This report, so help me, is primarily devoted to a segment of the rural problem. And may I say it is a good report and I don't mean to belittle your efforts in the least, because this subcommittee is very proud of having initiated the watershed program. The program was initiated under my Republican predecessor, Carl Andersen, with the help of Mr. Horan, who was on this committee at that time. However, it was first initiated by the Democratic platform in 1952.

We have made and approved these pilot plans and enacted, subsequently, Public Law 566, which was passed by the legislative Committee on Agriculture, and we are very proud of our part on it.

This committee worked up with the staff a proposal to increase the authorities under the Farmers Home Administration Act. As I pointed out earlier, with regard to housing, this committee initiated. this change for various reasons. The former law disqualified many of those in need for funds for housing construction, funds which city people were able to get through the Farm Housing Agency insured program.

Now, I know that you realize we are going to ask some questions, but wholly unanswered in your formal presentation is the matter of corn, cotton, wheat, tobacco, the soundness or unsoundness of price supports. It was touched on in two or three of the illustrations. Also, you fail to discuss the problems incident to failure to use section 22, farm commodities from other countries coming into the United States, the livestock problem, where livestock prices have been falling, and many, many of those things.

I am raising this at this point to ask you if you wish to discuss the overall agriculture situation. After all, as fine as these new programs are, they have precious little to do with the source of food and fiber for all American consumers, and they have mighty little to do with the income under present conditions of that fellow who has to have $51,000 invested in a farm to farm.

With all due deference to this, this is figuratively peanuts, though very, very important to the people involved. And I am for programs that help in this area. We have supported them and financed them, but I do think it hardly touches on the soundness of agriculture, the tremendous investment of agriculture, the sources of meats and poultry and cotton and corn and wheat, the returns that the farmer is getting with which he can pay taxes and pay off his mortgages and all of that kind of thing.

So at this point, I would be glad for you to give us some reports on those matters. This is merely the fringe that you have touched on here, Mr. Secretary.

Secretary FREEMAN. Your point is very well made, Mr. Chairman, and that was why I made it as specific as I could in my prepared testimony, the vital importance that this is the bedrock of the welfare of agriculture and to the Nation.

These programs are continuing to be of great concern and are on the firing line, so to speak, and I would be happy to run through them orally.

In my previous appearances, it seemed to be more efficient to respond directly to the inquiries that the committee had on these other matters. However, I would be happy to elucidate further, or to respond to questions, as the committee ses fit.

SITUATION ON COTTON

Mr. WHITTEN. I was frankly somewhat disturbed in the President's state of the Union message. No reference was made to agriculture. On inquiry, I found out he intended to submit a special message later, which he did.

He refers on the second page of his message to the commodities which require immediate attention-cotton, wheat, dairy products, sugar, and potatoes. So now, give us for the record, the picture so far as cotton is concerned, what the average income is, what the price is, what the problems are, and what is being done about it.

First, I will read what the President says in his message about cotton:

1. Cotton. The needs of neither the cottongrower, the cotton handler, the cotton textile mill, nor the consumer are being satisfied by the existing legislation. The cotton industry as a whole is our second largest. More than 1 million people are engaged in growing cotton-an additional 1.5 million people are employed in the production of cotton cloth and cotton products for consumersand additional millions work in firms which supply the goods, machinery, and services to the industry.

Domestic cotton prices are much higher than world prices. Consequently, our textile mills must pay more for cotton than their foreign competitors.

In addition, despite the fact that the 1963 acreage allotment was held to the statutory minimum, sharply increased farm yields, combined with a continuing loss of markets-as cotton products are displaced by imports and by other fibers has caused a sharp rise in the inventories of cotton held by the Commodity Credit Corporation. The carryover on August 1 will be almost 2 million bales higher than it was last year-adding over $300 million to the cost of the cotton program. The carryover will be enough to supply our domestic needs for 18 months.

Several legislative proposals are now pending before the Congress to deal with this program. I recommend the enactment of legislation which will (1) make cotton more competitive with other fibers and eliminate the inequity of the present two-price system under which cotton used domestically is priced substantially higher than cotton sold for export; (2) make it possible for growers who desire to do so to produce cotton at world prices, without any subsidy, on a basis which will not add to our stocks; and (3) maintain the income of cottongrowers while reducing excessive carryover stocks.

Mr. WHITTEN. So I would just like for you, for the record, to give us the overall picture of cotton now. Then we will come to the others. Secretary FREEMAN. The chairman is very aware, being an expert in the field of cotton

Mr. WHITTEN. You mean in the problems, not in the answers, Mr. Secretary.

Secretary FREEMAN. I think you have also come forward periodically with some recommendations that are very sound in this field. The outstanding characteristic in the development of cotton has been the tremendous increase in productivity in the last crop year. Our initial estimates were that with the program at the legal minimum of 16 million acres, offtake and production would about balance. However, there is a record yield which exceeded previous crops by far. For the first time production averaged over a bale per acre. The yield was 524 pounds compared with the previous high of 466 pounds in 1958.

In any event, this year-as a result, despite the minimum acreage of 16 million acres there will be an increase in carryover of close to 2 million bales. This has resulted in a very substantial increase in the cost of the program and even at the projected figure of substan

tially lower output in 1964 because 1963 was an abnormally good year, there will be in the absence of legislation, a further increase in the cotton carryover.

Further, we have been competitive, pursuant to law, in foreign markets and have been selling on a bid basis from the Commodity Credit Corporation's stocks and anticipate a fair export year, which will be some 2 million bales above last.

But even so, the overall cost of the program and an increase in carryover will take place in the absence of legislation. There is, this very afternoon, cotton legislation under consideration in the Senate Committee on Agriculture, and we are very hopeful that a program that has been developed and submitted by a group of cotton producers, and which the Department reviewed and testified on a week ago, that something will come from that committee, and very frankly, will get quick attention in the Senate, so that it would go into effect this year before the planting season.

The essence of this program is, on the one hand, through the medium of an appropriate payment to producers who are willing to cooperate by cutting back their production, to help them maintain their income, and through the means of payments which will affect the price of cotton to our domestic manufacturers, to get them cotton at the world price. It is our estimate that this will increase consumpion over the course of several years by several million bales, and during the first year this program will cut CCC carryover an estimated 2,400,000 bales and cut costs about $160 million over what they otherwise would be. This is presently under consideration and is the present status as a practical matter, Mr. Chairman, of what seems possible of passage, given the various groups in the very complicated cotton picture, all of whom have both something to say and some power to exert in the process.

Mr. WHITTEN. Mr. Secretary, as you well know, this committee does not have any jurisdiction in the area of writing new laws for any of these commodities. We have the obligation to recommend financing to the whole Committee on Appropriations and to the Congress.

As a result, in addition to our interest in the welfare of agriculture. we have a responsibility to develop for the record the needs and reasons for the financing that we have to recommend.

I would like, in connection with cotton, for you to provide for the record the price-support levels, the acreage, the exports, separating those exported under aid programs and those sold for dollars, for, say, the last 10 years or for such other period as is most convenient. I would like you to show the average production per acre and the domestic consumption compared with consumption of synthetic fibers. And in connection with all of this, indicate the U.S. production and consumption as a part of world production and consumptions, showing the figure on synthetics as well as on cotton.

(The material requested follows:)

Cotton and manmade fibers, production and consumption, United States and world

1 Manmade fibers data on basis of calendar year. Cotton data on basis of marketing year beginning

Aug. 1.

2 Estimated.

Cotton: Acreage, yields, production, utilization, and price support levels

2 Upland Middling 1-inch at average location, average support rates, extra-long staple for all growths. Refers to choice A and B programs for cotton for these years.

• Estimated.

Denotes year in which cotton wasoffered for sale from CCC stocks in world markets at competitive prices.

Mr. WHITTEN. Quite a number of years ago, we were having real serious problems with cotton and it developed that one of the major reasons was that, while the Commodity Credit Corporation had authority to sell cotton in world trade competitive, it had not done so. May I say it held all commodities above world price levels, which had left us as a residual supplier.

It was this committee, in 1955-I could be in error about the yearthat insisted that U.S. surplus commodities be moved in world trade under the authority of the Commodity Credit Corporation for what they would bring.

The Department moved, with regard to all commodities, except

cotton.

This committee had an investigation and it disclosed that we had 714 paid employees in foreign countries teaching foreign peoples how to produce agricultural commodities. It developed that most of the increase in foreign production was American financed and that some of those that were interested financially in foreign production were on the advisory committees in this country, advising against selling U.S. cotton competitively.

On that finding, and the release of the information giving the names-which I won't burden the record with here-we finally got the Department to offer 1 million bales of cotton competitively and it sold in about 7 weeks. They had hoped to sell it in 6 months or a year.

Then the Department quit again and we had to pass a law telling them that they must sell on a competitive bid basis. Then they changed to a "payment in kind" approach. When the Department made that change, we said in our report, while we were going along in the hopes they were right, we didn't want them to give up competitivebid sales because we knew that would work.

Well, the Department did give it up anyway for a period of time. Then, we have had the problem of synthetic fibers. In the original cotton farm program way back, when we had a processing tax which was later declared unconstitutional, synthetics and cotton both were under the provisions of that act. That was declared unconstitutional primarily, as I recall it, because the proceeds of the processing tax were paid out to a particular group; that is, the producers. The court held that could not be done under the Constitution.

Then when the act was rewritten, price supports were provided on cotton, but synthetics were left without price supports and have consistently undersold cotton. That has been a factor, people differ as to how much a factor, in this shift to synthetics and away from cotton. Many people have felt that price is the sole reason there, and some that think it is only part of the reason.

USE OF SECTION 22, AGRICULTURAL ADJUSTMENT ACT

Section 22 of the Agricultural Adjustment Act provides that the President, on recommendations of the Tariff Commission, can impose tariffs up to 50 percent of the value, if necessary, to protect any farm program that is endangered by imports. He can actually fix a quota. I am aware that several efforts have been made to get the Tariff Commission to act in connection with this matter. I would like for the record to show information on the Cooley bill, as it passed the House,