PRINCIPAL CLASSES OF VIOLATIONS

In the case of hogs, there were three principal classes of violations: (1) Production of hogs in excess of the contract maximum; (2) purchase of feeder pigs from noncontract signers to fill up producer's allotment before the limitation on feeder-pig purchases was lifted on August 1; and (3) purchase of an excessive number of feeder pigs from signers before the purchase limitation was lifted.

Excess pigs produced by the signers' sows were given to relief agencies in most cases, in accordance with the compliance options offered under the program. In some cases where only a few excess pigs were involved, there was deducted from the producer's adjustment payment the sum of $20 for each pig in excess of his allotment.

V. BENEFITS TO GROWERS RESULTING FROM
PROGRAM

What effect did the 1934 corn-hog production-adjustment program have on production and prices? Did it aggravate the conditions which followed the drought?

The total reduction in hog production among all farmers from 1934 litters, according to the Government report of December 1, 1934, is expected to be about 25 million head below the average production of recent years. The aggregate adjustment required of producers under the 1934 contract was approximately 13 million head. A little over one-half of the total expected reduction, therefore, is represented by the contract requirements.

The additional reduction beyond contract requirements is the result of action on the part of both signers and nonsigners to adjust to the feed shortage occasioned by drought in some sections in 1933 and by the general drought in 1934.

TABLE 23.-United States average farm price of hogs per hundredweight, processingtax rate, and fair-exchange value, by months

1 Monthly average farm price as of the 15th day for each month reported in The Agricultural Situation, issued by the Bureau of Agricultural Economics, U. S. Department of Agriculture.

Processing-tax rate of 50 cents per hundredweight became effective Nov. 5, 1933; subsequently increased to $1 per hundredweight, Dec. 1, 1933; to $1.50 on Feb. 1, 1934; and finally to $2.25 per hundredweight on Mar. 1, 1934, where it has since continued. Benefit payments to farmers are made out of the processing-tax collections, all of which have been appropriated to the Secretary of Agriculture.

Fair exchange value computed by taking index of average prices farmers pay for each month (expressed in percentage of pre-war), times $7.22 per hundredweight, the average farm price of hogs during the August 1909-July 1914 period.

Hog slaughter has only recently begun to reflect the 1934 adjustment in both spring and fall farrowings. Therefore, it is not yet possible to determine the final effect of the adjustment program on either price or income. This adjustment certainly will influence marketings until well along in 1935. There are indications thus far that both price and income may be favorably affected.

Between the fall of 1933 and the fall of 1934, the value of hogs per hundredweight advanced materially. (See table 23.)

This upward trend in price represents a gradual fulfillment of the primary objective of the Agricultural Adjustment Act-raising and maintaining the unit value of basic commodities, including corn and hogs, to a fair-exchange level. (See figure 21.) The level chosen is that at which a bushel of corn or a hundredweight of live hogs at the farm will have the same exchange value with respect to articles farmers buy that it had in the pre-war period (1910-14). In December 1934 the fair-exchange value of hogs on this basis was $9.10 per hundredweight.

FIGURE 21.-Farm price of hogs and index numbers of prices paid by farmers, 1910 to 1935.

PRONOUNCED ADJUSTMENTS IN CORN PRODUCTION

At the same time that material adjustments were being made in hog production in 1934, and prices were resuming an upward trend, still more pronounced adjustments were taking place in corn production. (See table 24.)

The total area planted to corn in the United States in 1934 was about 92,526,000 acres; that is, about 13,000,000 acres less than the 1932-33 average of 105,500,000 acres. Practically all of this reduction was acreage taken out of production under contract with the Secretary of Agriculture.

Those who did not sign contracts represented about 45 percent of the corn acreage and about 40 percent of the annual production in the United States. Apparently those nonsigners made no significant reduction in their total corn acreage below the 1932-33 average. The average reduction among signers, on the other hand, was nearly 24 percent. This is more than the minimum requirement because adjustments up to 30 percent were made by some producers.

TABLE 24.-United States average farm price of corn per bushel, processing-tax rate, and fair-exchange value, by months

1 Monthly average farm price as of the 15th day in each month reported in The Agricultural Situation, issued by the Bureau of Agricultural Economics, U. S. Department of Agriculture.

* Processing tax at rate of 5 cents per bushel became effective Nov. 5, 1933.

Fair-exchange value computed by taking index of average prices farmers pay for each month (expressed in percentage of pre-war) times 64.2 cents per bushel, the average farm price of corn during the August 1909 to July 1914 period.

DROUGHT CUT CORN CROP

If yields had been normal in 1934, the total corn production on the adjusted acreage would have been held to about 2,200,000,000 bushels; that is, between 350,000,000 and 375,000,000 bushels under the 2-year average production of approximately 2,600,000,000 bushels. This reduced total production would have been in good balance with requirements, in view of the corresponding adjustment in hog numbers planned simultaneously.

On account of the severe drought, however, the 1934 corn crop, instead of being about 2,200,000,000 bushels, actually was about 1,320,000,000 bushels, or nearly 1,200,000,000 bushels under the 2-year average. Thus in 1934 nearly three-fourths of the actual change in corn production from the 2-year average was due to the drought.

In the face of the unexpected and severe drought the corn-hog program, instead of intensifying the drought effects, proved to be of material help in easing the resulting shortage of feed. Without the control program, farmers would not have made so large an advance adjustment in hog farrowings as they actually did make in the spring of 1934, and the shortage of feed would have been more acute when drought conditions developed. Heavier liquidation of stock at lower prices would have taken place and the loss to producers in labor and money already invested in pigs would have been extremely large.

ADJUSTMENT PREVENTS SURPLUS PRODUCTION

After June 8, because of the emergency feed situation created by drought, contract signers were permitted to plant on other than contracted acres, for roughage purposes not to be harvested for grain, an acreage of corn in excess of the total corn acreage permitted by the contract. On June 30, in view of the increasing intensity of drought, the same plantings were authorized on the contracted acres.

The eventual production of feed from these various emergency plantings tended to offset to a large extent the 200,000,000 bushels of corn which, at the low 1934 yield, might have been raised from the 13,000,000 contracted acres if no control program had been in effect. Many of the emergency crops planted were more drought-resistant than corn and produced more feed than corn would have produced. Much of the land lying idle or being summer-fallowed had conserved moisture and was in good condition to produce quick-growing forage

crops.

This is not to suggest that the experience in 1934 has proved acreage control is ineffectual. Instead, it demonstrates the beneficial effects of adjustment programs in drought periods as well as in years of more normal weather. It is true that a substantial change in acreage is a minor factor in the change in total production during a drought year, but it is also true that, in the event of normal weather, acreage control very effectively prevents surplus production and would have done so under normal conditions during the past year.

FIGURE 22.-Farm price of corn and index numbers of prices paid by farmers, 1910 to 1935.

As a consequence of the sharp drop in all crop-production prospects, corn prices continued to advance through the spring and summer months of 1934 at a somewhat faster rate than livestock prices. The average value of corn per bushel at the farm at the close of 1934 stood at about 85 cents as compared with 44 cents at the beginning of the year. (See figure 22.) As already pointed out, the drought was the predominant factor affecting supplies of corn.

PRODUCER'S INCOME RECEIVED IN TWO PARTS

The increased income resulting from the adjusted corn and hog production is coming to contracting producers in two ways-first, as a direct return from the sale of the commodity at the open-market price; second, in benefit payments derived from the proceeds of the processing taxes, appropriated to the Secretary of Agriculture.

The release of purchasing power made possible by corn-hog checks eventually works back through wholesale houses and transportation agencies to factories and to workers' pay rolls. There is an impetus to reemployment all along the line. Agricultural adjustment has

effectively demonstrated during the first year that although it is primarily in the interest of farmers, it also is promoting the general welfare.

An accomplishment in 1934 which ranks with importance in the raising of corn and hog values through adjustment was the Nationwide organization of corn-hog producers into county control associations. Over 1 million farmers thus were brought into direct contact with broad problems affecting their business, and made more keenly aware of the nature of these problems.

They discussed the loss of the export market, the facts underlying this loss, and its consequences. They learned that production control is essential and that only the producers themselves, working together, can effectually exert this control. During the year, they saw production adjustment effectively demonstrate its capacity for raising prices.

The framework of the vast producer organization is made up of the thousands of local committeemen elected by farmers from their own ranks. There are 2,182 county corn-hog control associations throughout the United States today. It is estimated that there are not less than 20,000 community committees and about 75,000 community committeemen.

Despite many necessary first-year expenditures for equipment and extended committee work, the average total county budget for completing the 1934 program in the States will run in the neighborhood of 4 to 5 percent of the contract signer's benefit payments. Administrative expenses vary from county to county, however, since the budget within each county is determined by the board of directors of its own control association to suit its particular needs.

VI. PROCESSING TAXES

Benefit payments under the corn-hog adjustment program, and expenditures in the emergency and supplemental purchase operations, have been derived from funds appropriated to the Secretary of Agriculture for such uses, under the provisions of the Agricultural Adjustment Act, which appropriates to the Secretary the proceeds of processing taxes on basic commodities, and makes available to him other funds from direct appropriations, as well.

The rate of the processing tax on hogs was set at 50 cents per hundred pounds, live weight, when the tax went into effect on November 5, 1933. This rate was changed to $1 on December 1, 1933, to $1.50 on February 1, 1934, and to $2.25 per hundred pounds, live weight, on March 1, 1934.

The rate of the tax on corn, which also went into effect on November 5, 1933, was set at 5 cents per bushel, and has not been changed. It was at first expected that the corn processing tax rate would probably be increased on December 1, 1933, to 20 cents per bushel, but this increase was indefinitely postponed when subsequent investigation indicated that such increase would tend to cause a reduction in the consumption of corn and would tend to result in the accumulation of surplus stocks. The corn processing tax, therefore, was continued unchanged at 5 cents per bushel.

Total tax collections on the processing of corn during the first marketing year beginning, for tax purposes, on November 5, 1933,