or sound argument against the change from gross weight to netweight trading and that any support for gross-weight trading must come from groups or individuals interested in something other than

cotton.

Bagging fabricated of jute or jute products which are imported from India has been used on more than 90 percent of the cotton crop for many years. After the cotton is baled it becomes necessary to remove portions of the cotton from the interior of the bale for the purpose of obtaining samples of the cotton, these being obtained from the interior of the bale. Now, this has resulted in one of the very heavy economic losses which is directly attributable to grossweight trading. The holes from which the cotton has been taken must be patched, where the samples are withdrawn, and over these holes are now placed the heaviest patches, composed of the heaviest jute bagging.

Under the gross-weight trading practices middlemen and shippers, particularly when cotton is ready for export, profit by this practice, since the patches are paid for at cotton prices. This results in no profit to the growers but since the middlemen are permitted approximately 30 pounds of bale covering to a standard-weight bale when it is shipped abroad, the extra 9 pounds are added while the goods are in transit.

The middleman, of course, sells his patches then at cotton prices, approximately doubling his money. This is paid to him in addition to his normal profit in fees and handling charges, and creates a wholly unnecessary cost on cotton, increasing the cost to the consumer and indirectly lowering the price to the grower.

We believe the proposed legislation would entirely eliminate this evil, would lower the cost of cotton goods to the consumer, and increase the price to the grower, dividing the savings between them.

The annual economic loss entailed by gross-weight trading of 15,000,000 bales, priced at 10 cents per pound, is conservatively estimated at from $15,000,000 to $20,000,000. The elements included in the estimate are: Charge for the excess jute patches at the price of cotton; extra freight charges on the excess weight; higher fire-insurance rates on the American cotton than on the better packed foreign cotton; and damage due to the inferior bale covering, from tie rust, stencil-ink stain, and dust coming in between the loose fibers of the jute.

The saving to the American cotton grower on these items alone would amount to from $15,000,000 to $20,000,000.

The proposed legislation will in no way affect the right of the grower or ginner to use such bale covering as he chooses. However, with the incentive to use excess bale covering and patches removed, it is entirely likely that more suitable bale coverings will come into use. A better jute covering of the longer-fiber quality such as is used in Egyptian, Indian, Brazilian, and American round bales already on the foreign market, where net weight trading is in vogue, would undoubtedly result from net weight trading, giving the cotton a vastly improved appearance in the bale and more effective protection. A bale covering manufactured from all cotton would also be available at a competitive price. There would result a considerable additional demand for low-grade cotton. A third type of covering might be

available composed of cotton and three-ply kraft paper of domestic manufacture. Such a bale covering would utilize cotton over the ends of the bale and for interior reinforcing, in combination with layers of pleated kraft paper to allow for the stretch when the bale is compressed. This would create a demand for the product of American kraft paper mills.

As will be seen, the proposed legislation would not only effect the elimination of very definite economic wastes, but would tend to end the virtual monopoly of jute now being imported from India, in favor of bale coverings made from our own cotton and domestic kraft paper.

As I have said, the bill is wholly in the interest of American cotton. It is the belief of those who are in favor of the legislation that the three types of bale covering I have mentioned might share equally in the furnishing of baling materials. There is, of course, no reason why jute should have a monopoly nor is there any reason why it should be legislated out of competition with other wrappings in a discriminatory manner. There is, however, equal reason why other bale materials should be given an opportunity to prove their worth under the more reasonable method of trading. Incidentally, the total imports of jute into the United States would be little affected by the proposed change since only about 10 or 15 percent of present imports is used for bale covering. It is estimated that no more than 5 percent of the total jute imports would be lost, and such loss would be entirely replaced by domestic materials.

The provisions of the proposed legislation are very practical, and a simple reading of the bill tells the story very plainly. Stocks of cotton now in warehouses would be traded in and sold on the old "tare basis." Only cotton baled after the effective date of the proposed act would be required to bear the marking indicating the weight of the bale covering. It is an easy matter to imprint this weight on the goods at the factory, to stencil it on at the gin or compress, or to attach it by tags. Patches would be similarly marked as to weight.

Since approximately 90 percent of the bales used in this country require ties weighing a total of 9 pounds with very negligible variations it would be unnecessary to mark ties of standard weight or those aggregating no more than 914 pounds or no less than 834 pounds. Only ties outside of this tolerance would require marking. No practical difficulties are presented to any member of the cotton industry in making the change to a net weight basis, and thus the American cotton grower will automatically receive the benefit without effort on his part.

That the net-weight trading basis will benefit both the grower and the public has long been maintained by the United States Department of Agriculture. In 1933 an extensive study was made by the Department on the subject, resulting in the issuance of several publications including an exhaustive analysis entitled "Cotton Tare Practices and Problems, 1933," in which the change from grossweight to net-weight trading was endorsed. In a recent letter the Department expressed the following approval of net weight trading:

In our opinion the adoption of net-weight trading for cotton would be a desirable step because the present system of gross-weight trading has an accompanying economic waste.

The various State departments of agriculture in the South have likewise gone on record as favoring a change to the net-weight basis. There is every reason to believe that the change will early result in a slightly better price to the American cotton grower on every pound of cotton he produces. It is also certainly reasonable to ask for legislation which will give domestic materials an even chance to compete for a part of the bale-covering business.

The American bale, after it reaches the export market, has the reputation of being the "tramp" among the cotton bales. Foreign growths are sold on a net-weight basis, and the bales are trim and neat like a well-dressed person. Our gross-weight traded bales are ragged and unkept, and they can be instantly spotted in foreign warehouses by their poor appearance. I need not tell you that competition in the export markets of the world has already reached serious proportions and that nothing ought to be left undone to give our cotton a better chance in foreign markets.

We urge that the legislation proposed be enacted at the present session.

Senator BILBO. Are there any questions?

Senator HATCH. Yes; I wanted to ask Mr. Johnston a question: Where does this first start, the gross weight, when the farmer sells the cotton, does he receive the pay in the first instance for the bagging and ties?

Mr. JOHNSTON. I am sorry that I can not answer that question. Senator HATCH. I think that he does, that is my impression, that he sells on the gross weight, after it has been to the gin, and it has been many years since I was in the cotton country, but as I recall, they go to the gin and then the cotton yard where it is weighed, at the cotton yard, by a public weigher.

Mr. JOHNSTON. Is that before or after it is put in the bale?
Senator HACH. After it is baled.

Mr. JOHNSTON. Then it is gross weight, after it is put in the bale. Senator HATCH. And the farmer then in the first instance receives himself for that excess weight.

pay

Mr. JOHNSTON. Possibly so, although as I understand it, the patches that are attached later constitue the racket that has grown up in the cotton business. They are paid amounts for the cotton patches that go to middlemen, and the tendency is to pu on al lthat they will bear, so that every bale weighs the limit to which they are allowed to go, because they receive the double price for their patches.

Senator HATCH. I am sure that the patching would be later, and the farmer would get no advantage from that, of course.

Mr. JOHNSTON. Senator, if you will ask that same question of some of the people that appear for the Department of Agriculture, they can give you definitely that answer, because they are thoroughly familiar with that phase of it.

Senator HATCH. Then there is one other question. Has the trade itself ever attempted to correct this?

Mr. JOHNSTON. There have been a number of bills introduced in Congress during the last several years.

Senator HATCH. I mean without legislation.

Mr. JOHNSTON. No; I think that they feel that it can not well be corrected without legislation. All of the effort that I know anything about has been put forth in the effort to secure legislation for net

weight trading, and that has been done for 15 years, and I don't know why it has always been blocked.

Senator HATCH. I wondered that, too, but that may develop.
Will there be opposition to the bill here?

Senator BILBO. I have not imaged any opposition.

Mr. JOHNSTON. We think that there cannot be any opposition from anyone interested in cotton.

Senator HATCH. That is all.

Senator BILBO. My information from all of those that seem to be in a position to know, is that no one has any right to object to this legislation. It does not affect any industry, outside of the cotton industry.

Mr. JOHNSTON. I think that that is true.

Senator BILBO. It is my further information, that it has been ceded by all of those interested in this reform, that the only way it can be brought about is through national legislation.

I wonder if there is anyone from the Department of Agriculture present?

Mr. FINCH. Mr. C. H. Robinson and C. F. Finch, of the Bureau of Agricultural Economics.

Senator BILBO. Will one of you gentlemen testify next? I am sure that you gentlemen have seen this legislation, and you have seen the amendments.

STATEMENT OF C. L. FINCH, OF THE DEPARTMENT OF

AGRICULTURE

Mr. FINCH. We have seen the bill and the mimeographed sheet that came down to the Department.

Senator BILBO. We would be glad to have the reactions of the Department to the bill.

Mr. FINCH. Senator, my statement will be very brief. The Department for a number of years has favored net-weight trading. In the absence of legislation, we would favor a voluntary adoption of net-weight trading by the industry. It appears, however, that this is a subject that will ultimately have to be dealt with by legislation, and in principle, we favor the objectives of your present bill.

I may say that candidly we have felt in the past that net-weight trading should be associated with the standardization of tare, but if it should appear that the entire program is not practicable at the present time, we now feel that legislation to require the sale of cotton on net weights would be a desirable step, certainly a desirable first step.

Now, so far as the bill itself is concerned, I believe that the committee has a letter from the Secretary of Agriculture, in which comments are made in some detail. I will not read the letter unless you think it necessary.

Senator HATCH. Has that letter been put in the record, or did you intend to?

Senator BILBO. I did not intend to because the letter was offered on the original bill, and we have the amended bill, and then I understood that the Department would present the views of the Department in person through Mr. Finch.

Mr. FINCH. There is one question concerning section 10 of the bill, which provides that "this act shall become effective 90 days from the date of enactment." Of course it would be impossible to say when enactment might be anticipated, but we suggest that perhaps since the bill might not pass, if at all, at the present session before rather late in the spring, it might be advisable to change that section to make it effective, say, at the beginning of the 1940-41 season. If there are any questions, Senator, I shall be glad to try to answer them. I believe that that is all that I have to say by way of preliminary comment.

Senator BILBO. I want to ask you this question: Is it the practice of the trade to make a uniform deduction of 24 pounds for ties, in the trading of cotton, in the trade?

Mr. FINCH. Senator, a more or less standard tare for the gin bale that is before compression, is 21 pounds. There is more or less variation, of course, but I should say 21 pounds is nearer the standard for the gin bale than any other figure. And 24 pounds might be taken as a rough approximation of the average tare on a compressed bale in the domestic trade.

So far as export cotton is concerned, there is more tare added, because the rules under which cotton is sold, to foreign countries, allow more tare. I should say that about 261⁄2 pounds for a 500-pound bale would be an approximate average for cotton shipped to other countries, but the tare rules vary to some extent.

Senator BILBO. Then there is no definite poundage fixed in the trade for tare?

Mr. FINCH. There are different cotton trade organizations, both here and abroad, which have rules on the subject, but these rules vary as to permissible tare.

Senator BILBO. I was under the impression that it was 24 pounds as the basis fixed, and in the event that the covering and ties would weigh, say, 17 or 18 pounds, the purchaser of the cotton would deduct 24 pounds, and I am just wondering who would take that loss. would be furnishing cotton instead of baling and ties.

You

Mr. FINCH. Some domestic trade rules provide for 24 pounds of tare. My recollection is that that would apply to standard compressed cotton. Suppose that in a particular case the rule specifies 24 pounds of tare and the actual tare on a bale, we will say, is 20 pounds. Then, since the sale is on gross weights, the seller would lose, whereas if there were more tare than the permissible allowance on the bale and no tare claim were filed, he would gain accordingly.

Senator BILBO. In that case the merchant or the seller of the cotton would take the loss, if any, and the producer, or the farmer, he suffers his loss in the general reduction of price that the trade offers for cotton because of this gross weight.

Mr. FINCH. Well, under the gross-weight system the entire weight, including the bagging and ties, is used in determining the commercial value of the bale. Say the price is 9 cents, you arrive at the value of the bale by multiplying the gross weight by 9 cents per pound, so that theoretically, at least, the bagging and ties on the bale bring the cotton price, but actually it is reasonable to suppose that buyers of the cotton, particularly the mills, give due consideration to tare in fixing the prices that they are willing to pay.