FARMERS: Big Dump

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To a philosopher from the moon, most fantastic sight in the U. S. last week would have been that of thousands of cultivators black and white trudging patiently out into the fields to plant another cotton crop. For if there was anything the U. S. apparently did not need, that thing was more cotton. Hanging over the market was an enormous carryover of 13,000,000 bales, twice as much as the U. S. would use in a busy year. The major part of this hoard—11,250,000 bales, 5,625,000,000 pounds—lies in warehouses in the South, assigned to the Government for "loans" in hock to the U. S. taxpayer, who is paying $123,000 a day to keep it in out of the rain. If it were to be shared equally, every man, woman and child in the U. S. would have to go to the warehouses and carry away 43 Ibs. of cotton on his back.

One day last week the President of the U. S. told White House correspondents that he could think of only three ways to get rid of the nation's cotton mountain. He could burn it in a huge bonfire. He could float it into the Gulf of Mexico and sink it—no fantastic dream, for Brazil, weighted down by a similar mountain of coffee, tried both.

For a third, revolutionary method, Franklin Roosevelt proposed to build a "spillway" into the world market, in which the U. S. "fair share" of cotton trade would be 6,000,000 to 7,000,000 bales a year and in which its 1939 share will be about 3,500,000 bales. To accomplish that he suggested three definite steps:

1) On its 11,250,000 bales in loan stocks the Government had lent farmers an average 8.3¢ a pound. Since cotton was last week selling at about the current loan rate of 8.3¢, it was obvious that the loan was pegging the price. It was also clear the farmers could not get their cotton out of hock. Let the Government make them a nominal payment of $1.25 a bale (about ¼¢ a pound) and take clear title.

2) The Government would then own outright loan stocks which cost it about 8.5¢ a pound. At that price, the world market would not absorb it. In order to sell it, let the Government offer its cotton to exporters at about 8.5¢, pay them a bounty of from 2¢ to 3¢ a pound for as much as they can sell abroad. Result: exporters could sell cotton abroad at about 6½¢ and turn a profit.

3) Foreign manufacturers would then pay less for raw cotton than U. S. manufacturers. So let import quotas be imposed on textiles to protect the home market, and offer further subsidies to domestic manufacturers to help them compete in foreign markets.

Well aware was Franklin Roosevelt that this proposal conflicts with New Deal trade philosophy. By a similar plan, Adolf Hitler has so affronted the Administration that last month Secretary Morgenthau clapped an extra 25% duty on German exports proved to have been subsidized. Secretary of Agriculture Henry Agard Wallace is on record as opposing cotton export subsidies (although Federal Surplus Commodities Corp. has since July 1938 dumped 67,000,000 bushels of wheat abroad). But last week Cordell Hull and Henry Wallace no less than Franklin Roosevelt felt that King Cotton, overloaded by a bumper 1937 crop of 19,000,000 bales, had got out of hand.