Statement on the Cotton Export Situation.

The cotton situation requires prompt and effective action. Loan stocks total more than 11 million bales and if our exports continue at their present rate, our shipments of cotton abroad for the year ending August 1, 1939, will be the lowest in more than fifty years. And unless we build a spillway out of the loan we are likely to add several million more bales from the 1939 crop to the mass overhanging the market. Carrying charges alone on the cotton already in the loan approximate $45,000,000 annually.

The present status of the cotton industry goes back in large part to the almost 19 million bales of cotton we grew in 1937. This record crop followed the invalidation by the Supreme Court of the control provisions of the original Agricultural Adjustment Act. Since that time another law enabling an effective control program has been enacted but several years of adjustment will be necessary to bring our supplies to normal.

So great is the cotton surplus that the current loan of 8.3 cents a pound—a loan only a little more than half of parity—has proved a price pegging loan. Foreign cotton is underselling our cotton in world markets and is likely to continue to do so until we restore American cotton to its normal competitive position.

This might be done by abandonment of the loan if we did not take the welfare of the growers into account. But abandonment of the loan for this year means a sharp drop in the already pitifully meager income of producers. The continuance of protection for the growers necessitates the continuance of the loan for 1939 and, with that continuance, action to prevent the loan from doing more harm than good.

A cotton program at this time should include the following objectives:

(1) The merchandising in an orderly fashion of our excess supplies of cotton;

(2) The maintenance of our fair share of the world market for cotton;

(3) The protection of producer income;

(4) The accomplishment of our aims with the least possible cost to the Treasury.

Various proposals are pending which aim at the retention and expansion of our foreign markets for cotton and the reduction of loan stocks. Of them, I believe the best plan is an export program for cotton, a program which would include a payment on all cotton exported during the life of the plan.

The details of such a plan remain to be worked out but it probably would include:

(1) A payment of $1.25 per bale to producers who release their loan cotton to the market.

(2) A moderate payment on all cotton exported after the plan goes into operation.

Such a plan would protect mill inventories by fixing a rate at which cotton could be released from the loan. I believe there is ample authority under existing legislation to establish import quotas which would protect both the domestic producers of raw cotton and probably domestic manufacturers as well from foreign importations. A payment could be made on exports of manufactured goods so the program would not put them at a disadvantage in the world markets.

Frankly, I wish it were possible immediately to expand domestic uses of cotton to the point where our own people would absorb the surplus. That time has not yet arrived and pending its arrival our farmers and consumers, too, will be injured unless we protect our foreign markets.

The plan does not contemplate payments on exports in excess of our average exports over a representative period in the past. What we are proposing is to restore the normal competitive position of American cotton and our normal share of the world market.

An export plan for cotton should cost a good deal less than proposals to pay the growers to keep their cotton out of the loan. The export program calls only for payments on cotton sold abroad; the other plan calls for payments on all the crop. And the export proposal promises to be more effective in retaining and expanding our foreign markets.

As you know, an export program has been in effect for wheat for several months. This program was adopted to retain our share of the world wheat market. I believe the majority of wheat producers will agree the plan is one of the reasons why wheat prices in this country are more than twenty cents higher, as compared with the normal relationship, than Liverpool prices. The rejection of an export plan for cotton is certain to raise doubts as to the advisability of its continuance for wheat.

I want to emphasize that the proposal for a cotton export program is in no sense a repudiation of the reciprocal trade programs. If the spirit behind these trade programs had prevailed in the post-war era it would not be necessary now to take steps to protect our export markets. The reciprocal trade programs are an effort to restore order out of the chaos prevailing in international trade. They should be pressed vigorously.

I believe the export plan, if put on a sound and workable basis, will not only help the cotton farmers, but will help the entire industry. As I see it, this plan would not do away with the long established system for handling cotton but would eventually reduce surpluses and restore trade so that this system could be put on a firmer basis.