The export-debenture plan first received congressional consideration in the McKinley-Adkins bill of 1926. It received its greatest publicity in the Jones-Ketcham bill of 1928 following the vetoes of the McNary-Haugen bills. The schemes embodied in these bills were rather complex, but in effect they provided for the use of tariff revenue to pay export bounties on certain agricultural commodities: Wheat, corn, tobacco, cotton, hogs, and cattle. In the final bill the bounties on most commodities were made equal to one-half of their respective tariff rates. Congress did not enact this plan into law.

The domestic-allotment plan was proposed as an alternative to the export-debenture and equalization-fee plans. It was designed primarily to avoid the stimulus to expand production that some farm leaders thought was inherent in the other two plans, particularly the export debenture. The basic idea was to raise the price of the domestically consumed portion of each crop by the amount of its tariff duty, the surplus above domestic consumption requirements to be sold abroad at the prevailing world price. Farmers were to be given certificates permitting them to sell part of their crop (the domestic allotment) in the domestic market. These certificates or "rights" were to be sold to processors who would be required to have certificates equal to the total amount of any commodity which they proposed to sell in the domestic market. On production in excess of domestic allotments, farmers were to be given no certificates and were to receive only the world price. A modified plan, in which the transferable certificates were replaced by benefit payments which were to be paid on the domestic allotment out of the proceeds of a processing tax and which were contingent on limitation of output, was embodied in the Hope-Norbeck bills of 1932.

THE SEARCH FOR A MARKETING APPROACH

During the period 1929-32 the McNary-Haugen type of approach was not pressed by its sponsors in the face of the Federal Government sponsorship of a marketing approach. The Agricultural Marketing Act of 1929, which set up the Federal Farm Board, had as its broad objective the placing of agriculture on a basis of economic equality with other industries through the orderly production and marketing of farm products. The major provisions of the act dictated an attack in the marketing sector. The Federal Farm Board encouraged cooperatives to unify the process of agricultural marketing with the support of loans from a 500-million-dollar revolving fund in the hands of the Board. At the outset the Board apparently viewed the development of a system of cooperative marketing associations as its principal function.

But with the drastic decline of agricultural prices which began in the latter part of 1929 the Board shifted its emphasis to the stabilization of agricultural prices. This was attempted first by making loans to cooperatives to enable them to hold their products from the market, and later by the organization of stabilization corporations for wheat and cotton. These corporations not only purchased commodities directly in the market but also took over supplies held by the cooperatives. These corporations were originally intended to be creatures of the cooperatives themselves, but, although they were legally organized as cooperative-owned enterprises, the Farm Board

took over the actual financing and operation and assumed all the risks.

The Board lost heavily upon commodities held through the stabilization corporations and concluded that gains from holding could be realized only if production was held in line with marketings. This experience was very influential in making production control a feature of the Agricultural Adjustment Act of 1933.

With the deepening of the agricultural depression, and its final development into a major factor in the general economic collapse, all of the currents which had been flowing in the direction of the formation of a strong agricultural policy converged. The result was the enactment of the Agricultural Adjustment Act of 1933.

These different currents included the excessive swings in agricultural prices, exploitation and destruction of soil fertility as a result of unlimited competition at low price levels, losses of export markets, and disadvantages to agriculture resulting from increasing organization of industry through the growth of corporations.

Powerful impetus to the plan of action outlined in the Agricultural Adjustment Act was given by the experience of the Federal Farm Board. After the failure of its attempts to maintain farm prices and farm income without having any control over supply, the Farm Board itself concluded that organization of farmers to give them some degree of production control would be an essential part of any farm program that could have a real chance of lasting

success.

As a result of the various needs and movements outlined in the foregoing pages and of the experiences of the Federal Farm Board, and of farmers' marketing cooperatives, in attempting to grapple with economic forces without any adequate legal mechanism, the Agricultural Adjustment Act was passed by Congress. It was one of the first acts in the special session which was called by President Roosevelt at the beginning of his administration and it was signed by the President on May 12, 1933.

CHAPTER 2

SUMMARY OF RECENT ADJUSTMENT

LEGISLATION

Consideration of the various proposals for meeting the problems outlined in the preceding chapter was overshadowed early in 1933 by the immediate need for coping with the national economic emergency which had arisen. Consequently, the major farm legislation embodied in the Agricultural Adjustment Act, approved May 12, 1933, was designed first of all to deal with the Nation-wide agricultural emergency, and in this way help to meet the general economic crisis confronting the Nation.

The new Agricultural Adjustment Act sought to achieve its objective by directly bringing about an increase in farm buying power. This was to be done to the end not only that the farmers' economic plight might be relieved by an immediate increase in income but that urban industries as well might benefit by a subsequent increase in farm purchases of factory goods.

In adopting means to attain this end, Congress was undoubtedly strongly influenced by the results of the Federal Farm Board experiment, which indicated to its own members and others that a program of lifting prices unsupported by some form of production control could not be permanently successful. Production control, therefore, was the dominant feature of the first Agricultural Adjustment Act.

I. THE AGRICULTURAL ADJUSTMENT ACT OF 1933 Under the provisions of this act the Secretary of Agriculture was empowered to provide for a reduction of acreage, or a reduction in the production for market, or both, of any basic agricultural commodity through agreements with producers or by other voluntary methods.

To accomplish this the Secretary could make benefit payments to producers who reduced their acreage or production for market of basic commodities under agreements with the Secretary. He could also make payments on that part of the production of any basic commodity required for domestic consumption. The commodities designated as basic in the act were cotton, wheat, tobacco, field corn, hogs, rice, and milk and its products. Cotton producers who signed acreagereduction contracts were given the option of purchasing from the Secretary an amount of cotton not in excess of their estimated reduction in production at the price at which the Secretary purchased cotton from other governmental agencies.

As another method of increasing farm purchasing power, the Secretary was authorized to enter into marketing agreements and to issue

licenses to processors, associations of producers, and others engaged in the handling of any agricultural commodity in interstate or foreign commerce. These licenses aimed at better returns to growers and the elimination of unfair trade practices or charges that tended to prevent the restoration of normal economic conditions in the marketing of such commodities.

The act was financed through (1) an appropriation of $100,000,000 and (2) an excise tax levied on the processing of any basic commodity on which benefit payments were to be made. The tax funds could be used for the expansion of markets and the removal of surplus agricultural products, as well as for benefit payments and administrative

expenses.

THE BROADENING AMENDMENTS OF 1934

In 1934 a number of laws were passed modifying and broadening the scope of the original Agricultural Adjustment Act. In the amendments, particularly in those concerning sugar, and in supplementary statutes as to cotton and tobacco, the marketing approach to the adjustment problem again received considerable emphasis.

The Jones-Connally Cattle Act. The first of the 1934 amendments was the Jones-Connally Cattle Act, approved April 7. This act (1) added cattle, peanuts, rye, flax, barley, and grain sorghums to the original list of basic commodities; (2) authorized an appropriation of $200,000,000 to provide for surplus reductions and production adjustments in the dairy- and beef-cattle industries and to support and balance the markets therefor; (3) authorized the appropriation of an additional $50,000,000 to be used for relief purchases of dairy and beef products and for the elimination of diseased dairy and beef cattle. Under this act the A. A. A. program for the elimination of cattle afflicted with tuberculosis, Bang's disease, and mastitis, and the 1934 Drought Emergency Livestock Purchase Program were begun.

The Bankhead Cotton Act.-The Bankhead Cotton Act, approved April 21, 1934, supplemented the original Agricultural Adjustment Act by adding to the voluntary acreage-reduction methods a control over the volume of cotton marketed. It imposed no actual limitation upon the growing of cotton but did provide for establishment of a national quota of cotton marketing and for apportionment of this national quota among individual farms. Ginning of cotton from a given farm in excess of the tax-exempt allotment made to that farm was subject to a tax. Proceeds from the tax were to be used in connection with the cotton-control program. The allotments of individual growers were smaller than the production of those growers had been during the base period fixed in the act.

The act was to remain in force for the crop year 1934-35, and 1935– 36 as well, if the President found and declared that the economic emergency with respect to cotton continued and if two-thirds of the cotton producers approved by referendum. It was in force for these 2 years, but was repealed by the act of February 10, 1936, as amended March 2, 1936.

The Kerr Tobacco Act.-Similar in intent to the Bankhead Cotton Act was the Kerr Tobacco Act, approved June 28, 1934. It added to the voluntary acreage reduction method a control over the volume