at a reduced rate The economic loss from hookworm is tremendous. Mr. Candler. That is it. A fellow affected with hookworm is so lazy and so inefficient that he does not accomplish much. Dr. LuMSDEN. That is right. A child with hookworm infection foing to school gets only half value from the opportunities presented, 'he richness of the blood is only half up to what it should be. The child is mentally only half efFicient, and half of the effort of that child is wasted. Half of the effort given to that child by the teacher is wasted. Half of the money spent for the education of that child is wasted. I do not know of anything, from an economical stand- point, that we can make as strong an argument for as we can for this health business. Mr. Haugen. What is the cause of hookworm ? Dr. LuMSDEN. It is a worm known as the hookworm. Mr. Haugen. What is going to be the ultimate cost of this plan which you have in mind ? Dr. LxjMSDEN. That depends on how the work goes. I can not make an estimate at this time. What we shall be justified in recom- mending to Congress year aftei: year for the enlargement of this work or the contracting of the work wih depend on the specuic results accomplished and the general conditions in this country to which such results would apply. It is impossible to foresee definitely what the necessities or what the indications will be in that direction. The national Govrernment might adopt a policy of contracting from year to. year the proportion of the expenses for it to bear in the cooperative work in the counties — bearing expenses for the work on a 50 per cent basis for the first year, on a forty per cent basis for the second year, on a 25 per cent basis for the third year, and none alter the third year. That might be determined to be a wise policy. Mr. Haugen. After all, we could not go into this thing blindly. We should have some definite plans. 290 eueAl sanitation. Dr. LuMSDEN. That is what I like about this bill. We are not going into it blindly. We are going into it with a definite appropria- tion for each fiscal year, and it is an increasing appropriation. Mr. Haxigen. Up to a million dollars. Dr. LuMSDEN. A million is the limit of the sums to be allotted in any fiscal year. Mr. Haugen. But that is only an entering wedge. That would not carry you anywhere. Dr. LuMSDEN. The maximum amount carried by this bill for any year is $1,480,000. That would carry us a long way. It would carry us so far that I do not believe the people of the United States woxild be willing for rural health work ever to go back t6 anythiijg like it was. I beheve that by , the time this act has been in operation three or four years we will have accomplished a demonstration in the United States as to the value of county public health work of such convincing power that the people of this country will say, "From now on we are going to have in every community an adequate health organi- zation." Mr. Hatjgen. I beheve that this would grow with general approval, but if it does, of cotu-se, expenses wUl increase with it, and it was simply for information, that we might give the House some estimate as to the ultimate cost, why I asked the question. Do you concur in the suggestion about $6,000 a coimty? Dr. LuMSDEN. For counties of 20,000 population or over. ' Mr. Haugen. Take the average counties. There are about 3,200 counties, I beheve, in the States. Dr. LuMSDEN. I think it would be safe to estimate $6,000 for the average coimty. I mean by that it would be liberal. If anything, the budget for the average county .would be less. Mr. Haugen. You would extend the service about as far as the Department of Agriculture is extending it, and inasmuch as it is sug- gested that you would cooperate with that department, the plan would be to extend it to as many counties as we have county agents — 2,700? Dr. LuMSDEN. Yes; eventually. Of course, the State must act, and the counties themselves must act. Mr. Haugen. Yes; I appreciate that. Dr. LuMSDEN. Here is another way that this would be limited if we extend it to 2,500 counties Mr. Haugen (interposing). It would be $16,000,000; $8,000,000 by the Federal Government ? Dr. LuMSDEN. That would be the maximum — that is, if we put in 50 per cent of the budget in every county. This biU gives us admin- istrative latitude. We can say to the State health officer in arranging the plan of work, the counties which will agree to put up two for one wiU be more apt to get this work than those agreeing to put up only one for one. In other words, we can offer an incentive to the county to put in a larger proportion of the investment for its health work. Mr. Haugen. I understand that you would apportion the money among the different States ? Dr. LuMSDEN. Yes. Mr. Haugen. And it would be for the States, then, whether ;to accept it or not ? Dr. LuMSDEN. That is right. RXJEAL, SANITATION. 291 Mr. Haxp&en. That puts- Dr. LuMSDEN (interposing). Dr. Eankin tells us that in North Carolina he is able to get from a large proportion of the counties right now more than one for one. That is, against the funds from the National Goremment and the State, the county wUl put up more than one for one. Mr. Hatjgen. There is where you run up against trouble, where you ask more from one county than you do from another; for instance, the Federal Government putting up more money than the county or the State, you would then meet with objections from the State au- thorities protesting against Federal Government encroaching on the States' rights and authority. That is the trouble we are up against now on this county agent proposition. The contention is if the Federal Government pays 80 per cent of the cost, they say that in that case the Federal Government is going to swallow us up. If so they do not want to have anything to do with it. Dr. LuMSDEN. Under this bill there is so much coming to each State. Mr. Haugen. Yes. Dr. LcMSDEN. As soon as the Secretary of the Treasury is assured that the States wiU put up that much he makes the allotment within that limit. Mr. Haugen. That is all, Mr. Chairman. The Chairman. Anything fiu-ther. Doctor? Dr. LuMSDEN. There are, Mr. Chairman, some suggestions about amendments which have occurred to us, from an administration standpoint, but I do not know that this is the proper time to ofFer them. The Chaieman. You may suggest anything in the way of amend- ments to the bill that occurs to you. Dr. LuMSDEN. Under section 1, on page 2, in the third line, I see the possibility of objection being raised to the ambiguity. What is meant might be inserted there to make it definite. The language is "Shall be construed to include such methods and means as niay be appropriate for the prevention, control, and mitigation of the diseases and the people" and so on. Who shall decide what is "appropriate" is not designated. It is stated in subsequent sections that the plan of work is to be submitted by the State health departments to the Secretary of the Treasury for approval. The Secretary of the Treasury would probably refer the matter to the Public Health Service. I am not sure whether it would help or hinder to put in after the word "be" in hue 3 the following: "determined by the Public Health Service to be." Definiteness sometimes has advan- tages and sometimes disadvantages. The Chairman. Your difficulty there. Doctor, I imagme, would be that you would second any suggestion as to the means and methods that might be made by the State health board, wouldn't you ? Dr. LuMSDEN. I think that section 5 covers that. The Chairman. Really I am inclined to think that your amend- ment would not help that situation. Dr. LuMSDEN. It is practically covered by subsequent sections I did not know whether it was necessary to put it in there or not. The Chairman. This is a definition of the term "rural health work" and that is all'it is, and it is defined to be "such methods and 292 RUEAIi SANITATION. means as may be appropriate for the- prevention, control, and miti- gation of the diseases of thepeople in the rural districts of the United States, including towns in such districts having a population of not more than 5,000, as shown by the latest available Federal census. " Dr. Ltjmsden. It might be better just to eUminate the Words- "as may be appropriate" in line 3. The Chaieman. I think your latter suggestion is very much better. Dr. LuMSDEN. I presented both for consideration. The Chairman. What is your next amendment? Dr. Ltjmsden. In lines 5, 6, and 7 on page 2 is "including towns in such districts having a population of not more than 5,000, as shown by the latest available Federal census." Th^t pomt was discussed here this morning. A question was raised as .to the 5,000. I suggest that the clause "including towns in such districts haying a popula- tion of not more than 5,000," either be cut out or changed, to ehmi- nate it would confine the proposition to rural districts, and I think the term "rural districts" is defined in law applying to the -Bureau of the Census, but I am not sure that such is the case. The Chairman. I think they are. Dr. Ltjmsden. Twenty-five hundred is rural, accordmg to the census tables in recent years, I know. The Chairman. My own suggestion would be that you had better let it apply to rural districts as defined by the census. Dr. LuMSDEN. Including towns, etc. — cutting that part out would leave it The Chairman (interposing). Yes; I think so. Dr. LuMSDEN. I was going to suggest, that if the size of the town is to be designated that 20,000 be substituted for 5,000. That woidd enable us, in estabhshing this cooperating county health organization, to have the county health officer also the health officer- for the town^ The Chairman (interposing). I think you have that power now. Dr. LuMSDEN. With that cut out, I think we would have it. I think it is better to cut that out. The Chairman. So do I. What is your next amendment? Dr. Lumsden. In section 3 there are two different sums appro- priated. One is the sum of $480,000, 110,000 of which is to bejaid annually to each State, and the other is an increasing sum from fiscal year to fiscal year, to be alloted to the different States in proportion to which the rural population of each State bears to the total rural population of all the States as determined by the latest available Federal census. After the present fiscal year both sums are to be paid or allotted to the State annually when at least an equal amount is appropriated or made available from State or local sources within^ the State. The Chairman. I do not think you construe that as we do. For the first fiscal year there will be appropriated $480,000. That is an absolute, unconditional appropriation. The State does not have tO' match that at aU. There is a further appropriation of $250,000, and the State would have to match that. Then your next year, the fiscal year ending June 30, 1920, you have an appropriation of $500,000, which $500,000 is to be matched, plus an appropriation, of $480,000, which is stiU unconditional. In other words, we are= following out here identically the same plan as is carried out under KUKAL SANITATION. 293 the agricultural extension act, and that unconditional appropria- tion is put in here, as it was put in there, for the purpose of educa- tional work more than anything else, to get the backwoods State or the backwoods county interested in the proposition. Dr. LuMSDEN., To make studies and surveys such as we have been making, for instance ? The Chairman. Yes, sir. Dr. LuMSDEN. An amendment will be needed, then, to carry out that intention. Beginning on line 6, page 4, in section 5, is "no payment out of the appropriations under, this act shall be made to any State for any fiscal year subsequent to the fiscal year ending June 30, 1919, until at least an equal sum has been appropriated for the same fiscal year by the legislature of such State, or provided by State, county, local authority, or individual contribution, for rural health work within the State under this, act." That would apply to both sums, as it is worded now, I should take it. The Chairman. I would like to look into that. I am not so sure about that. Dr. LuMSDEN. That is the way it looks to me. The Chairman. I think the act should read "That no payment out of the additional appropriations under this act." I think that is the wording of the agricultural extension act. If you put that word in there, it would foUow; your proposition, and I thmk it would be very well to do it. Dr. LuMSDEN. That is a matter, of course, for you gentlemen to decide, whether you wish to give to each State ten thousand a year, whether the State puts up anything or not. The Chairman. All right. Take your next amendment. Dr. LuMSDEN. Section 8, on page 5, reads, "that out of the sums deducted for administering the provisions of this act, the Secretary of the Treasury is authorized," etc. There is nothing said previous , to that about any amount being deducted. I think that either section 8 should be amended or a provision should be put at the end of section 3. on page 3, line 6. Section 8 might be amended "that out of the sums appropriated by this act" to take the place of "the sums deducted for administering the provisions of this act," because there is nothing deducted for administering the provisions of the act. There will be certain sums necessary for administering the pro- visions of the act. There will be a lot of bookkeeping necessary and a certain amount of field supervision wiU be advisable. Instead of changing section 8, a provision somewhat as follows might be inserted at the end of section 3: "That such amount, not to exceed 10 per centum of the sums herein appropriated for any fiscal year, as the Secretary of the Treasury may estimate to be necessary, shall be deducted for administering the provisions of this act and be available until expended." The Chairman. Is there anything else ? Dr. LuMSDEN. That last suggestion was to insert a provision at the end of section 3 and leave section 8 as it is. The provision would be that so much, not to exceed 10 per cent of the sums appropriated for any fiscal year, as the Secretary of the Treasury may estimate to be necessary, shall be deducted for administering the provisions of this act and be available until expended. 294 RURAL, SANITATION. Mr. Haugen. That would give you $480,000? Dr. LuMSDEN. As a maximum. Mr. Hauoen. I should not be surprised if the proviso would not be better under section 3, because that is the appropriating section. Dr. Lumsden. I will leave this copy of the bill with you gentlemen. The Chairman. All right Dr. Lumsden. Now, Mr. Chairman and gentlemen, I wish, in con- clusion, to submit one more amendment. The previous witnesses have referred to this bill as one of the most important steps ever suggested in health legislation. I should like to amend that defini- tion by striking out the word "health." I look upon this legislation contemplated in this bill before you to-day as one of the most important steps in legislation which has been presented to our Con- gress. This matter of reasonable elementary sanitary measures for the protection of human health reaches down to the bedrock of human existence. It affects every phase of human life. No matter what we are doing, whether 'W^orking, playing, or resting, we enjoy our daily lives and contribute to the welfare of ourselves and others according^ to what our health happens to- be. We know from the studies that have been made by earnest, frank, sincere, honest, unbiased investi- gators that there are in our rural districts of the United States gen- erally a serious situation from a health standpoint. We know that with the exception of a few, not over 100 of our 3,000 or 2,700 — whatever the number may be — rural counties have reasonably adequate local health organizations. We are convinced from the studies which have been made that without some assistance, without some financial assistance, as a stimulus from the National Govern- ment that progress in establishing county health organizations of a definite sort is not going forward at a rate in the next few years — in the next 10 years — which will in any way meet the conditions. That is a fact. We may find objection to the National Government going into this business. Unless the National Government goes into this business along the line contemplated here the urgently needed result is not going to be obtained. That is a cold condition with which we are confronted. We know that the work can be done on this cooperative plan. We know that the participation of the National Government will furnish the stimulus to carry it forward, and we know that we will get a dividend on this investment of National funds of at least 1,000 per cent. Such investment seems wise if con- sidered only from the standpoint of dollars and cents, without regard to the suffering incident to preventable sickness and postponable death. The Chairman. We are very much obliged to you, Doctor. (Whereupon the committee adjourned.) o