Mr. PEYTON. The average price received for the pooled cotton was 12.39 cents from which charges of 1.01 cents were deducted. Mr. TABER. Was it not all pooled?

Mr. LAMKIN. No.

Mr. TABER. I thought you told us it was all pooled.

Mr. TAPP. This item relates only to the pooled cotton.

Mr. TABER. All right, then; you have an average net price of 11.38, if it was sold at the average price. The farmer who was in the pool got $80 cash and the difference between 6 cents a pound and 11.38 on 1,500 pounds of cotton. That means $80.70. So that the farmers that were in the pool, on the average, got $160.70 instead of $110 cash that they would have gotton if they had taken straight cash; is that correct?

Mr. TAPP. That is approximately correct.

Mr. LAMKIN. How many bales of cotton are you figuring on?
Mr. TABER. Three bales, at the average price.

The

Mr. PEYTON. You have a 4-cent distribution the first time. second time he received $7.60 a bale, which is 2 cents less carrying charges-yes, that figure is approximately right.

Mr. BACON. In other words, the figures are approximately correct, but they got it in two bites?

Mr. TABER. That does not make any difference.

Mr. PEYTON. Yes; it makes very little difference. Now, this man is left with a C-5-I certificate.

Mr. TABER. What does that say?

Mr. BACON. He has not gotten all of his second bite?

Mr. PEYTON. The second bite has been taken and he has a certificate representing a potential third bite.

Mr. TABER. What is this C-5-I certificate?

Mr. PEYTON. The third bite is a potential one only. If there had been any money left in the pool as a result of the sale of the pooled cotton, then the C-5-I certificate would be worth something and a ratable distribution would have been made.

Mr. BACON. Let me ask you a question right there. How much has this farmer gotten in cash now, without counting the third bite? In other words, he has gotten more than he would have gotten had he figured cash to begin with, is that correct?

Mr. PEYTON. Oh, yes.

Mr. BACON. It seems to me he is pretty well off. Why should he get this third bite?

Mr. TAPP. I think probably the answer to that is this, that the farmer was given an option on 500 pounds of seven-eighths-inch middling cotton. He was given an option in those terms. They organized this pool and a certain amount of the cotton was turned over to it. The Secretary liquidated a certain amount of cotton that was not turned over to the pool. When all of this cotton was liquidated and these payments were made on the basis of 500 pounds of seven-eighths-inch middling cotton, there arises, from sources in which the pool is not interested, this $1,800,000.

Mr. BACON. Let us take this same farmer with 10 acres of cotton plowed under. If he had exercised the privilege of taking cash in the beginning he would have received $110. As it is up to now, he has received $162.80?

Mr. PEYTON. Or he could have received another amount if he had exercised an option by direct sale. He might have sold cotton, say, when it was at 13 cents.

Mr. BACON. Let us assume he came in with the average. He therefore has received $162.80 to date.

Mr. PEYTON. That is right.

Mr. BACON. As against the other fellow who received only $110? If he had exercised the cash option he would have received only $110. This proposal before us now is to give him the difference between $162.80 and $165.80.

The CHAIRMAN. Is that correct?

Mr. BACON. In other words, this gives him about $3 more per bale? Mr. PEYTON. This will give him $3 more.

Mr. BACON. I think he is pretty well off with $162.80. Here we are asked to go into the Treasury in order to give him $3 additional, when he is so much better off than the man who just took the cash proposition to begin with and who got only $110.

Why is not the farmer who just took the cash to begin with entitled to as much as the fellow who took the option? It is just the same thing, he put 10 acres out of production. Would he not have a kick?

Mr. TABER. He would think he would be entitled to $55 more. Mr. PEYTON. Every holder of an option contract had an opportunity to go into the pool.

Mr. BACON. What is the average that this farmer has gotten? He has gotten $162.80 already as against the other fellow's $110. Now you are asking us to give him $3 more; that is, to give $3 more to the farmer who has already received $162.80. He has already been favored over the other fellow who took the cash in the beginning.

Mr. TRAPP. The answer, of course, is that he has realized more than the man who took the cash option.

Mr. BACON. He has gotten that already.

Mr. CANNON. Sometimes we can get at these things a little more definitely by taking a concrete illustration.

Let us take, for example, a farmer who had planted 6 acres of cotton. After he had planted his crop, this act was passed and the Government made him a proposition, that if he would plow up every third row they would give him the option you have just indícated.

What would he have made if he had not accepted the proposition and had not plowed up every third row? His 6 acres of cotton, according to generally accepted estimates, would have produced an average of half a bale an acre. It would have brought him in three bales of cotton. Three bales of cotton were selling at that time according to the Statistics of the Department of Agriculture, 1937, page 89, at 6.52 per pound.

Mr. LAMKIN. This was 1933.

Mr. CANNON. We are taking the price he would have received in the event he had not accepted this offer.

Mr. LAMKIN. I see.

Mr. CANNON. The three bales, then, at that price would have brought him how much?

Mr. PEYTON. Approximately $90.

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Mr. CANNON. But he accepted the proposition. He plowed up every third row and so instead of raising three bales, he raised two bales. He starts here with two bales of cotton instead of the three bales he otherwise would have raised. Let us assume he was a foresighted man who took the proposition including the certificates. He elected to take for his two bales part cash and an option contract. How much would the cash payment have been on his two bales. Mr. PEYTON. It depends on the pounds of lint cotton per acre. Mr. CANNON. He has two bales of cotton.

Mr. PEYTON. That would be on the basis of 250 pounds of lint cotton per acre, whereas in the 10-acre example, the basis was 150 pounds of lint cotton to the acre.

Mr. CANNON. I am taking the 6 acres for the reason that we want to eliminate a third. Eliminating one-third, we eliminate 1 bale, leaving 2 bales.

Mr. PEYTON. He would get $34 for plowing under 2 acres on the basis of 250 pounds of lint cotton to the acre.

Mr. CANNON. In cash?

Mr. PEYTON. Cash.

Mr. MCMILLAN. Per bale?

Mr. PEYTON. No; for the 2 acres.

Mr. CANNON. And he would get an option on how much?
Mr. TAPP. That would be 500 pounds, would it not?

Mr. PEYTON. Yes.

Mr. CANNON. He would get an option for 500 pounds.
Mr. PEYTON. Yes; that would be a bale.

Mr. CANNON. Five hundred pounds of cotton.

When the next distribution comes, he takes advantage of the cash offer and accepts the 4-cent distribution and the second certificate. How much cash does he get then?

Mr. PEYTON. By entering his option cotton in the pool, he would get a 4-cent cash distribution which, in this example, would amount to $20; 500 pounds at 4 cents a pound.

Mr. CANNON. He gets $20 in cash, and he would get a yellow certificate?

Mr. PEYTON. That is correct; he would get a yellow certificate.

Mr. CANNON. He holds that and when the next distribution comes around of 2 cents, he again elects to take his dividend and gets a brown certificate?

Mr. PEYTON. That is right. But he does not get that 2 cents. He gets that on the basis of $10 per bale less $2.40 carrying charges, which gives him $7.60 per bale in cash.

Mr. CANNON. How much would he get, then?

Mr. PEYTON. He would get $7.60, as his certificate represented 1 bale.

Mr. CANNON. $7.60. So he gets $7.60 and he gets a brown certificate, a C-5-I certificate

Mr. PEYTON. That is correct.

Mr. CANNON. When the next option comes around, when he gets ready for the third bite, there isn't any third bite for the reason that they have liquidated the pool and instead of having a surplus they find themselves faced with a deficit. So the brown certificate is worthless. Now, he has received altogether, how much?

Mr. PEYTON. $49.60. And he had two bales of cotton that he grew.

Mr. CANNON. So what would be his total income from the 6 acres? Mr. TAPP. The two bales of cotton that he grew in 1933, instead of at 6 cents a pound, say, was 10 cents a pound. That is $50 a bale. Mr. CANNON. But it went to 12 and 13 cents a pound?

Mr. LAMKIN. In July 1933, cotton was 9.50.

Mr. CANNON. But it did go to thirteen and something.

Mr. LAMKIN. It went there in 1935.

Mr. TAPP. The average price for the 1933 crop was about 10 cents. Mr. CANNON. Then what did he get for the two bales?

Mr. TAPP. One hundred dollars.

Mr. CANNON. Fifty dollars a bale?

Mr. TAPP. Yes.

Mr. PEYTON. That would be a total of $149.60.

Mr. CANNON. So under his contract he would get $149.60 for his crop whereas he would otherwise have received only $90 from his 6 acres of cotton.

Mr. TAPP. Ninety dollars on the basis of selling his cotton at 6 cents per pound.

Mr. CANNON. Then he would have made $59.60 by coming into the pool?

Mr. TAPP. That is by coming into the whole program.

Mr. CANNON. By compliance with the A. A. A. program, this man has made $59.60 more than he would have made otherwise?

Mr. BACON. How much would that same man have made if he had just taken the cash option; in other words, the fellow who took the cash option?

Mr. LAMKIN. The cash option would have been $17 an acre on the basis of 250 pounds of lint cotton to the acre.

Mr. CANNON. There is one thing we have overlooked. We have overlooked the source from which they got this cotton taken over by the pool. The pool bought this cotton from the Government itself. The Government had bought up this surplus cotton and was carrying it.

The CHAIRMAN. I think we ought to put in the record the financial status of this 1933 pool.

Mr. CANNON. You might tell us now. The pool was liquidated in 1936. All of the assets had been converted.

Mr. LAMKIN. That is right.

Mr. CANNON. There are no remaining assets of any kind?

Mr. LAMKIN. No.

Mr. CANNON. So that his brown certificate represents nothing. It is worthless?

The CHAIRMAN. Are there any debts? Are there any obligations outstanding?

Mr. LAMKIN. No obligations except to the Secretary of Agriculture for advances.

The CHAIRMAN. How much does that amount to?

Mr. LAMKIN. The deficit shown by the pool is about $452,000. Mr. CANNON. Let us go back to the source of this cotton taken over by the pool. You bought the cotton from the Government. What had the Government paid for it?

Mr. TAPP. That came from the Farm Board, Mr. Chairman. We do not have that information.

Mr. CANNON. I urged you, when we talked this matter over the other day, to get us that information. It ought to be available. And it is important that the committee know how much the cotton cost the Government.

Approximately what did the Government pay for it? It is, of course, just a matter of bookkeeping. The Government bought the cotton and paid a definite amount for it. It went through the Comptroller General's office. How much on the average, if you recall, did the Government pay for that cotton?

Mr. TAPP. We have no connection with that. You remember, Mr. Chairman, that on the 1929 cotton they advanced about 16 cents and in 1930 they advanced a different figure. But frankly I do not have definite knowledge of what those advances were. This cotton has accumulated over a considerable period of time and has been held for years. How much it cost, we in the Department of Agriculture would not know, because that was a Farm Board operation.

Mr. CANNON. You bought some at 14 cents and some at 15 cents and some at 16 cents. At what price was the largest amount of it bought?

Mr. TAPP. That was under the Farm Board.

Mr. CANNON. I am merely asking you, because it should be a matter of common knowledge.

Mr. TAPP. My guess would be that the largest amount was taken over in 1929.

Mr. CANNON. That would have been at 16 cents?

Mr. TAPP. Yes.

Mr. CANNON. You would have paid then at least an average of 15 cents a pound.

Mr. LAMKIN. The seed-loan and fertilizer cotton that came in there would have been at a lower price.

Mr. CANNON. Well, we are taking an average.

How did you come to settle on 6 cents a pound as the price for this cotton when the pool took it over from the Government?

Mr. TAPP. That cotton was turned over to the Secretary at 5 cents and 1 cent was added to cover carrying charges, making it 6 cents. Mr. CANNON. Why was it turned over at 5 cents? Why was this cotton for which the Government had paid 15 cents turned over at 5 cents?

Mr. LAMKIN. I would say that that was turned over for the purpose of getting the producers to comply with the 1933 program. Any figure above 6 cents would have caused them to turn it down because at that time that was about the market price of cotton. Mr. CANNON. Cotton was selling at about 6 cents? Mr. LAMKIN. Yes. Cotton broke 6 cents at one time. I was living in Mississippi at the time and I know that quite a few large planters turned down the option because they did not believe it would ever be worth 6 cents a pound. So it would have been impossible to have gotten this proposition at a higher price. It would not have been accepted.

Mr. CANNON. As a matter of fact, I remember that it was stated on the floor of the Senate by one of the Senators from a cotton State that but for this program cotton would have gone to 5 cents a pound. Mr. LAMKIN. I suppose it would have been almost unsalable. It