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GRAZING FEES
UARANTY PRICE ON WHEAT
HEARINGS
OMMITTEE ON AGRICULTURE
HT
HOUSE OF REPRESENTATIVES
SIXTY-STIXTH GONGRESS
SECOND SESSION
(@
° &
SD4 +
ix & 1)
Tourspay, Aprit 1, 1920 sae anae
‘\
\ Se ee a
WASHINGTON ;
fi GOVERNMENT PRINTING OFFICE
173198 1920
COMMITTEE ON AGRICULTURE.
House or REPRESENTATIVES.
GILBERT N. HAUGEN, Iowa, Chairman.
JAMES C. McLAUGHLIN, Michigan.
SYDNEY ANDERSON, Minnesota.
WILLIAM W. WILSON, Illinois.
CHARLES B. WARD, New York.
WILLIAM B. McKINLEY, Illinois.
ELIJAH C. HUTCHINSON, New Jersey.
FRED S. PURNELL, Indiana.
EDWARD VOIGT, -Wisconsin.
MELVIN O. McLAUGHLIN, Nebraska.
CARL W. RIDDICK, Montana.
J. N. TINCHER, Kansas.
WILLIS J. HULINGS, Pennsylvania.
J. KUHIO KALANIANAOLE, Hawaii.
GORDON LEE, Georgia.
EZEKIEL 8, CANDLER, Mississippi.
J. THOMAS HEFLIN, Alabama.
THOMAS L. RUBEY, Missouri.
JAMES YOUNG, Texas.
HENDERSON M, JACOWAY, Arkansas
JOHN V. LESHER, Pennsylvania.
JOHN W. RAINEY, Illinois.
L. G. HavuGEN, Clerk.
2
CONTENTS.
Statement of—
TW; Tomlinson’. « scccascuweumwos bese secesebecsuieccis eos ems sete womens
Be Ey Cleme@nt 2a..2c.seescees $6 sce teeet eno ienG ences: c's eemareiw ee
GRAZING FEES—GUARANTY PRICE ON WHEAT.
ComMITTEE on AGRICULTURE,
House or REPRESENTATIVES,
Thursday, April 1, 1920.
The committee this day met, Hon. Gilbert N. Haugen (chairman)
presiding.
The CHarrman. Mr. Tomlinson would like to make a statement
on the grazing proposition.
STATEMENT OF MR. T. W. TOMLINSON, SECRETARY AMERICAN
NATIONAL LIVE STOCK ASSOCIATION, DENVER, COLO.
Mr. Tomurnson. Mr. Chairman and gentlemen of the committee,
my mission before you this morning is to urge that your committee
send a subcommittee from your membership into the West for the
purpose of inspecting the grazing conditions on the national forests.
When the Agricultural appropriation bill was under consideration
by your committee, I believe it was the view of many of your mem-
bers that the fees now being charged by the Forest. Service were
disproportionate to the value of the grazing. When I appeared
briefly before your committee something over two weeks ago, in
answer to a question I referred to the advance in chaiges which was
put into effect in 1918 and 1919 and to the five-year permit which
was granted at that time. There was a great deal of discussion
between stockmen and Secretary Houston and the officials of the
Forest Service at the time this 100 per cent advance was projected,
and a good many stockmen felt that the proposed increase was not
justified by the grazing conditions on the forest reserves. However,
the Secretary of Agriculture and the forest officials offered to the
users of the forests the privilege of a five-year permit, which, in effect,
provided that they would not be disturbed, so far as the number of
head of live stock which they were permitted to graze during that
five-year period was concerned, and without any change in the rate.
This was intended to stabilize and steady the business of grazing on
the national forests. It was clearly understood by the stockmen at
that time that there would be no change in the fee until the. expira-
tion of the five-year grazing permit, and I believe that is supported
by the wording of the permit. As I stated before your committee
some three weeks ago, there was no written contract to that effect;
it was an implied agreement or understanding which the stockmen
construed in the nature of a contract, something not unlike, if I may
be permitted to say, the celebrated hog guaranty of 13 to 1, which
the committee is familiar with.
5
6 GRAZING FEES—GUARANTY PRICE ON WHEAT.
There are multiple factors which enter into the value of graz-
ing on these vor forests, which I doubt could Pe pore
and intelligently presented to your committee by stoc en x oO
might come here to testify ; and in that _aspect I think, be =a
the committee presses the question of this advance, you ought,
not only in fairness to the users of these reserves, but also in justice
to yourselves, send a representative committee out to thoroughly
inspect the conditions of grazing on some of these representative
forests throughout the West.
Mr. Trxcuer. Do you not think that the reports from Mr. Graves,
who has charge of the forests, would be reliable in that respect? He
has probably better facilities for understanding the true condition
than a congressional committeé. .
Mr. Tomitson. I should think that Mr. Graves’s recommendations
would be fairly correct, but Mr. Graves does not understand the
forests as well as the stockmen who use them. I have not heard
what Mr. Graves’s position has been, at least the record of the hear-
ings does not disclose it accurately, but I have been told on the out-
side that he was not averse to some increase, that he had been impor-
tuned by Congress to try to make the forests self-supporting and
finally had assented to your demand. I do not know whether that
is a correct statement of his position or not.
I have been told that Mr. Potter opposed the increase, and largely
because of the existence of this so-called five-year permit and the un-
derstanding with the stockmen about it.
I wish, however, to refer briefly to some disabilities encountered
by the stockmen in using these reserves. I hope it is a matter of
record, and if it is not it should be, that the users of the forests have
in the past 10 years paid for more than half the improvements put
on the forests. You understand that the permits provide that in the
making of those improvements the title to the same goes to the Gov-
ernment. Therefore, from that viewpoint the users of the forests
are paying considerably more than the actual fee assessed. We do
not secure as good returns from the bulls on the forests; the losses
are extraordinary, as compared with the losses in fenced inclosures;
and the expense of getting the stock to the reserves is extremely
heavy; the restrictions are many and are expensive to comply with.
You may remember that at the time the 640-acre grazing-homestead
bill was enacted that there was a great deal of talk about driveways
to and from the forests, and the Interior Department withdrew in a
few instances driveways as long as 150 miles. Now, these drive-
ways were for permitting the users of the forests to drive from their
permanent location to the reserves. It is not infrequently the case
that the users of the reserves are obliged to ship their live stock by
train to as near the forest as possible, and then drive them the bal-
ance of the way. All this contributes to the ex
: ‘ ense of using t!
grazing on the forests and to our mind largely make up for eae
appears on the surface as too great difference between the cost of the
grass on the forests as compared with the grazing under fenced
‘pastures. Poisonous plants and predatory animals take a heavy toll
on our live stock. Rue
However, I do not wish to keep you here with a recit
consider the heavy disabilities of grazing on the foes ee
GRAZING FEES—GUARANTY PRICE ON WHEAT. f
is to urge that a committee be appointed to go out and inspect the
forests themselves, and then, if the matter is further pressed, that we
be given an opportunity of bringing here representative stockmen
from all the forests, in order that they may be heard before the mat-
ter is definitely determined.
__ I feel warranted in saying that if there is no other way of arrang-
ing for the expenses of the committee that our association will under-
take to pay the expenses, if you are willing to accept the offer. How-
ever, I hope that Congress will authorize such a committee to go out
and arrange for the payment of their expenses.
There is a broader aspect to this advance in grazing than may
seem on the surface. We all know that there has been a general in-
flation of values of all commodities, and that has permeated the value
of grazing. When the forests were turned over to the Agricultural
Department in 1905 there was no fee assessed. A charge was made
in 1906, rather nominal, I might say, and that was objected to by
the stockmen on the false theory that they had probably an actual
right to the use of the forests without any payment. Since then
there have been three or four advances, even previous to the 100 per
cent increase. All of this has been reflected in the cost of grazing
on the Indian reservations and on the privately owned lands; and I
believe that a further increase in the fees on the forest reserves
would be promptly reflected in the cost of grazing on these other
lands. Obviously any increase of this kind must be paid by some
one, and undoubtedly the consumer will pay a large part. It must
be passed along to the man who buys the feeders raised on the forest
reserves or by the consumer, if it be fat cattle.
While our Government is spending money and efforts trying to
increase the production of live stock, it does seem unwise that an
extra burden should be placed upon those using the reserves, unless
it is absolutely necessary for the Government.
I have had prepared by the Forest Service the actual figures as to
the cost of administration of grazing on the reserves, as compared
with the receipts; the cost including the money paid to the States,
and all the administrative expenses both here and on the range, and
the grazing shows a profit of over $1,000,000. Of course, according
to the balance sheet made up by this committee, there is a deficit
on the reserves—there is no deficit, however, but there is a substan-
tial profit on the grazing end. I do not believe that I care to burden
the committee with a further discussion of this, and will leave it
with you with the urgent request and hope that you may see fit to
send a committee out to investigate these conditions.
The Cuairman. Mr. Potter is a cattle man, is he not?
Mr. Tomiinson. Mr. Potter was in the cattle business before he
went with the Forest Service in 1901.
The Cuatrman. He is an expert on grazing, and is in charge of
the work?
Mr. Tomiinson. Yes, sir. Mr. Potter and Mr. W. C. Barnes have
been in supreme charge of the grazing, subject to the chief.
The Cuarrman. I desire to call your attention to the statement
of Mr. Potter which appears on page 65 of the hearings on the
agricultural bill for 1921. After discussing the question of the fee
charged for grazing in the forest as compared with grazing on the
‘8 GRAZING FEES—GUARANTY PRICE ON WHEAT.
Indian reservations and on private lands, he was asked this question
by the chairman:
Upon investigation, do you believe you are charging what it is worth at
the present time? f
Mr. Porrer. We are not charging the full present market value.
‘Then he goes on to say:
I consider that we have been handling this in the right way. If, however,
the values arising from the present abnormal conditions are to be the. basis
of charge, of course the present fees would be doubled.
Mr. Tomiinson. That is no doubt a fair statement from his stand-
point; but I wish to emphasize the fact that conditions throughout
the intermountain region, so far as grazing is concerned, are wholly
abnormal, as they are in most industries. We believe that it would
be eminently unfair to attempt to adjust on the reserves the grazing
fees on the basis of the present abnormal and inflated charges now
being secured on private lands or on State lands, or on the Indian
land, Last year, I believe, in Kansas they charged as high as $18
a head, did they not, Mr. Tincher? You can rent grazing down
there now for half that sum. The Flint Hills of Kansas are con-
sidered to have the best and strongest grass in the country.
Mr. Trycuer. Here is the thing that appeals to me about it. The
committee had some trouble on the floor of the House of Representa-
tives in getting any legislation. Finally, as-I remember it, the
amendment was passed providing for appraisement by the depart-
ment and rental upon the appraised value. Personally, I can not
see why the stockmen should object to that, and why you prefer a
congressional committee to investigate it to a fair appraisement by
a fair committee of the Agricultural Department, but here is the
proposition that has always bothered me about the forest reserves
until you spoke this morning, every stockman that has come down
here to testify has objected to it on the basis that the stockmen out
there had some fundamental interest in the forests and that they
should be treated differently, that they had some priority of rights;
that is the way they testified.
Mr. Tomtrnson. I do not make that claim; we have not any
greater rights than anybody else, although many stockmen located
near Government land on exactly that theory. *
Mr. Tincuer. We are confronted with this proposition: The
representatives of the department come here and ask for big appro-
priations to build fences, roads, and so forth, and I am frank to say
that your testimony has been a revelation to me as to the expense
that the cattlemen have gone to in reference to fences. That. is
something that we did not consider very much. However. I can not
see now the objection to having an appraisement and the leasing
based on that appraisement. If the appraisement is unfair then it
would be time for the cattlemen to make their objections. I do not
think that you would get much results by taking members of this
committee out there and going over the forest reserves to decide
what the cattlemen should pay for the pastures.
ead te they would obtain a better
und i an they could by the witnesses com-
ing down here and trying to tell them. In answer to the question
why we object to a reappraisal, I do not believe the stockmen gen-
GRAZING FEES—-GUARANTY PRICE ON WHEAT. 9
erally do object to a reappraisal, but they do object to a reappraisal
pee made until the end of the so-called five-year grazing permit
system.
The Cuarrman. I read into the record the other day the Secre-
tary’s letter. I do not care to go over that again, but it was not
even intimated that the rate would continue for five years.
Mr. Tomrrnson. The Secretary gave the stockmen to understand
that the fee would not be disturbed during that period, but there
was no written guarantee and no contract.
' ane CrairMANn. He did not give them to understand that in the
etter ?
Mr. Tomuinson. Let me put it this way: Every stockman who
used. the reserves interpreted the understanding that way, whether
correctly or not.
Mr. Trncuer. You do not believe that the Government should be
bound by an implied understanding with the head of some depart-
ment, unless it was fair to everyone concerned ?
Mr. Tomurnson. No; I do not.
Mr. Trxcuer. Suppose the Department of Justice had a kind of
implied understanding with the packers that the consent decree
would probably end legislation and that they would be permitted
to live under the consent decree instead of there being legislation
to regulate the packers, you would not want Congress to be at all
embarrassed by that implied understanding?
Mr. Tomurnson. Not in the slighest. We are quite willing to stand
on the merits of our case. I do not want the committee to think by
any means that there was not a great deal of discussion and talk
by the Secretary of Agriculture and by Mr. Potter at the time that
this 100 per cent advance was put in effect. As is frequently the
case here in Congress discussion of any matter helps in determining
what was meant. The discussion that we had with the Secretary.
has pretty indelibly fixed in the minds of the stockmen and some
of us people that there was an intent on the part of the Secretary
and the Forest Service not to disturb the fees during the five-year
permit system.
Mr. Rainey. You think that the Government should carry it out
in gocd faith?
Mr. Tomiinson. That is the position of the stockmen and the
position to which I absolutely prescribe.
Mr. Rainey. Regardless of whether or not the Government loses.
a few dollars on the transaction?
Mr. Tomurnson. Yes, sir.
I have been a user of the grazing on the Rio Grande National
Forest, in the sense that I am connected with a company which for
two seasons grazed 5,000 sheep on that forest. We decided, after
two years’ experience, that we had enough of grazing sheep on the
forest and thought that it might be better suited for cattle. There-
fore we shifted out interests of grazing on that forest by putting
about 600 steers on the grass allotted to us, and after one year’s
experience we are firmly of the opinion that we would rather run
our steers on rent-leased pastures than on the forest reserves. Per-
haps, in all fairness I should explain that it was necessary for us,
to get on this forest reserve from our land holding in San Luis
10 GRAZING FEES—GUARANTY PRICE ON WHEAT.
Valley, to ship our cattle and sheep about 60 miles on a narrow-
gauge Taal, unload them this side of Creed, Colo., and then
drive them by a most tortuous trail into the forest. We lost so
many sheep by storms, predatory animals, and poisonous plants that
it was a distinct and decided financial loss to our company. We lost
many cattle by drifting over the mountains onto the other side of the
range, and we have not yet been able to find those cattle that we
lost. Our. loss on cattle will be close to 10 per cent up to date, and
our sheep loss was almost that heavy. I think you will find many
similar instances from other users of the forests in other sections
of the country. :
I wish, however, to make perfectly plain that those men who have
ranches near the forests and can turn their cattle out and they can
drift onto the forest reserves are in an ideal position to use them at
a minimum of expense, but, of course, everyone who uses the forest
is not situated right near them. A majority, in the very nature of
things, must live a distance away from the forest. ; :
Mr. Russy. Just a word. I think the situation is about this: This
committee prepared a proposition to put into the agricultural bill
on grazing, but it went out on a point of order, and then it became
necessary to so word our regulation as to make it in order. I pre-
pared that amendment myself and it was adopted in the House.
That amendment leaves it to the office of the Secretary of Agricul-
ture to do the appraising. It seems to me that if the Secretary of
Agriculture should decide to pursue that policy and appraise the
grazing lands in the forest reserves, that in making that appraisal
he would take into consideration all the difficulties that you have
enumerated here this morning. It would only be fair to the stock-
men for those things to be taken into consideration, and then, when
they have established the value of the grazing, taking into considera-
tion all of those factors which you have enumerated this morning,
it seems to me that would be a fair basis upon which to make the
charge. It would not make any difference to the stockmen whether
that was increased or not, because they would not lose anything;
they would simply pass it on, as you said a moment ago, to the con-
sumer, and the result would be that in the end you stockmen would
not be hurt, if you pursued that policy.
_, Mr. Tomurnson. What I said referred to whether they could pass
Mr. Rusey. Yes, sir.
Mr. Tomurnson. Of course, that brings up a big economic ques-
ur. ich I gs a ig that
r. Lomitnson. As to whether they could pass it on
Mr. Rusey. I doubt whether they could it ,
Mr. Tomutnson. So do I. eae
Mr. Rosey. I think it is fair to get a reasonable return for the
grazing in the national forests, and I do not believe we are getting
what we ought to have at the present time; I think we should have a
ne more.
Mr. Tomrinson. You bring out a point that I want to comment on
ep The officials of the Forest Service have frequently told us
that they had no disposition to make these advances and that the 100
GRAZING FEES—-GUARANTY PRICE ON WHEAT. 1]
per cent advance was in deference to the insistence of this committee
that they get more money out of the reserves, and that may explain
Mr. Graves’s present attitude. I do not know. But we have always
understood that the Forest Service thought they were getting along
pretty well with the grazing charges they had and the advances were
always the result of the attitude of this committee, and it was with
that view that I thought a subcommittee ought to go out. When
the 5-year permit system ends,’ I have no doubt that' the Forester
wl] inake his recommendations as to the fees and that the Secretary ~
of Agriculture will submit them to us so that we can have an oppor-
tunity to consider their reasonableness. That, however, is our Inst
cout of resort; we can not go beyond the Secretary. That is one of
the unfortunate things, I think, in the administration of the national
forests—there is no court review on it. We are therefore hoping
that some members of the committee might go out and familiarize
themselves with the conditions.
Mr. Rusey. I think it would be a good thing if the whole Agri-
cultural Committee spent a month out in the national forests, not
only on the grazing proposition, but all other things connected with
the national forests. At the same time, just to take a subcommit-
tee and send it out there to spend a week or so, looking around over
the grazing proposition, I do not believe that would be of any great
advantage. :
_ Mr. Tomzinson. Not if you spent a week—it would be a six
weeks’ tour; that is what it would have to be to be of any real value.
Mr. Lee. And they could look at the timber matter at the same
time?
Mr. Tomurnson. Yes, sir.
Mr. Rusey. The way that Congress has been running the last
8 or 10 years, we have not had any chance to go, because we have
had to stay right here on the job.
Mr. Tomurinson. I-am sure it would be very satisfactory to the
members of the committee if they could go out there and see the con-
ditions. They would then ‘know whether they should insist on the
Forest Service getting a little more money or not. At the pres-
ent time they have to take the recommendation of the department.
Mr. Tixncuer. A thing that appealed to me as never before was
when the Forestry Department was before the committee asking for
an appropriation. It developed that the stockmen were paying 70
cents for stock or 71 cents for stock for the grazing; that is, grazing
of live stock, a steer, and I wondered if it was just the right thing
for the Government to appropriate money to keep up a pasture, so
to speak, on which some people, only a small portion of the meat
producers of the United States, could pasture their steers for a fig-
ure like that, when other people who were helping to feed the people
of the United States would not get any such rates. JI wondered if
we could protect the cattlemen in Kansas and Texas where they do
not have the forest reserves, and how they could compete with a man
who, at the expense of the Government, could raise his cattle for 70
cents. You must remember that this committee at the same time that
we are discussing the charges for the pasture on the forest reserves
are spending everybody’s money in appropriations to keep up the
forest reserves. We are asked to appropriate a lot of money; that
12 GRAZING FEES—GUARANTY PRICE ON WHEAT.
is what brings on the discussions. There ought to be a fair and rea-
sonable charge to the stockman who uses the forest reserve, for the
reason that it is maintained by Government taxes and for the reason
that it is not fair for the Government to go into competition with
the other stock raisers and take their money to maintain the reserves
and charge the fellow who uses the reserve a less rate than it is
really worth.
Mr. Tomuinson. Consider for a moment, Congressman, that there
are to-day approximately 175,000 000 to 200,000,000 acres of our
range the stockmen can graze on without paying anything. — ;
r. Trncuer. Yes; we talked about that. We had that in the bill.
Mr. Rusry. One word. We were not going to go after you gen-
tlemen who pasture on the forest reserves alone; we felt that the
Government also ought to charge for grazing on the public lands
as well as on the forest reserves; but, of course, as the committee had
no jurisdiction, we could not do anything along that line.
Mr. Tomurnson. Take Congressman Tincher’s question. The for-
est reserves down in Arizona and New Mexico do not produce what
you might call fat cattle; they turn them off in the shape of yearlings
or two-year-old feeders, which are bought by the Kansas stockmen
and put on Kansas grass for fattening.
Mr. Tincuer. And some are bought by people in Iowa?
Mr. Tomirnson. A great many are bought by the Iowa people.
The bulk of the cattle comes off the reserves in the shape of feeders—
many come off fat, I grant you. We do not want to pay an unrea-
sonably low fee. Our position is that the present charge is amply
high under all the conditions on these reserves. However, to-day the
situation is abnormal, and it would be unfair for the Forest Service
to adjust their grazing fees on the present inflated and abnormal con-
ditions.
I thank you, gentlemen.
The Cuarrman. We are grateful to you, Mr. Tomlinson.
(Thereupon the committee proceeded to the consideration of ex-
ecutive business.)
Hovsr or Representatrvas,
CommitTer on AGRICULTURE,
Thursday, April 1, 1920.
_ The committee met at 2.30 o’clock p. m., Hon. James C. McLaugh-
lin of Michigan, presiding.
Mr. McLaveutin of Michigan. The committee will please come
to ‘Grose,
r. McKintey. Mr. Chairman, the gentlemen here are grain
dealers; Mr. Clement, from Texas, will make a statement before
the committee.
A eee of Michigan. We shall be glad to hear you, Mr.
STATEMENT OF MR. B. E. CLEMENT, WACO, TEX.
Mr. Crement. Mr. Chairman and i
} . Mr. Chair gentlemen of th
way of introduction I will state, as chairman of the one
this joint committee, representing six States and authorized and
GRAZING FEES—-GUARANTY PRICE ON WHEAT. 13
instructed by the several associations of these several States to bring
to the attention and urgent consideration of this honorable commit-
tee and Congress the facts which and by reason of which the grain
dealers of these several States sustained losses in the year 1917 by
reason of the fixing of the price of wheat.
I want to say to you that we come as plain business men. We have
no attorneys and we will have no lobbyists, but we come here to
present to you the cause of these grain dealers who sustained this
loss, believing that in presenting the facts to you you will see the
justice of making reparation to those who sustained those losses
without incurring needless and unnecessary expense to those who
sustained them.
As stated before, the six associations are cooperating in presenting
this matter and are assisted by the national association.
Mr. Younc. Please name the States you represent.
Mr. Cirement. Texas, Oklahoma, Kansas, Nebraska, Missouri, and
Illinois. There are some claims, too, that will be presented by the
Illinois association from Indiana, but Indiana has no official repre-
sentation.
Our losses were sustained by reason of the fact that the Govern-
ment fixed the price through a special committee that was appointed
in 1917 and, we believe, without authority of law, but we are not
questioning it from the legal standpoint, we are not raising that
question, but they fixed the price of wheat without the knowledge of
the grain dealer in time to protect himself.
Our claims will aggregate, we believe, about $5,000,000. We have
now compiled claims that aggregate something like $2,000,000. We
are prepared to show the committee in logical sequence the facts
upon which we acted due to which these losses were sustained.
The first matter that we desire to call to your attention is a state-
ment from President Wilson at the time that he transmitted his' mes-
ahve to Congress, asking for food control under date of May 20,
1917,
PRESIDENT OUTLINES PowERS DESIRED FoR Foop ConTroL—AUTHORITY TO PRE-
VENT UNDUE INCREASE IN PRICES OF Foop SoucHt.
President Wilson outlined the administration’s food control program in a
statement to-night, and declared the powers asked for the Government are no
greater than those other Governments at war have been compelled to take.
There is no intention, he said, to restrain or interfere with normal’ processes of
production.
The objects sought to be served by the legislation asked for are * * *
the prevention of all unwarranted hoarding of every kind and the control of
foodstuffs by persons who are not in any legitimate sense producers, dealers,
or traders.
Mr. McLavenurn of Michigan. May I ask what you are reading
from? ,
Mr. CrementT. This is a typewritten copy of a publication taken
from the Dallas News which was issued by the Associated Press.
Mr. McLaveuturn of Michigan. Do you know whether or not the
President addressed Congress on that subject or sent a message or
issued any official statement ? 5 of one
_ Mr. Cizmentr. The only way we know this is official is on the
assumption that what is put out by the Associated Press is authentic,
14 GRAZING FEES—GUARANTY PRICE ON WHEAT.
and this matter is what controlled the mind of the grain dealer in
proceeding with his business. : alae
Mr. McLaveuuin of Michigan. I do not wish to intimate that we
would not consider that authentic, but I wished to know.
Mr. Ciement. I thank you for calling my attention to that. We
will be glad to give you that.
Although it is absolutely necessary that unquestionable power Shall be placed
in my hands in order to insure the success of this administration of the food
supplies of the country, I am confident that the exercise of those powers will
be necessary only in a few cases where some sniall and selfish minority proves
unwilling to put the nation’s interest above personal advantage. * * *
The successful conduct of the projected food administration by such means
will be the finest possible demonstration of the willingness, the ability and the
efficiency of democracy, and of its justified reliance upon the freedom of
individual initiative. * * #*
It is of vital interest and importance to every man who produces food and
to every man who takes part in its distribution that these policies thus liberally
administered should succeed and succeed altogether. It is only in that way
that we can prove it to be absolutely unnecessary to resort to the rigorous and
drastic measures which have proved to be necessary in some of the European
countries.
Again, on the same day, there was another statement emanating
from Mr. Hoover that was disseminated by the Associated Press and
published in the same paper.
HOOVER WILLING TO SERVE WITHOUT PAY.
A statement given out by Mr. Hoover after the White House announcement
was made gave his plans for food administration and called on the country
to render voluntary assistance in carrying it out.
Mr. Hoover proposed that the Food Administration be divided into four
great branches, whose duties he defined in detail. Most of the work would
be carried out by men and women of the country on a volunteer basis.
“If this can not be done,” said Mr. Hoover’s statement, “I shall certainly
and willingly surrender the task to some other method of emergency. I hold
that democracy can yield to discipline, and that we can solve this food problem
for our own people and our Allies in this way and that to have done so will
have been a greater service than our immediate objective, for we will have
demonstrated the rightness of our faith and our ability to defend ourselves
without being Prussianized. * * *
“It has been the experience of all European food control that results can
be best accomplished by acting through or by regulation of the ordinary dis-
tributing agencies in the community, placing such restrictions which will cause
a minimum sacrifice on the part of the legitimate distributors, and will elimi-
nate broad national waste, unnecessary hoarding, and the sheer speculator in
foodstuffs. With the good will of the distributing community it is possible to
do this without disruption of the essential commerce of the country.”
Those two statements, coming from the highest authorities, had
the effect of causing the grain dealers to proceed with their business
in a natural, normal way. They had no reason to doubt that there
was going to be any such circumstance or legislation that would tend
or would authorize the fixing of a price. This was in May. Asthings
proceeded a bill was presented in Congress and debated there. There
arose from time to time various stories with reference to the fixing
of the price of wheat and other commodities that caused us to be
very unsettled. Those of us who were handling grain could not
afford to handle the new crop of wheat which was soon to begin to
move in Texas and those other States without having‘some definite
information as to whether or not the price might be fixed. The
secretaries of several associations did get into communication with
GRAZING FEES—GUARANTY PRICE ON WHEAT. 15
Mr. Hoover’s office. He was then located in Washington. He had
already selected the men who were to act with him in the discharge
of the duties under the food bill. When it was passed he was here and
had his organization all perfected, so that we took it up with him,
through our secretaries, with a view to ascertaining just what their
policy was going to be.
Here is a letter which was written to Senator Sheppard, in an-
swer to one forwarded to Mr. Hoover and answered by Mr. Barnes,
Mr. Hoover’s first man.
Mr. MeLaveutin of Michigan. Who was the letter written to?
Mr. Crement. This letter was written to Senator Sheppard in an-
swer to a letter addressed to Mr. Hoover’written by Senator Shep-
pard transmitting a letter received from Mr. Dorsey, secretary of
the Texas Association. Here is the reply.
Mr. Rurey. Have you a copy of the letter which was transmitted
to Mr. Hoover to which this was an answer?
Mr. Cremenrt. I have it not here, but I am sure our secretary has it.
Mr. Dorsey. Yes; I have it in Mr. Lanham’s office.
Mr. Rurey. We ought to have the letter to which this is a reply.
Mr. Crement. When this letter is read you will get it all.
My Dear Senator SHEPPARD——
Mr. McLaveuitn of Michigan. What is the date of that letter?
Mr. CLEMENT. vue 8. That is very important. July 3 it was.
Mr. McKintzy. What year—1917?
Mr. Ciement. Yes, sir.
Hon. Morris SHEPPARD,
United States Senate, Washington, D. C.
My Dear Senator SHEPPARD: I have your letter of July 2 and return you the
letter from Mr. Dorsey mentioned therein, and you may say to Mr. Dorsey that
no one appreciates more than I do that the present state of doubt and uncer-
tainty is menacing the whole grain trade and preventing a market for the
farmers’ purchases in grain, but until authority is given me to act I can not
act or definitely express a policy even. I think when we do get authority to
evolve a plan the plan will be such that Mr, Dorsey will feel that we have
taken every care to protect the established channels of trade and all useful
agencies. I have been especially careful to get the advice of experienced men
and I am relying on the desire for public service and the spifit of self-sacrifice
which has been shown by so many of our people just as is expressed in Mr.
Dorsey’s letter.
Yours truly, 4 oe
ERBERT VER,
By Jutius H. Barnes.
This latter was sent out to the entire trade, calling attention to
the attitude of the food control through Mr. Hoover’s office. This
letter, together with other publications, confirmed us in our view
that we were not taking any needless risk in handling the wheat
on the market. This was July 8. The wheat began to move in
Texas about July 1, and the movement spread on into Kansas, Mis-
souri, Oklahoma, Nebraska, and Illinois. As the movement pro-
ceeded, notwithstanding the bill pending in Congress, no framing
of which indicated that power was going to be conferred upon
anyone to fix the price of wheat—as the movement proceeded we
had continuous reports emanating from Mr. Hoover’s office to the
effect that this country’s supply of bread grain was something like
16 GRAZING FEES—-GUARANTY PRICE ON WHEAT,
400,000,000 less than would be required during the ensuing year
for the consumption of the American people and our allies. ;
With this information being disseminated through the publica-
tions of the country, the market naturally advanced. There was a
heavy demand for wheat at that time. The 1916 crop of wheat was
just about exhausted. There were less than 6,000,000 bushels of
wheat at the principal points of accumulation in the United States
at that time. The average annual carry-over in years gone by had
been something like 150,000,000 bushels. This comparison will give
you an idea of the distressing necessity for the immediate movement
of the crop of wheat of 1917.
Now, then, gentlemen, the wheat had to be moved. It had to be
moved on the basis of the market. ‘There was nobody authorized to
say that the price of wheat was going to be fixed. Those in author-
ity denied that they had the right, that they had the power, or that
they had the intention to fix the price of wheat, as I will show you
in a minute.
The wheat had to move on the basis of the market, and the market
was advancing daily. The market around August 11 was something
like $2.82 in Kansas City. The bill was passed on August 10. —
In the meantime, however, on. account of the great uncertainty
and the continued publication of suggestions that the price might
be fixed, or something of that sort, the grain dealers kept endeavor-
ing to get an expression as to whether that would be done. On July
10 here is the statement of Mr. Hoover; it was printed in the Dallas
News of July 10, 1917:
It is not the intention of the Food Administration to fix the price of wheat,
nor is it expected that it will have any such power.
Mr. Youne. The Dallas News is a paper of large circulation
throughout that part of the country ?
Mr. Crement. It has the largest circulation of any paper in the
Southwest. This is an Associated Press report of the words of Mr.
Hoover, in answer to continued and pressing inquiries as to whether
or not the price of wheat was to be fixed:
If the food bill passes Congress, however, we certainly will not stand for
speculative buying of wheat.
Now, I want to call the committee’s attention especially to the fact
that the wheat had been moving in Texas just about 10 days before
this expression was had, and from the date of this expression on July
10 until the bill finally was passed by Congress the market was ad-
vancing daily. No grain dealer could expect to buy wheat nor could
he buy wheat on any other basis than the market. No one would be
assumed to have tried to do such a thing.
We make the point that since we could not buy wheat on any other
basis than the market, and since Mr. Hoover had expressly stated
that he had neither the power nor the authority nor the intention to
fix the price of wheat, it was but natural to suppose that the grain
dealer would handle his business in the same way that he had been
handling it all the time. It was necessary to transmit the wheat into
the channels of trade. Many of the mills were absolutely without
stocks, and right at that moment, if the grain dealer had hesitated
to perform his natural and normal function as a grain dealer, you
GRAZING FEES—GUARANTY PRICE ON WHEAT. 17
can imagine what would have been the condition of the people of
the country.
There was a period of about five weeks during which, if the grain
dealer had not functioned, there would have been hunger in this
country ; because, as I have just stated, there were less than 6,000,000
bushels of wheat at the principal points of accumulation in this coun-
try at that time. The milling stocks were practically exhausted.
This was one of the reasons, therefore, for the rapid advance in the
market; the other was, of course, the fact that Mr. Hoover was circu-
lating the reports and making the statement that we were 400,000,000
bushels short of the necessities of the world at that time.
On August 11 Mr. Hoover made another statement. This is from
the Dallas News of August 11, 1917:
HOOVER ANNOUNCES AIMS OF FOOD LAW—SEEKS COOPERATION IN FAIR DISTRIBUTION
OF SUPPLY AND ELIMINATION OF WASTE.
WASHINGTON, August 10.
The American Government to-day assumed control of the country’s food sup-
ply with the signing by President Wilson of the administration food survey and
regulatory bills.
Formal announcement of Herbert C. Hoover’s appointment as Food Admin-
istrator was made at the White House soon after the measure was approved,
and to-night Mr. Hoover set forth the aims of the Food Administration in a
statement declaring its purpose will be to stabilize and not to disturb condi-
tions.
On August 11 he talked of stabilizing conditions. The first thing
that he did the day afterwards was to do anything else but stabilize;
it was to announce in the following language, published in the Dallas
News of August 13, dated Washington, August 12:
It must be evident to all thinking persons——
Mr. McLavcuutrn of Michigan. Now, you are quoting him?
Mr. Crement. I am quoting his exact statement, as published in
the News as coming from him:
It must be evident to all thinking persons that unless the price of wheat,
flour, and bread can be materially reduced we can not expect to maintain the
present wage scale of the country, and that we must not, in this social read-
justment, lose efficiency at a time when we can afford no such sacrifice.
Gentlemen, that was absolutely the first intimation that the grain
trade of this, country had that there was any intention to fix the
price of wheat. We knew already that under the bill passed by Con-
gress there was no authority conferred for fixing the price of wheat.
We acted absolutely on the basis of the supply and demand in a free
and open market in the handling of wheat.
Mr. Younc. Right there, wait just a moment. That was August
13 that you got this last information?
Mr. Crement. Yes, sir; August 13.
Mr. Youna. You are leading up to the matter of the losses that
individual dealers sustained through these steps that you mention.
Did you have an accumulation of grain on hand at that time?
Mr. Crement. No great accumulation; no, sir. But we had wheat
on hand. It is’impossible to handle wheat and not have it; that is
a physical impossibility. Somebody is going to have wheat. The
grain dealer was receiving the wheat from the farmers, and at that
173198—20—2
18 GRAZING FEES—GUARANTY PRICE ON WHEAT.
time, unfortunately, he had a little more than he probably would
have had under normal conditions, for the reason that the car supply
was so bad that it could not be moved. For that reason he probably
had more than he normally would have had with good freight trans-
portation facilities. ’
Mr. Trncuer. Of course that would depend on the locality. Some’
localities had cars, and some localities, I think, did not have any
more grain at that time than they had at that time of that month
in any other year. = ;
Mr. Cremunt. That is true; those conditions varied throughout
the country. Some places would have more than others, according
to how heavy the receipts had been.
You will understand that the greater part of the crop of wheat
moves, in Texas, in the month of July. And that year we had ideal
weather throughout all of the wheat-growing section of the country
for the movement of wheat in the month of July. It was very fortu-
nate that we did have it, because if we had had a rainy spell at that
time we would have had a very serious condition confronting the
country. ;
Now, then, I want to call your attention to just one more state-
ment by Mr. Hoover. It is dated at Washington, D. C., August 16,
1917, and it comes out under a statement entitled “To operators of
country elevators and warehouses.” Here is one paragraph of it:
It is quite possible that the Food Adininistration, or some agency of it, may
shortly approach you for a voluntary agreement by which you will retain
grain in your house upon payment of fair storage and other charges, and for-
ward such grain by direction of the Food Administration, if this seems neces-
sary, in order to insure mills of favorably placed sources of supplies. In
return, we could probably assure you against any loss in case of a decline in
the price of wheat or rye.
That was on the 16th. The day after the bill was passed by
Congress Mr. Hooyer was appointed. The next day thereafter, I
believe it was, a committee was appointed by the President, charged
with the duty of fixing the price of wheat. That committee was
composed of some professors from the East and representatives of
laboring interests in the East and, I believe, one Western man who
was not a wheat grower.
Mr. Tincuer. Who was that?
Mr. Crement. Mr. Funk, of Tlinois.
Mr. Wizson. I think it is only fair to him to say that he does
raise wheat, but not to any very great extent.
Mr. Dorsey. He raises corn.
Mr. Trncuer. Yes; he is a corn man. I know he raised more
wheat than usual during the war period, because I talked with him
aaa it. Now, who were these professors from these eastern col-
eges ?
Mr. Ciement. Dr. Garfield, and there was another one.
Mr. Dorsry. There was another one from Williams College.
Mr. Ciement. Two professors.
Mr. Witson. You do not mean to say those men are not good
judges of the wheat condition of the country?
Mr. Cremenr. I would absolutely say, unqualifiedly, they would
not be. [Laughter.]
Mr. Youne. I believe you also had a gentleman on that committee
from Georgia, according to my recollection ?
GRAZING FEES—GUARANTY PRICE ON WHEAT. 19
Mr. Cremenr. Is that so? I did not think there were but three
men on the committee.
Mr. Dorsey. Oh, yes; there were 11, I think.
Mr. Rusey. Was not the president of the Agricultural College of
Kansas a member of that committee?
Mr. Dorsry. Yes, sir; he was. He was the one that protected us
.from having the price fixed at $1.50.
Mr. Trncuer. You mean Mr. Waters, of Missouri?
Mr. Rusry. Waters, yes. He was formerly connected with the
Missouri College.
a Trncuer. He was the man who offered the resolution for $3
wheat.
Mr. Dorsry. And he tied them up from the 22d of August to the
3d of September to keep them from fixing it at $1.65.
Mr. Ciement. From the very moment that the announcement was
issued that the price of wheat was going to be fixed the price of
wheat began to decline, so that on the date that the price of wheat
was finally fixed the price of wheat was approximately a fixed price.
That is a fact.
Mr. Youne. Let us stop right there a moment. When this com-
mittee was appointed, clothed with the authority to fix the price of
wheat, that resulted in the normal flow of wheat, and the normal
market for wheat being disturbed, as I understand it, and people
kept out of the market ?
Mr. Crementr. Absolutely.
Mr. Youne. And the grain dealers did not dare buy ?
Mr. Ciementr. We could not afford to. The fact of the matter is
that those who had wheat at that juncture could not sell a bushel.
Mr. Youne. You dared not buy, and could not sell?
Mr. Crement. We dared not buy, and we could not sell. Between
the time they announced they were going to fix the price and the time
they actually fixed the price there was no wheat busiiess.
Mr. Rusey. How long a period was that?
Mr. Cremenr. That was between August 13 and September 3.
Mr. McLaueutin of Michigan. Are you not getting a little ahead
of your story. The law did not authorize the fixing of a price, but
authorized the determining of the minimum price; that is, that the
price should not go below that?
Mr. CLEMENT. Yes, sir. :
Mr. McLavueutin of Michigan. And that is all that this committee
did. Later there were some activities of the Grain Corporation, and
Mr. Hoover acting with them, that made that minimum price the
maximum price?
Mr. Crement. Exactly; I was coming to that point.
Mr. McLavueuuin of Michigan. That was what you were more
interested in than the matter of determining what the minimum price
should be, it seems to me.
Mr. Crement. Exactly; I am coming to that.
When this bill was passed and Mr. Hoover was appointed and the
Food Administration began to function, the first thing they did was
to create a milling division, through which they made contracts with
the mills, under which the mills could not buy any wheat from any-
body but the Grain Corporation, and the Grain Corporation would
20 GRAZING FEES—GUARANTY PRICE ON WHEAT.
not pay anything but the fair price that had been fixed by this com-
mittee. That resulted, therefore, in absolutely a fixed price. No
grain dealer could sell his wheat to a mill for any more than he
could get from the corporation. If he did, the mill had to report it
immediately, and pay for having done so. They had to remit, I
believe, 1 per cent. Where they bought wheat from a grain dealer
or farmer they had to pay to the milling division 1 per cent for having
done so. By that means they controlled absolutely the price of wheat.
There was no other agency through which to sell it, except the
Grain Corporation or those with whom they had contracted and
who had contracted to pay only the price fixed by this committee.
So there was no chance to get any more for the wheat. ;
Now, the grain dealers have figured their losses on the basis of the
actual cost of their wheat and the price they had to take for it when
they sold it to the grain corporation or the mills. They are not asking
for any-loss in interest. They are asking for no commission. _ They
are simply asking to be reimbursed for the actual difference in the
value of the wheat between the price they paid for it and the price
they got for the wheat when they sold it. The money loss is all they
claim.
We make the point that there was no other way for us to do busi-
ness except on the basis of the market. We make the point that those
in authority led us to believe that there would be no fixed price, that
there was going to be no attempt to fix a price, that there would be
no power to fix a price. And yet they did fix it. Acting in good
faith, performing our duties as loyal citizens of this country, we put
that wheat into the channels of trade at a time when it was of vital
necessity to the country to do so.
The fixing of the price resulted in loss to us. It was done with
good intent; we do not question that. We feel that those men who
were acting in the capacity of food administrators did what they
thought was right and for the common good. We question the wis-
dom of it, but they did what they thought was right, and in doing
so they caused the grain dealer a heavy loss. And the public profited
by it. To the extent that they made the loss for the grain dealer,
the public profited by it. The farmer profited by it because he got
the big price.
Mr. McLaveutin of Michigan. When did he get the big price?
Mr. Crement. He got the price we paid him for the wheat on the
advancing market.
It is very clear that the loss was occasioned absolutely by the fixing
of the price. It is equally clear that the public benefited by it.
Now we come to this committee and we ask you to give us relief, to
reimburse our dealers who sustained those losses.
The exigencies of the war made it necessary for the Government
to take over a great many factories in this country and operate them.
In doing so they reimbursed those people whose factories they took.
They paid them rentals. Where they made changes in the factories
they paid them damages, and they made good every loss sustained by
those whose factories they have taken.
The exigencies of the war made it necessary for the Government
to construct cantonments all over this country. In doing so they paid
a fair rental for the land used. After the cantonments were aban-
doned they sent their commissions around and arrived at the damaca
GRAZING FEES—GUARANTY PRICE ON WHEAT. 21
done to the property, with a view to settling for the same. In the
construction of those cantonments they paid the full market price to
the lumber dealers for the lumber that was used. When they em-
ployed labor to build those cantonments they paid the men three
times what they had been getting in industrial pursuits at that time.
Through the exigencies of the war it was necessary for the Gov-
ernment to make contracts for stupendous quantities of munitions,
guns, and var equipment of all kinds. Through the sudden termina-
ation of the war upon the signing of the armistice it was practicable
and wise to cancel those contracts. The Government did so and im-
mediately, I understand, reimbursed those people with whom they
had the contracts for their extraordinary loss arising therefrom.
Through the exigencies of the war the wool was taken from the
woolgrowers at less than its market value, and, I understand, there
is now pending in Congress a bill to give them relief for the differ-
ence between the market value of their wool and the amount that
was paid for the wool.
Through the exigencies of the war it was thought necessary to take
the railroads of this vast country over. The Government guaran-
teed a reasonable return on the investments, and in turning the rail-
roads back to their owners they gave further guarantees.
In the institution of the Food Administration the Government
gave them almost unlimited power over the grain interests of this
country. The grain dealers suffered greatly, in more ways than one.
They suffered, however, in common with all the citizens of this coun-
try, and they claim no exemption from the sacrifices they made. But
the Food Administration, through the fixing of the price of wheat,
to the extent that they cut the price under the price that was paid by
the dealer for the wheat, confiscated the property of the citizens.
It was nothing less than confiscation.
That same Food Administration entered into contracts with the
millers of this country, by which the millers did not lose one dollar
on the amount of wheat they had on hand at the time the Govern-
ment fixed the price.
Mr. Youne. How did they do that?
Mr. Crement. Through a contract by which they provided that
the miller should mill his wheat and sell his flour on the basis of
cost plus 25 per cent profit for his flour.
Mr. Younc. In other words, if all the wheat that you gentlemen
had on hand had been sold to the millers and in the millers’ posses-
sion there would have been no loss sustained by reason of the fixing
of the price on the wheat then in existence?
Mr. Crementr. Absolutely not.
Mr. Younc. But on that that was caught in your hands and that
had not been disposed of you suffered a loss?
Mr. Crement. Yes.
Mr. Youne. Whereas, as to that in the millers’ hands they gave
the millers 60 days in which to grind it on the basis of the price they
had paid ?
Mr. Crement. Yes, sir.
Mr. TrxcuEr. Why don’t you tell the whole story? Why don’t
you say they made a contract with the miller by which they let him
make 25 cents a barrel on the wheat he had on hand and the wheat
22 GRAZING FEES—GUARANTY PRICE ON WHEAT.
he would purchase, and so enforced that contract that they let him
make about $2 a barrel on the wheat he had on hand and the wheat
he purchased? And they went to-him with their auditors and found
the miller had profiteered, and let him settle with the Food Adminis.
tration for anywhere from 14 to 5 per cent of the amount he had
charged over that 25 cents a barrel. ;
Mr. Cuement. I was going to come to that, but you have told it so
much better than I could there is nothing left for me to®@ay along
that line. That was absolutely true. ;
But there was one exception with reference to the millers. There
were some millers who had more than a 60 day’s supply of wheat
who were compelled to ship out some of their wheat, and they took
the same loss that we did on their wheat, and they are also claiming
the loss.
Mr. McLavenuin of Michigan. They claim the same loss?
Mr. Ciement. Yes, sir; they are asking for the same thing. They
paid the high price too, and they forced them to ship it out.
Mr. Rusry. They had more than they could get rid of?
Mr. Crement. More than they could grind in the 60 days. The
contracts were all the same. There was uniformity in the contract,
but there was no uniformity in its enforcement and in the interpre-
tation of the rules under that contract, so that it dealt with some as
fish and with others as fowl.
Mr. Tincurr. The only cases that I know of where anybody in
Kansas got into trouble over that contract were two specific cases
where millers were cited to show cause why their licenses should not
be revoked, for two reasons; first, for paying too much for their
wheat, and, second, selling flour too cheap. I attended those hear-
ings. [Laughter.]
r. Witson. Don’t you think the licenses should have been taken
away from such reckless men?
Mr. Tincuer. They did come pretty near doing it.
Mr. Criement. In conclusion we will state that our whole case
rests upon the proposition that it was unjust to place a loss of that
kind under those conditions on the grain dealers. The second pro-
position is that we are entitled to recover either from the Treasury
of the United States or from the treasury of the Grain Corporation
the losses we sustained. I understand they have a $1,000,000,000
revolving fund and that they have made over $50,000,000 in the
operation of the Grain Corporation, and we know part of that money
is ours.
Mr. Trncuxr. That $50,000,000 is in better shape now, since Con-
gress has let them furnish that $50,000,000 worth of flour to the
Armenians.
Mr. Wirson. Would you be willing o wait for your money until
we get that money back from them? [Laughter.]
Mr. Ciement. No; I do not believe we would. I had hoped they
would not use all that profit in putting out that flour on the terms
at which they put it out over there.
Mr. Wirson. I understand the flour was not good flour, that it
was a very low grade of flour that they could not sell in this country.
Mr. Crement. I do not know about that.
GRAZING FEES—GUARANTY PRICE ON WHEAT. 23
Mr. Wuson. We did not know anything about it either, until after
this idea developed that that would be a good way to help the Ar-
menians.
Mr. Ciement. I think it is very humane to feed them.
We make the point that we used every diligence to find out what
was going to be the attitude of the Grain Corporation and the Food
Administration. We abosolutely left nothing undone. We dis-
charged our duty to ourselves as business men to find out what sort
of hazards we were taking. We could not learn. We could not
learn from those charged with the responsibility to advise us. We
have since talked to one of the zone agents, and he told us we must
have known they were going to fix the price of wheat, notwith-
standing Mr. Hoover said on July 10 they would not.
Mr. Tincuer. Who was that? I want to get that in the record.
Mr. Ciement. That was Mr. Piazzek. When we were in Wash-
ington at that time that was one of the very vital factors we dis-
cussed and one of the things we were fully agreed upon. And not-
withstanding that fact when we pressed them for a statement that
would have confirmed that objection, they gave us the opposite in-
formation. They did that because they knew they never would
have passed the bill through Congress if it had been the intention
of those vested with that power to fix the price of wheat. We know
that. You all know that was the reason.
We ask that we be reimbursed, on the theory that the Government
of the United States in the exercise of its power placed a loss upon
us that was in a measure confiscatory. We ask that we be reim-
bursed because the American people profited to the extent of our
loss. We ask to be reimbursed because we know that the farmers
received the money that we paid them for the wheat and that thev
did not suffer by reason of the fixing of the price on this wheat. We
ask that we be reimbursed because those who were charged with
the authority and the power to give us information failed to do so
in time to prevent us from making these. losses, and they were the
agents of the United States Government.
Mr. McLavucuiuin of Michigan. You have quoted, have you, all
the statements that have come to you that were made by Mr. Hoover
previous to August 10, 1917?
Mr. Crement. Yes, sir; and subsequently thereto.
Mr. McLaveutin of Michigan. I think you have not read all the
statements that Mr. Hoover made or that were attributed to him.
Mr. Cremenr. Oh, no; I misunderstood you. There were a great
many statements put out that we did not think would be pertinent
here. We know there were numbers of statements by him.
Mr. Dorsey. We have a number of letters.
Mr. Crement. We even have numbers of letters that we have not
presented here, showing they did take this very same view.
Mr. McLaveuurw of Michigan. Did you hear any statements that
were not of a reassuring character ?
Mr. Cirment. Only this
Mr. McLaventtn of Michigan (interposing). I mean, emanating
from Mr. Hoover?
Mr. Crement. Not from Mr. Hoover; no, sir.
24 GRAZING FEES—GUARANTY PRICE ON WHEAT.
Mr. McLaventin of Michigan. The Congress did, and that 1s
why it fixed the guaranteed price at $2; because Mr. Hoover was.
telling us about the joint buying agency, that the allied countries
and the United States would have only one purchaser of wheat, and
that he, Mr. Hoover, could make wheat $1.50 if he wished, and even
less
Mr. Cremenr (interposing). On an open market, did he assume
to say? :
Me McLaveutin of Michigan. He said he could do it if he were.
given control, and we felt that he was going to be given control.
Hence the bill was passed by which it was so arranged that the
price should not be below $2 per bushel. Those statements emanat-
ing from Mr. Hoover, or attributed to him, never reached you?
r. CLement. No, sir. This price that you guaranteed, however,,
Mr. Chairman, was for 1918.
Mr. McLaveuttn of Michigan. I was speaking of the reasons that
lead up to the fixing of the guaranty price, or the putting into the
law that the guaranteed price should be $2. ,
Mr. Cremenr. Our understanding of the guaranty price of $2.
was that it was to encourage the farmers to put in a large crop of
wheat for 1918 and 1919. .
Mr. McLaveutin of Michigan. You were speaking about being
misled by statements of Mr. Taoven, and I asked you if you had
quoted all the statements that you had heard from him, some of
which were not of a reassuring nature; and I was telling you of
statements that reached the Congress and influenced the Congress
to pass that nat gg tones provision—because they were afraid, after:
hearing what Mr. Hoover had said, that he would reduce the price
away down below what the farmers ought to be asked to sell their:
wheat for.
Mr. Crement. I am frank to say that we did not get that in-
formation. And if we had had any information that would indi-
cate that Mr. Hoover thought that he had the power to depress.
the price of wheat to $1.50 a bushel we would have known very well
that he was powerless to do that, with all the authority you wanted
to invest him with, if you did not give him the power to fix the
price. He could not have done it in a free and open market. The
people of this country knew we had less than 600,000,000 bushels
of wheat, and they knew the demands of the world.
Mr. Youne. Here is another suggestion that might be pertinent.
This was the crop of 1917 on which you gentlemen sustained this
loss. The food control law was passed after that particular wheat
crop had been made?
r. Cuemznr. Oh, yes; long after.
Mr. Dorsry. After it had been harvested.
Mr. Crement. It was being harvested.
Mr. Youne. As a mattter of fact, Congress in that food control’
law, where it authorizes the fixing of this minimum price, provided
that if this power to fix the price should be exercised it must be
exercised seasonably and in advance of seeding time. That is the
language of the bill, as I recall it. That would make the power, if’
exercised, apply to the 1918 and 1919 crops, and it could not relate-
back to the 1917 crop in which you gentlemen were dealing?
GRAZING FEES—GUARANTY PRICE ON WHEAT. 25
Mr. Ciement. Absolutely not.
Mr. Youne. I had overlooked the fact that they fixed the price
on the 1917 crop.
Mr. Crement. Yes, sir; it was the 1917 crop.
Mr. Trncner. You read an extract from a document sent out by
Mr. Hoover to all the grain dealers. I hope you will let that whole
document go into these hearings.
Mr. Crement. We will be very glad to do so.
Mr. Witson. You also spoke about receiving numerous communi-
pein from Mr. Hoover about this time on this subject. Have you
those ¢
Mr. Dorsey. We have those, but not here.
Mr. Witson. I do not know, but I think it would be a good thing
to insert them in the record in the proper place, if you have got.
them so you can do so.
Mr. Crement. We will furnish you everything we have got.
Mr. Wirson. I do not know what they are, but I suppose they are
along the same line and would undoubtedly be of interest to the
committee.
Mr. Youne. Let us get back a little bit to the marketing ques-
tion. You poutlenee represent the six States involved in this con-
troversy. Now, take Texas as an illustration of the conditions in
the other States. A farmer out near Fort Worth, for instance, pro-
duces wheat. His first market is the local buyer in his country town,
is it not?
Mr. Crement. Exactly.
Mr. Youne. Now, do you gentlemen, as dealers in grain, become
that first buyer or do you buy from the local merchants?
Mr. Crement. Well, sometimes we have elevators at different
places, and at other times we buy from the merchants. Except in
the Panhandle they handle most of the wheat grown in Texas.
Mr. Youne. The country merchants?
Mr. Crement. There are a good many little country elevators.
Mr. Dorsey. I will say, Mr. Young, we have 400 members in our
association, and more than 90 per cent of them are country buyers,
who buy from the farmers. ee
Mr. Youne. You gentlemen simply accumulate it in larger quan-
tities and put it into the commerce of the country? ;
Mr. Crement. Exactly. The smaller elevators do not get in touch
with the general trade like the grain dealer does. a
Mr. Younc. That system of buying from the farmer applies sim-
ilarly to the six States involved here, does it?
Mr. Crement. Exactly.
Mr. Youne. Now, as I understand it, with reference to this par-
ticular crop of 1917 you gentlemen kept in touch with the Federal
authorities so far as you could?
Mr. Crement. Absolutely. :
Mr. Youne. To see what was going on, so that as business men
you would know what to do?
Mr. Crement. Exactly. ;
Mr. Younc. Instead of making the market, you simply bought on
the market that was made by the combination of circumstances in
the entire world?
26 GRAZING FEES—-GUARANTY PRICE ON WHEAT,
Mr. Crement. Exactly. ' ee
Mr. Youne. And you put your money out in good faith in the
ordinary channels of doing business in that industry ? ;
Mr. Ciement. Exactly. We had nothing whatever to do with the
market. As you suggest, we followed the market. The law of
supply and demand made the market, and there was an excessive
demand, and naturally at that juncture when these reports were
emanating from Mr. Beover and the other authorities here, to the
effect that we were 400,000,000 bushels short of the required amount
of food the market was in an ascending state. :
Now, if you want any evidence in the world that the grain dealers
were acting in the best of faith, on evidence and information that
they believed to be true, why, look at the course of the market. If
there had been one dissenting view to the effect that there was going
to be, or that there appeared to be a probability of the fixing of the
price of wheat, you never would have seen an advancing market.
It would not have been possible. If we had not believed, not only
the grain dealers of these States but of all the States—if they had
not eat convinced that there was not going to be a price fixed on
wheat, they would have protected themselves.
Mr. Youne. Let me put this question now. This matter will be
gone into, so we had better get every suggestion on it. You gentle-
men, as grain dealers, knew the world conditions and knew the
cee of the world for wheat, and that there was a short crop of
wheat ?
Mr. Crmment. Indeed we did. .
Mr. Youne. Now, during that particular season, was there any-
thing in your method of handling grain that varied from prior
years? In other words, what I mean is this. Knowing of this world
shortage in wheat, were you gentlemen gathering. together great
volumes of wheat and holding it for the purpose of reaching the
ultimate higher prices that would necessarily come unless there was
son TetPIetiOn:; or were you simply going on as you would nor-
mally?
Mr. Cremenr. We did absolutely. And I will state this for your
information, that our claims are an aggregation of small claims.
There are no large claims among them. That proves conclusively
that there was no general holding of wheat. The. largest claim our
Texas delegation has is, I believe, $28,000.
Mr. Dorsry. There is one of $39,000, but that gentleman had 15
country elevators.
Mr. Crement. There was no disposition to hold the wheat.
Mr. Youne. The point I want to make is this: Was there any dis-
position on the part of those trading in wheat, whom you gentlemen
are representing, to hoard wheat?
Mr. Crement. Absolutely none.
Mr. Tincuer. The only fellow that was hoarding wheat was pro-
tected—the big miller.
Mr. Crement. You are absolutely correct about that.
Now, gentlemen, I believe I have presented all of the facts con-
cerning our case that I have to present. I do not believe there is a
single point I have not covered.
Mr. Tincuer. How many bushels of wheat did you say there were
on hand in the United States at the time this law was passed?
GRAZING FEES—-GUARANTY PRICE ON WHEAT. gt
_Mr. Crzment. There were less than 6,000,000 bushels in the prin-
cipal points of accumulation. Of course, there was some wheat
scattered around over the country.
Mr. Trxcuer. I mean in the hands of the producers.
Mr. Cremenr. Oh, I do not know how much there was in the
hands of the producers. Mr. Smiley, of Kansas, is a statistician,
and he can tell you more than I can. You are talking about wheat
of the 1916 crop?
Mr. Trxcuzr. Oh, no; I mean the 1917 crop.
Mr. Crement. Oh, that was all in their hands.
Mr. Tincuer. What was the amount of wheat produced?
Mr. Smiter. There were 663,000,000 bushels produced in the
United States in 1917.
‘Mr. Tincuer. There was a certain portion of that in the hands
of the mills that was sold on the basis of this market; that is, before
the Government confiscated the wheat for war purposes?
Mr. Crement. Exactly.
Mr. Trxcuer. I want to know this: What reason can there be, what
reasonable excuse can the Government offer now, having assumed the
attitude it did assume with reference to other war transactions that
you have so nicely enumerated to this committee, for not reimbursing
every man who had property in the form of wheat, that being the
raw material that they confiscated for the purpose of winning the
war? It would cost less than a quarter of a billion dollars to reim-
burse all of them, every man whose wheat was confiscated.
Mr. Crement. Our losses will aggregate, we think, $5,000,000.
You mean, including the farmers?
Mr. Tincuer. Yes.
Mr. Crement. We anticipated that you would ask that question,
sir
Mr. Trncuer (interposing). Well, they confiscated his wheat.
Mr. Ciement. Well, there was no way to tell whether or not he
would have received that price for his wheat if he had waited dur-
ing the year. I am frank to say to you that I believe he would have
received $5 for his wheat, absolutely. But here is the point: The
farmer has been compensated by reason of the guaranties for the
subsequent year. ;
Mr. Tincuer. He has had a price under the guaranty for the en-
suing year, as it turned out, of a little less than the cost of produc-
tion. But here is a cold fact: A farmer has a bushel of wheat. The
Government, by placing a certain power in the hands of certain
men, reduces the market price of that*wheat 60 cents. I do not
know how we could spend a quarter of a million dollars with any
more merit in the whole proposition. And I can not distinguish
between the farmer who has a bushel of wheat, when the Govern-
ment comes along and says, “ You have to take 60 cents off the
market price of that wheat,” and any one else that has a bushel of
wheat. You both came by it honestly. You are both engaged in a
necessary occupation for the success of the Government.
Mr. Cremenr. I will agree with you there, and I think the fixing
of the price of wheat at less than the market was indefensible. If
they did not think the price ought to go higher, then they ought to
have fixed it at the market value. As I have said, I do not believe it
28 GRAZING FEES—GUARANTY PRICE ON WHEAT.
was necessary. I do not think they had authority to do it, and I do
not think they ought to have done so. .
At the same time, the case of the farmer and the case of the grain
dealer are not analogous;‘there is no question about that. As to the
farmers, there have been compensating circumstances in connection
with the fixing of the price of wheat, and I believe the farmers have
been pretty well satisfied. And I will state this for your information,
although you probably already know it: Since the release of the mills
from this contract that you made reference to, to pay only the price
that the Grain Corporation would pay for the wheat, the market has
been an open market for the farmer, and he has gotten whatever it
would bring.
Mr. Rusey. And it has gone up?
Mr..CLement. Yes; the market has advanced. ;
Mr. Tincuer. There is not any question but that the price of that
one product was kept down.
Mr. Ciement. Yes, sir; absolutely; but only for that one year
of 1917. ;
Gentlemen, we have not had anybody prepare a bill for us, and we
have not attempted to prepare any bill ourselves. We came here for
the purpose of presenting these facts to this committee, with the
hope, and, I might say, with the expectation that this committee
would see the justice of giving us relief and finding a way to do it.
We want to express our grateful appreciation of your kind atten-
tion and your courtesy in having arranged this hearing at this hour
for us, and we shall be very grateful if some one on the committee
will prepare a bill that will give us the relief that we deserve, and
that, I believe, you will agree we deserve.
It may be that such a bill should provide for a special commission
to determine the correctness of the claims that we will present.. We
are prepared to furnish the evidence to show that these losses were
sustained. We have come here merely to present the facts showing
how these losses were sustained, so that if you agree with us that we
should have relief you may provide a means by which we can prove
these things to the satisfaction of the Government, and then arrange
for the protection of them after they have been proved.
Mr. Witson (presiding). We are very much obliged to you for
your intelligent and illuminating statement, and we will be very
glad to hear from anyone else you have.
Mr. Youne. You might add that we can see from his statement
why they have not employed an attorney to present their case. It
has been very ably presented.
Mr. Witson. Whom else have you?
Mr. Ciement. I do not believe there is another member of this
delegation that expected to present anything in addition to what I
have presented. If there is any member of the committee that wants
to add anything, I should be very glad to have him do so.
Mr. Youne. I understan you gentlemen have already talked the
situation over among yourselves, and you are simply the spokesman
for the rest?
Mr. Ciement. Yes, sir; for the entire committee. I am the spokes-
man, as chairman of the committee.
GRAZING FEES—GUARANTY PRICE ON WHEAT. 29
Mr. Tincuer. Mr. Clement, I do not like to ask you for anything
you have not already stated, but you have had this matter up with
Mr. Barnes, have you not?
Mr. CiemeEnt. Yes, sir.
Mr. Tincuer. That is all I wanted to ask you. If you want to tell
us about it, all right.
__Mr. Crement. That does not embarrass me a bit—not one particle.
We conceived the idea that if we could come to this committee with
an indorsement from the Grain Corporation it would be a good thing
and that it would have weight with this committee. So we went up
to New York and we called on Mr. Barnes and we laid our case be-
fore him. He told us very courteously that we ought to have been
advised, that we ought to have known that this legislation was pend-
ing in Congress, and that they had it in mind to fix the price of
wheat. And when we showed him his letters and the communications
from Mr. Hoover and from his own office, why, he intimated that
we ought not to have believed what he said.
Mr. McLaveuutn of Nebraska. That is probably correct. [Laugh-
ter. |
Mr. Crement. That was the only conclusion we could reach.
Mr. McLavenuw of Nebraska. But you gentlemen did not know
‘that at the time you received the communications?
Mr. Crement. No; we felt that they were given to us in good
faith. We realize now they were sent to us to mislead us. We did
not know that the Grain Corporation and these men that Mr. Hoover
had chosen for his assistants had come to Washington and conferred
with one another and agreed it was necessary and proper to fix the
‘price of wheat for 1917, and that it was necessary and proper also
to conceal the fact that they intended to do it.
Mr. Tincuer. As far as I am concerned, I want to assure you that
vou are not laboring under any handicap by reason of not having
the indorsement of the Grain Corporation.
Mr. Ciement. Gentlemen, we concluded that when we called upon
a man and laid the facts before him and had his own documents to
convince him that he was wrong, if he could not see the justice of our
position we did not think his opposition was worth a continental.
That is why we felt that way about it. I have very little respect for
a man that has not any conception of justice, and we do not think he
has.
a Wuson. Is Mr. Barnes the only man that you saw in New
ork?
Mr. Crement. Yes, sir; he was the only man we saw.
Mr. Young. I take it from your remarks that you gentlemen and
the producers are all thoroughly convinced that price-fixing is a
failure all along the line?
Mr. Ciement. Well, I have a little flow of language that would
express it—chiefly descriptive
Mr. Witson (interposing). Is it parliamentary ?
Mr. Ciement. Well, I never swear, but I would say you are
damned right. [Laughter. ]
Mr. Witson. There are a number of gentlemen here from Illinois.
J wonder if any of them would like to be heard.
30 GRAZING FEES—GUARANTY PRICE ON WHEAT.
Mr. Mzrcaur. I do not think we could add anything. We have
all talked this matter over before submitting these facts, and have
tried all along the line to be just as brief as possible, and present them
to you gentlemen to show you that our position, as we feel, is one of
justice and right. But, for one, whenever I have anything to do with
buying a crop of grain while we have a Grain Corporation, I am
going to get mea Ouija board. [Laughter. ] ;
Mr. Tincuer. Do you want to say anything, Mr. Smiley? ;
Mr. Smmxy. No; I think the gentlemen representing our commit-
tee have covered the matter very fully. We have all discussed the
matter prior to going to New York City, since being in New York
City, and since arriving here, and Mr. Clement has covered the
ground thoroughly. ® -
As to what you stated with reference to the farmers sustaining a
loss, I quite agree with you. Although I am not authorized to speak
for them, I am in touch with approximately 200 farming organiza-
tions in Kansas and southern Nebraska—the jurisdiction of our
grain dealers association extending up to the Platte River in Ne-
braska—and I believe they feel they should be reimbursed to the
extent of the value of the wheat at the time Mr. Hoover made this
infamous announcement.
Mr. Rusry. We have two or three gentlemen here from Missouri.
I do not know whether they want to be heard or not.
Mr. Curr. We represent the Missouri Grain Dealers Association,
composed of about 400 grain dealers and small elevator men in our
State. We have thought this thing over very carefully in committee
meetings with the several States. Mr. Clement has presented our
combined ideas, and we have nothing further to add.
Mr. Witson (presiding), Does any one else wish to be heard? If
not and if there is nothing else to be done, I presume we might ad-
journ. I will say, gentlemen, that we will take this matter under
consideration, and you will hear what is done. I understand that
we are to adjourn until 10 o’clock to-morrow morning, to hear At-
torney General Palmer in the committee room of the Committee on
the Judiciary.
(Thereupon, at 3.35 o’clock p. m., the committee adjourned to
meet at 10 a. m. to-morrow, Friday, April 2, 1920.)
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