At the time we announced this meeting we did not know the House was planning to meet at 11 o'clock. Mr. Kennedy, would you care to start this morning? We have about 20 minutes.

Mr. KENNEDY. Whatever is the pleasure of the committee.

The CHAIRMAN. The committee is here and if you do not mind being interrupted in the presentation of your statement you may proceed for 20 minutes.

Mr. LEMKE. May I suggest, Mr. Chairman, that we consider the Massingale bill?

The CHAIRMAN. Yes.

STATEMENT OF EDWARD E. KENNEDY, PRESIDENT, NATIONAL AGRICULTURAL CONFERENCE, WASHINGTON. D. C.

Mr. KENNEDY. Mr. Chairman, and gentlemen of the committee, my name is Edward E. Kennedy. My home is in Kankakee, Ill. My Washington office is 109 First Street NE. I am president of the National Agricultural Conference. I also represent 10 of the farmers' State organizations in Washington.

Mr. HOPE. Would you mind putting in the record the names of those 10 States?

Mr. KENNEDY. I will be glad to do that.

(The information requested is as follows:)

The organizations of which I am the authorized legislative representative are: Iowa, the Iowa Farmers' Union; Illinois, the United Farmers of Illinois; Indiana, the Indiana Farmers Guild; Ohio, the Ohio Farmers Guild; Michigan, the Michigan Farmers Educational and Cooperative Union; Minnesota, the Minnesota Farmers Educational and Cooperative Union; California, the California Farmers Union; Washington and Idaho, the Washington-Idaho Farmers Union; Maryland, the Maryland Farmers Union; Pennsylvania, the Pennsylvania Farmers Guild. I also represent local and county organizations of farmers in the following States: Arkansas, Arizona, Kansas, South Dakota, Oklahoma, Nebraska, and Oregon.

Mr. KENNEDY. Mr. Chairman, I am sure that you and all the members of this committee know that we have been vitally interested in the cost-of-production approach, or the approach to the farm problem as it is contained in H. R. 2371, the so-called cost-of-production bill. There are 14 other members of the House of Representatives who have introduced identical or similar bills, I think with one exception, and that exception carries an amendment which the Commissioner of Agriculture from the State of Texas thought ought to be in there in order to make it apply more particularly to cotton as well as to other farm products in the bill. So, with your permission I would like to include H. R. 2371 in the record, and also a copy of the proposed amendment that would go in on page 6, on line 15 after the word "agency".

The CHAIRMAN. Without objection they will be included in the record.

(The bill and proposed amendment, in italics, are as follows:)

[H. R. 2371, 76th Cong., 1st Sess.]

A BILL To regulate interstate and foreign commerce in agricultural products; to prevent unfair competition; to provide for the orderly marketing of such products; to promote the general welfare by assuing an abun dant and permanent supply of such products by securing to the producers a minimum price of not less than cost of production, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Agricultural Equality Act of 1939". The term "agricultural product" means poultry, live

stock, and any farm product of the soil, and any product or byproduct thereof, in an unmanufactured state, which the Secretary of Agriculture shall determine, on the basis of available statistics, which was introduced into interstate or foreign commerce in quantities having a value in excess of $10,000,000 during the preceding marketing year. The word "producer" as used in this Act shall mean the original producer of agricultural products as herein defined.

SEC. 2. (a) The Secretary of Agriculture shall ascertain and determine for each year the average cost of production to the farmers of each agricultural product. Such average cost of production shall be determined after public hearings, participated in by the representatives of farmers' organizations, and all items of cost, including all taxes and other overhead charges, shall be estimated and included in accordance with the formula and method commonly used in the manufacturing industry.

(b) The Secretary of Agriculture shall consider the average individual farm as a business unit, and shall, among other things, include compensation to farm operators for management and for labor for themselves and their families and hired help, equal to the compensation paid for like time and services in industry, together with adequate allowances for maintenance and depreciation of soil, improvements, buildings, farm machinery, implements, tools and equipment, and stock-breeding and work animals. He shall also determine the fair and reasonable property investment value, not necessarily the market value, devoted to the production of such agricultural products, using the official census data so far as possible, and calculate a capital return, equal to the average interest rate on farm indebtedness, upon the investment value thus determined. The Secretary shall determine prior to the beginning of each marketing year for each agricultural product an average-cost-of-production price which shall be equal to the average cost of production of such product as determined under this section.

(c) The Secretary shall also calculate the average yields and production during the previous five-year period in determining the average-cost-of-production prices. If necessary, in order to carry into effect the purposes of this Act, the Secretary of Agriculture shall further ascertain and allow an equitable differential against varying transportation costs to different markets and shall establish appropriate zones or classifications therefor.

SEC. 3. The Secretary of Agriculture shall annually ascertain, determine, and designate the beginning and the ending of the marketing year for each agricultural product and shall estimate the volume of production for the current year of each such agricultural product. He shall also annually estimate with respect to each agricultural product (1) the quantity and percentage of the total volume marketed from farms that is required for domestic consumption and is to be distributed in the current of interstate commerce; (2) the quantity and percentage to be distributed in intrastate commerce affecting the price of the portion to be distributed in the current of interstate and foreign commerce; (3) the quantities and percentages remaining for warehouse reserves or export.

SEC. 4. (a) The Secretary of Agriculture shall, annually, prior to the beginning of the marketing year of each of such agricultural products, make proclamation and announcement of such determination of such average-cost-of-production prices of each of such agricultural products. He shall announce the date when such prices are to take effect and they shall continue in effect during the marketing year. He shall, at the same time, announce the estimated production and domestic consumption. He shall, also, announce the total quantities and percentages of such agricultural products that are to be held as warehouse reserves or for export. The Secretary of Agriculture shall upon request furnish to all persons required to have a license under this Act, such information as may be necessary or appropriate for carrying out the provisions of this Act.

(b) DOMESTIC PRICE. After the beginning of the marketing year, for any agricultural product, which begins in 1939, all dealers, manufacturers, millers, elevator operators, processors, packers, butchers, ginners, compressors, and other agencies dealing in interstate or foreign commerce shall pay to the producers of such agricultural products not less than such average-cost-of-production price, determined and proclaimed as aforesaid, for such percentage of each delivery of such agricultural product as is estimated for domestic consumption.

(c) LICENSES. No dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compressor, or other agency dealing in or handling any agricultural product in interstate or foreign commerce shall operate as such dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compressor, or agent dealing in or handling such agricultural product without first procuring from the Secretary of Agriculture a license pursuant to such regulations

as the Secretary of Agriculture may prescribe: Provided, That no license shall be required of any producer under the provisions of this Act for selling, disposing of, handling or storing any agricultural product produced by him.

(d) SURPLUS RECEIPTS.-When any producer of any agricultural product shall deliver any such agricultural product to any dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compresssor, or any other agency, dealing in or handling such product in interstate or foreign commerce, the Secretary of Agriculture shall cause to be issued to such producer receipts showing on their faces the quantity and grade of such agricultural product and the percentage of such agricultural product as has been proclaimed by the Secretary of Agriculture to be the percentage and quantity of the said agricultural product that is required for domestic consumption and the percentage, quantity, and grade required for warehouse reserves or for export. The said receipts which the Secretary of Agriculture has so caused to be issued shall be signed by him and countersigned by such dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compressor, or other agency, dealing in or handling such agricultural product and shall be delivered to such producer at the time of such delivery of the agricultural product by the producer to such dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compressor, or other agency: Provivded, however, That in the case of cotton any producer may dispose of his domestic consumption quantity and percentage and may, at the same time, keep or store his warehouse and export quantity and percentage, properly earmarked for identification. Such producer may in the following marketing year sell or dispose of such earmarked warehouse reserve and export quantity or new cotton to any dealer, manufacturer, miller, processor, ginner, compressor, or other agency dealing in or handling such cotton at the cost of production price to an amount equal to the percentage he would be allowed to sell for domestic consumption if he produced the same quantity of cotton as he produced in the previous year. Such producer shall be required to file a reasonable and sufficient bond with the Secretary of Agriculture, through the dealer, manufacturer, miller, processor, ginner, compressor, or other agency, dealing in or handling such cotton, to the effect that he will not sell or permit to be sold or disposed of, directly or indirectly, any of such warehouse reserves or export quantity and percentage in the domestic market during that marketing year.

MARKETING OF SURPLUS

SEC. 5. (a) At such reasonable time as the Secretary of Agriculture may direct, the said dealers, manufacturers, millers, elevator operators, processors, packers, butchers, ginners, compressors and other agencies, dealing in or handling such agricultural products shall deliver to the Secretary of Agriculture all of the warehouse reserves and export quantities and percentages of agricultural products in the kind and grade as receipted for, or in processed or converted form as hereinafter provided. In the case of livestock and poultry, the packers and butchers, after processing the same, subject to Government inspection, shall make delivery of the warehouse reserves and export quantities and percentages in the form of livestock or poultry products; provided that the butchers may deliver their warehouse reserves and export quantities and percentages through packers, and the Secretary of Agriculture shall pay the reasonable cost of processing; and the same provisions shall apply to dairy products and the processors and converters thereof. The Secretary shall not dispose of any of such warehouse reserves and export quantities and percentages for domestic consumption, except as hereinafter authorized and provided, but shall hold and dispose of the same to the best advantage in the world market. After proclamation and upon request of the Secretary of Agriculture the Post Office Department shall, at the end of the marketing year, redeem the receipts issued for warehouse reserves and export quantities and percentages in the net amount realized for each product after deducting all costs and expenses of handling and disposing of the same as determined and proclaimed by the Secretary of Agriculture.

(b) The Secretary may sell at or above the world price warehouse reserves and export quantities and percentage of any agricultural product to any processor or manufacturer for processing or manufacturing into finished or semifinished and manufactured or semimanufactured product, but he shall first require a sufficient bond from such processors or manufacturers to the effect that such finished or semifinished or manufactured or semimanufactured product or any byproduct thereof will not be sold or disposed of directly or indirectly for domestic consumption. Such finished or semifinished or manufactured or semimanufactured product together with any byproduct shall be exported to foreign markets unless the Secretary upon investigation finds that there no longer is an exportable surplus

and that some or all of such products or byproducts are needed for domestic consumption.

(c) ADJUSTMENT of supply to DEMAND.—If the quantity and percentage estimated for domestic consumption should be insufficient by reason of flood, drought, pestilence, or other calamity, or for any other reason, to supply the demand for domestic consumption, the Secretary of Agriculture is authorized to supply such shortage out of the warehouse reserve or export quantities and percentages, at the cost-of-production price, plus storage and expenses.

REDEMPTION OF SURPLUS RECEIPTS

SEC. 6. The Secretary of Agriculture is authorized to advance, from time to time, to the Postmaster General such sums as are shown to be required for the redemption of such receipts as provided herein and for the expenses of the Post Office Department in connection therewith. At the request of the Secretary of Agriculture, the Postmaster General, under such regulations as he may prescribe, shall require the employees of the Post Office Department to perform, without extra compensation, such fiscal-agency services as may be required in the handling, safekeeping, and redemption of said receipts.

REGULATIONS

SEC. 7. The Secretary of Agriculture is hereby directed to prescribe regulations for carrying out the provisions of this Act. The regulations prescribed pursuant to this Act shall include, among other things, requirements with respect to the issuance of licenses to dealers, manufacturers, millers, elevator operators, processors, packers, butchers, ginners, compressors, and other agencies, dealing in or handling such agricultural products in interstate or foreign commerce, systems of accounts, auditing of accounts to be kept by licensees, submission of reports by them and the entry and inspection by the duly authorized agents of the Secretary of Agriculture of the place of business of such licensees.

PENALTY FOR VIOLATION

SEC. 8. Any dealer, manufacturer, miller, elevator operator, processor, packer, butcher, ginner, compressor, or other agent dealing in or handling any agricul tural product in interstate or foreign commerce, who violates the provisions of this Act by knowingly and willfully paying less than the average-cost-of-production price determined and proclaimed by the Secretary of Agriculture, or violates any other provisions of this Act, shall be punished by a fine not exceeding $1,000 or imprisonment not exceeding one year, or by both such fine and imprisonment.

SEC. 9. Any agricultural product, now owned or hereafter coming into the possession of the Government of the United States, or any department or agency thereof, shall be conclusively deemed to be warehouse reserves or exportable surpluses, and shall be disposed of only in accordance with the provisions of this Act providing for the disposal of warehouse reserves and export quantities and percentages.

SEC. 10. In order to carry out the purposes of this Act, the Secretary of Agriculture is hereby directed that whenever he finds, upon investigation, that the world price, computed in United States currency, of any foreign agricultural product or substitute, in its manufactured or unmanufactured state, is below the cost-of-production price of any competing domestic agricultural product, in its manufactured or unmanufactured state, to notify the Secretary of the Treasury thereof. It shall thereupon become the duty of the Secretary of the Treasury to levy and collect upon such foreign competing agricultural product or substitute, in its manufactured or unmanufactured state, when imported from any foreign country into the United States or any of its possessions, a duty equal to the difference between the world price and the cost-of-production price of such product, plus 10 per centum of such cost-of-production price.

SEC. 11. This Act shall apply to agricultural products, as herein defined as may be owned by the producers or as may be grown, produced and harvested during the year 1939 and all subsequent years.

SEC. 12. All Acts or part or parts of Acts in conflict herewith are hereby repealed. Nothing, however, herein shall be held to repeal, amend, or modify the Soil Conservation and Domestic Allotment Act, as amended by sections 101, 102, 103, 104, 105, or Adjustments in Freight Rates and New Uses and New Markets for Farm Commodities, sections 201 and 202; a continuation of

the Federal Surplus Commodity Corporation, section 204; Loans on Agricultural Commodities, section 302; Crop Insurance, sections 508, 509, 510, 511, 512, 513, 514, 515, 516, 517, and 518, of the provisions of the Agricultural Adjustment Act of 1938 as amended (Public, Numbered 430, Seventy-fifth Congress). Nor shall it be held to repeal or modify section 32 of the Agricultural Adjustment Act as amended (Public, Numbered 320, Seventy-fourth Congress).

SEC. 13. If any provisions of this Act, or the application thereof to any person or circumstance, is held invalid, the validity of the remainder of the Act, and the application of such provision, shall not be affected thereby.

Mr. KENNEDY. Mr. Chairman, Mr. Louis B. Ward and myself have prepared a pamphlet of about 32 pages dealing with the theory and application of this cost of production bill. I do not want to take the time of the committee to read all of that or a part of it but if it is agreeable to the committee I would like to have it inserted in the record.

The CHAIRMAN. Do you have a sufficient number of copies to supply the members of the committee without having to include it in the record? That may serve your purpose.

Mr. KENNEDY. I have only three copies with me. Additional copies can be secured. However, I think the information that is contained in this pamphlet has been boiled down and briefed very carefully and it would be desirable on my part if it could be included in the record. However that is a matter for the committee to decide. The CHAIRMAN. I suggest that you leave a copy with us and furnish additional copies tomorrow if you can and we may find it desirable to insert it in the record.

Mr. KENNEDY. I will be glad to do that.

I should just like to say, Mr. Chairman, that H. R. 2371 is identical with S. 570 introduced in the Senate; that this legislation was first introduced in the Congress of the United States about 10 years ago and it was introduced at that time in competition with the idea that the farm problem could be solved by control farm production; that other methods could be found by which the problem of agriculture, which is a price problem, could be dealt with and handled without the use of the Federal power in regulating the minimum price of agricultural products.

It was also introduced in competition with the idea that it was impossible to use the Federal power to regulate minimum prices of agricultural products unless there was carried along with it the arbitrary power of the Federal Government to regulate and control agricultural production.

Now we have come down through the years, more than 10 years, since this legislation was first introduced. It was introduced first in the House of Representatives by Congressman Swank of Oklahoma and Senator Thomas of Oklahoma. Later it was introduced by Congressman Massingale and by Congressman Eicher who is now a member of the Securities Exchange Commission.

It was also introduced in the Senate by Senator Thomas each year in the last 10 years. Finally in 1933 the amendment was added over in the Senate which was known as the Norris-Simpson cost of production amendment and that amendment was added to the Agricultural Adjustment Act of 1933 and it passed the United States Senate. The provisions of the amendment were contained in the Senate bill but when it came over to the House, as I remember, it was eliminated in conference.