commodities, as recently as September food was still the cheapest component of the cost of living, standing at 84.4 percent of the 1924–29 average as compared with 86.5 percent for all living costs combined. As I understand the purpose of the pending bill, it is to cut off the inflationary spiral before it really gets started. The administrative effort will necessarily be to maintain a fair relationship among prices, and a practical margin between prices and costs. If a producer's prices are fixed at a given level, obviously his costs. cannot be permitted to rise so high as to wipe out his net income. One advantage of the parity formula is that it reflects changes in the costs of production. The prices of industrial goods bought by farmers include the wages paid by industry, and a change in wage rates sufficient to change the price of the item will change the index of prices paid by farmers.

Section 3 of the bill provides that no price ceiling shall be established on any agricultural commodity below 110 percent of the parity price or comparable price for such commodity, or the market price prevailing for such commodity on July 29, 1941. There has been a good deal of discussion of this 110 percent figure.

Farmers have been accused of greediness; of not being content with parity. Let me say here and now that accusations of that sort are, in my opinion, unjustified and unfair. The farm priceceiling provision of this bill is certainly no basis for such a conclusion. There is a perfectly practical and obvious reason for stipulating that no ceiling should be imposed on farm products at less than 110 percent of parity, rather than exactly at parity. As every farmer knows, farm products prices fluctuate every day. The supply of a commodity coming on the market changes from day to day, and the demand changes from day to day. Prices fluctuate accordingly. Price fluctuations may be desirable to stop the flooding of markets at certain periods. As a rule, daily price fluctuations are relatively small, but they ought to be allowed for, in order to keep to a minimum the amount of administrative supervision necessary. If ceilings were placed exactly at parity, the daily fluctuations in the market would necessarily all be between parity and some lower figure, and as a result, farmers could not possibly average parity. The real purpose of restricting ceilings to a point somewhat above parity is to make it reasonably sure that all farmers will have an opportunity to get parity. After all, it happens to be the expressed policy of Congress and the administration to achieve and maintain farm prices at parity.

In order that the intent of section 3 shall be clear, and in order that the instructions for administration of the section may be as specific as feasible, I should like to suggest to the committee certain clarifying changes in the language, as follows:

SEC. 3. (a) So as not to prevent the season's average prices for any agricultural commodity from averaging 100 per centum of parity, no ceiling shall be established for any agricultural commodity below (1) the market price equiv alent to 110 per centum of the parity price or comparable price for such com modity, adjusted for grade, location, and seasonal differentials, as determined and published by the Secretary of Agriculture; or (2) the market price prevailing for such commodity on July 29, 1941.

These changes in language are designed to leave no doubt of the intention of Congress to obtain parity for farm products. The revised language also uses the term "market price equivalent." Since a parity price is a farm or local market price, it is necessary, for purposes of administration, to determine at regular and frequent intervals the market-price equivalent of parity at the major terminal markets for any commodity. It is also necessary, as the new language suggests, to take into account, in the administration of this section, necessary adjustments for differences in the grade of a commodity, location, and for seasonal factors.

That concludes my statement, Mr. Chairman.

The CHAIRMAN. Mr. Secretary, do you think that the mere writing into the bill whatever figure might be agreed upon by the committee as the parity basis, would be of itself a sufficient protection incorporated into the bill to insure the object we have in mind? What I have in mind is this: Is the mere provision of a ceiling at parity, or at parity plus 10 percent, a sufficient protection to hold the benefits of the parity legislation passed by Congress?

Secretary WICKARD. Well, there must be a lot of other things. The CHAIRMAN. What I had in mind was this: I did not mean to say that whoever might be in charge of the administration of this law would not respect and carry out the purposes that Congress had indicated by the provisions now in the law, but since all legislation rests, more or less, upon a mistrust, in any event legislation should carry the necessary provisions and language to insure its fulfillment, and, in view of that, should not there be in the bill some provision. that would prevent the possibility of the nullification of the purposes of the bill by a ceiling that might be based on the finished goods or the processed article made from agricultural commodities?

Secretary WICKARD. I have in the revised language that I have suggested tried to cover that. I suggest there that there ought to be an established price for agricultural commodities which would bear the relationship to the commodities that 110 percent of parity would bear to the raw material, such as cotton. If you established a ceiling on cotton goods which would not permit paying the parity price, or 110 percent of the parity price of cotton, of course that would nullify the parity price objective, as I see it. I do not know whether that is what you refer to, or not, but I think there should be some way of securing a price basis for processed agricultural commodities that would be in line with the objective stated in the bill.

The CHAIRMAN. Would this be true-and I am not speaking of cotton alone, but of other commodities-that it would not be necessary to fix a ceiling at parity to beat down the price of the commodity below parity, or could that be done by discriminatory ceilings places upon the processed goods?

Secretary WICKARD. I think, of course, that you could nullify it in that way.

The CHAIRMAN. So that, if we want to make sure that the parity provision in this bill is carried out, we will have to put some provision in the bill that will insure it?

commodities, as recently as September food was still the cheapest component of the cost of living, standing at 84.4 percent of the 1924–29 average as compared with 86.5 percent for all living costs combined. As I understand the purpose of the pending bill, it is to cut off the inflationary spiral before it really gets started. The administrative effort will necessarily be to maintain a fair relationship among prices, and a practical margin between prices and costs. If a producer's prices are fixed at a given level, obviously his costs cannot be permitted to rise so high as to wipe out his net income. One advantage of the parity formula is that it reflects changes in the costs of production. The prices of industrial goods bought by farmers include the wages paid by industry, and a change in wage rates sufficient to change the price of the item will change the index of prices paid by farmers.

Section 3 of the bill provides that no price ceiling shall be established on any agricultural commodity below 110 percent of the parity price or comparable price for such commodity, or the market price prevailing for such commodity on July 29, 1941. There has been a good deal of discussion of this 110 percent figure.

Farmers have been accused of greediness; of not being content with parity. Let me say here and now that accusations of that sort are, in my opinion, unjustified and unfair. The farm priceceiling provision of this bill is certainly no basis for such a conclusion.

There is a perfectly practical and obvious reason for stipulating that no ceiling should be imposed on farm products at less than 110 percent of parity, rather than exactly at parity. As every farmer knows, farm products prices fluctuate every day. The supply of a commodity coming on the market changes from day to day, and the demand changes from day to day. Prices fluctuate accordingly. Price fluctuations may be desirable to stop the flooding of markets at certain periods. As a rule, daily price fluctuations are relatively small, but they ought to be allowed for, in order to keep to a minimum the amount of administrative supervision necessary. If ceilings were placed exactly at parity, the daily fluctuations in the market would necessarily all be between parity and some lower figure, and as a result, farmers could not possibly average parity. The real purpose of restricting ceilings to a point somewhat above parity is to make it reasonably sure that all farmers will have an opportunity to get parity. After all, it happens to be the expressed policy of Congress and the administration to achieve and maintain farm prices at parity.

In order that the intent of section 3 shall be clear, and in order that the instructions for administration of the section may be as specific as feasible, I should like to suggest to the committee certain clarifying changes in the language, as follows:

SEC. 3. (a) So as not to prevent the season's average prices for any agricul tural commodity from averaging 100 per centum of parity, no ceiling shall be established for any agricultural commodity below (1) the market price equivalent to 110 per centum of the parity price or comparable price for such com modity, adjusted for grade, location, and seasonal differentials, as determined and published by the Secretary of Agriculture; or (2) the market price pre vailing for such commodity on July 29, 1941.

These changes in language are designed to leave no doubt of the intention of Congress to obtain parity for farm products. The revised language also uses the term "market price equivalent." Since a parity price is a farm or local market price, it is necessary, for purposes of administration, to determine at regular and frequent intervals the market-price equivalent of parity at the major terminal markets for any commodity. It is also necessary, as the new language suggests, to take into account, in the administration of this section, necessary adjustments for differences in the grade of a commodity, location, and for seasonal factors.

That concludes my statement, Mr. Chairman.

The CHAIRMAN. Mr. Secretary, do you think that the mere writing into the bill whatever figure might be agreed upon by the committee as the parity basis, would be of itself a sufficient protection incorporated into the bill to insure the object we have in mind? What I have in mind is this: Is the mere provision of a ceiling at parity, or at parity plus 10 percent, a sufficient protection to hold the benefits of the parity legislation passed by Congress?

Secretary WICKARD. Well, there must be a lot of other things. The CHAIRMAN. What I had in mind was this: I did not mean to say that whoever might be in charge of the administration of this law would not respect and carry out the purposes that Congress had indicated by the provisions now in the law, but since all legislation rests, more or less, upon a mistrust, in any event legislation should carry the necessary provisions and language to insure its fulfillment, and, in view of that, should not there be in the bill some provision that would prevent the possibility of the nullification of the purposes of the bill by a ceiling that might be based on the finished goods or the processed article made from agricultural commodities?

Secretary WICKARD. I have in the revised language that I have suggested tried to cover that. I suggest there that there ought to be an established price for agricultural commodities which would bear the relationship to the commodities that 110 percent of parity would bear to the raw material, such as cotton. If you established a ceiling on cotton goods which would not permit paying the parity price, or 110 percent of the parity price of cotton, of course that would nullify the parity price objective, as I see it. I do not know whether that is what you refer to, or not, but I think there should be some way of securing a price basis for processed agricultural commodities that would be in line with the objective stated in the bill.

The CHAIRMAN. Would this be true--and I am not speaking of cotton alone, but of other commodities-that it would not be necessary to fix a ceiling at parity to beat down the price of the commodity below parity, or could that be done by discriminatory ceilings places upon the processed goods?

Secretary WICKARD. I think, of course, that you could nullify it in that way.

The CHAIRMAN. So that, if we want to make sure that the parity provision in this bill is carried out, we will have to put some provision in the bill that will insure it?

Secretary WICKARD. Yes, sir; and I tried to suggest something that would do that.

The CHAIRMAN. I was listening with great interest to your statement, but I was not quite sure about it.

Secretary WICKARD. That is what I had in mind. I was trying to accomplish that.

The CHAIRMAN. I was not quite sure whether the language you suggested would quite reach the situation.

Secretary WICKARD. I agree with you on the objective, and it should be carried in the law.

The CHAIRMAN. That is what you had in mind in submitting the suggested language?

Secretary WICKARD. Yes, sir.

The CHAIRMAN. I did not want to find fault with the language you suggested, because I have not had an opportunity to study it from the technical standpoint.

Mr. GIFFORD. Mr. Secretary, you are familiar with what has been done in the matter of cotton goods during the last day or two, are you not?

Secretary WICKARD. I did not know any new rules were put out. I know that some were put out sometime ago.

Mr. GIFFORD. Who authorized the putting of a ceiling on cotton goods prices, such as has been put on in the last day or two? Do you know how that affects spot cotton prices?

Secretary WICKARD. I am not familiar with what has happened in the last day or two. I did not know there were some new ceilings. Mr. GIFFORD. This committee should be made familiar with it. I would like to tell you what happened yesterday. Cotton went down. There had been no cotton goods sold, and they could not buy for several weeks until the ceiling was determined. On yesterday the order went out that the ceiling could be raised or lowered. The order was that it would be raised up or brought down according to the price of raw cotton. Did you know about that?

Secretary WICKARD. No, sir; I did not know that.

Mr. GIFFORD. So that people today should be buying cotton goods for half a cent less than they had to pay yesterday. Tomorrow if the price of cotton changes enough, the ceiling will change. If you put any ceiling whatever on spot cotton or raw cotton in that manner, will that have to prevail in every operation? I know of one buyer of cotton who could not buy. Up to yesterday they said they would not sell. They said, "We will sell it to you today, and you can take it or leave it" and "we will not sell you tomorrow at the lower price." Now, that cotton cost this buyer $50,000 more for cotton yesterday. He had to pay that much more than he could have bought it for today: if he could have bought it today, he could have saved $50,000. He has to go along with that situation. I want to ask you about parity: You have talked about parity, and I want to know whether that parity has any relation to any other products, as in the case of cotton, or is that parity on the basis of a fixed parity period?

Secretary WICKARD. We are adjusting the prices about once each month.