Mr. PACE. Yes. I am afraid, under the law now what they would do for the 1950 cotton crop they would announce the support level August 1, 1950, after the crop has been planted. What influence would that have on the acreage planted in cotton?

Mr. SMITH. None.

Mr. PACE. Of course it wouldn't.

Are there any questions?

Mr. WHITE. I would like to make one suggestion, Mr. Chairman. Mr. PACE. Mr. White.

Mr. WHITE. I think it is most unfortunate indeed that the members of the committee have not been able to have a copy of the testimony of our most distinguished and probably our most valuable witness, and I would certainly like one eventually if it can be arranged. Mr. MCMILLAN. How many copies do you have?

Mr. SMITH. Mr. Chairman, I will do this for the committee, as I said I was appearing as a private individual. I got a wire on Friday. Mr. PACE. Mr. Hope had a copy, and I will give it jointly to you and Mr. Gathings.

Mr. SMITH. I will mimeograph copies when I get home and send copies to each member.

Mr. PACE. That will be very helpful.

Any other questions of Mr. Smith?

Mr. Smith, have you anything more to say?

Mr. SMITH. I believe not, Congressman. I just wish you luck. Mr. PACE. I'm quite sure your comments are going to be most helpful to the committee, and we are very grateful to you for coming here and giving us the benefit of your views.

The committee will now stand adjourned until Friday morning for an executive session in the committee room.

I understand the full committee meets tomorrow.
(Whereupon, at 11:45 a. m., the hearing adjourned.)

COTTON ACREAGE ALLOTMENT AND MARKETING QUOTA

PROGRAM

FRIDAY, FEBRUARY 11, 1949

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,

Mr. PACE. Gentlemen, we will come to order.

Washington, D. C.

As you all know, you were notified that this meeting would be an executive committee meeting on cotton and we intend to go into executive session as soon as we have concluded with one witness. The circumstances are these: We took a look into the background on cotton, particularly with reference to the competing fibers including synthetics and the foreign production of cotton, trying to visualize the future of cotton from its competitive position. We did not have an opportunity to go into the question of jute, which, as everybody knows, is in the field and we had information that jute was preparing to become even more active than it has been in the past. I took the liberty some days ago of inviting Dr. Reed, who is here this morning, to come down to speak to us. He kindly consented to come down from New York last night and be here this morning.

I think it is important in our consideration of cotton legislation that we have a pretty good idea of what the situation is going to be in the competitive field as far as jute is concerned.

Now, Dr. Reed, you are free to make a general statement, or. if you prefer, we can open with a series of questions, just as you wish.

Dr. REED. May I make a general statement and then I will be glad to submit to questions.

Mr. PACE. Yes, sir. Will you first, for the record, identify yourself and state with whom you are associated and then make your statement. STATEMENT OF VERGIL D. REED, ASSOCIATE DIRECTOR OF RESEARCH, J. WALTER THOMPSON CO.

Dr. REED. My name is Vergil D. Reed, associate director of research of J. Walter Thompson Co., 420 Lexington Avenue, New York City, International Advertising Agency. However, I am testifying here as an individual and do not represent any policies or interest either of J. Walter Thompson or of any of its clients.

I shall attempt to give you any information that I have available, and in answer to any questions. If I do not know the answer I will

tell

you so frankly, and if I do I will give you the best benefit I can of the background I have gathered.

I have recently returned from a trip to India and Australia, and I have kept in touch with this matter of jute for some 21⁄2 or 3 years.

Mr. ANDRESEN. For whom did you go over to India? Did you go for the Government?

Dr. REED. I went over to India, as a matter of fact, clear around the world, on a business trip as a representative of J. Walter Thompson, and visited a number of their offices, all of their European and Asiatic and Australian offices, and handled a number of items including looking over the situation of jute and burlap while in India.

Mr. PACE. Go ahead, Dr. Reed.

Dr. REED. Fortunately, I am on record so I am sure you gentlemen under those circumstances will understand that I am not shading what I have to say ir the least from what I have always believed during the period that I have been looking into this matter. On January 21, 1948, in the Daily Mill Stock Reporter, which circulates rather widely in textile industries in this country and abroad, I made the following statement, and I think it may be of value to you here as giving the main background of cotton and jute competition:

Burlap's losses and cotton's losses, too, are mostly paper's gains. Both of the textiles fabrics have priced themselves out of many uses. They will price themselves out of more.

Unreliability of delivery dates, political instability and government controls in India, taxes and threats of taxes there have each contributed an additional competitive disadvantage to jute fabric. Burlap's greatest competitive advantage— price has been lost. Will it be regained?

I think that gives as clearly as I know how what I think is the real competitor of jute and cotton, and I do not consider jute and cotton as greatly competitive. In fact, I have been on record also as saying that I would be willing even to go so far as to say that jute could cooperate with cotton and I still think they would both be better off, because the biggest competitor, and the one that is going to knock everything into a cocked hat if anything does, is paper.

The rate of increase in the use of shipping bags made of paper is unbelievably great. For instance, I have some figures here which I included in the same article. In 1939 there was only about 200,000 tons of shipping sack paper made. In the short period of 8 years at 1947 that had increased to 571,000 tons for shipping sacks. Last year

it went well over 600,000 tons and is still increasing rapidly. There, gentlemen, is your competition for cotton, and our competition, also.

Mr. HOPE. How much of that paper displaced cotton and how much displaced jute, if you know?

Dr. REED. I don't think I am in position to answer that independently but in my opinion the textiles, cotton and burlap must depend in their use as a package material on price. At present they cannot compete on the basis of price with paper.

Now there is another great disadvantage, and a basic disadvantage, in that when a manufacturer puts in his filling equipment for paper bags, you have very little possibility of getting textile bags back into that plant for the simple reason that the paper filling equipment is expensive and once the investment has been made the manufacturer is no longer a prospect for either cotton or burlap as bag material. Mr. ANDRESEN. Just let me ask you a question there. Where does the raw materials for these paper bags come from?

Dr. REED. A great deal of it, in fact most of it, comes from different parts of the United States. Some comes from Canada.

Mr. ANDRESEN. Doesn't a great deal of it come from the pulp in the South?

Dr. REED. Yes; jack pine is becoming one of the main sources of kraft paper and that, of course, puts the South in competition with the South on paper and cotton.

The future competition, as I can see it, will remain almost as I have said, that paper will continue to make great and rapid gains because of its cheapness and burlap and cotton, because of their comparative dearness, are at a competitive disadvantage.

Mr. HOPE. What is the price trend on paper now?

Dr. REED. The price trend on paper now is down. It is also on burlap and cotton.

Mr. HOPE. The present trend is in favor of which group?

Dr. REED. There is not much of a spread as compared to what conditions were 2 years ago, leaving paper in a very decided advantage. Mr. HOPE. Paper has come down as rapidly as cotton?

Dr. REED. And they have improved their methods of manufacture and distribution, and developed new types of bags to the place where they are able to get them down to a price where cotton and burlap, even though they are capable of reuse, cannot compete. The reconditioning of cotton and burlap bags after their second and third and fourth use has increased so much in cost, that that, itself, has taken some of the advantage away from burlap and cotton. It used to cost very little to recondition bags after you got them from the sugar factory or fertilizer users. You could take the bags to a reconditioning plant, clean them and recondition them-maybe a small patch, and that was low enough in cost that after you used the burlap bag six times you actually got a per-trip cost that competed very well with paper, paper not being adaptable to reuse, of course.

Perhaps you gentlemen are acquainted with this fact-but there is even an association of second-hand bag dealers in the United States and believe me, it is big business.

I have attended two or three of their conventions and I assure you they are a thriving organization. They handle textile bags, and they curse and swear loudly when the dumper has some tie-in sales of paper bags they must buy in order to get the textile bags. They cannot dispose of second-hand paper bags at a profit. They are usually not good for reuse.

Mr. HOEVEN. In what section of the country do they manufacture these burlap bags?

Dr. REED. All over the country. There are quite a number of mills here in the East, some in Texas, some down in Louisiana, and out in the Middle West. They are well scattered. There is the Bemis Bag Co., the Central Bag Co., the Chase Bag Co., and quite a large number of others. Some make all three kinds of bags-paper, burlap, and cotton.

I have talked to some of these manufacturers and I have said, "Why do you get into paper? I thought you fellows were textile-bag manufacturers?" Usually you get a wry smile and they say "Cotton and burlap have priced themselves out, and we have to go to paper. We don't want to, but we have to."

Mr. ANDRESEN. Isn't it a fact in the textile trade, in the case of flour milling they have gone very largely to paper bags?

Dr. REED. Very largely.

Mr. ANDRESEN. Up in our section in Minnesota where we have quite an extensive milling industry I do not know of anyone who uses second-hand cotton bags for their flour in the domestic trade.

Dr. REED. It may be due to local pure-food laws. I could be rather scathing in some comments on that, because I think it has been maybe a little encouraged, but there are many State laws which forbid the reuse of textile bags for food products because of claims of infestation by insects and animals-particularly animal urine-and small insects that they claim make it impracticable to reuse bags. Of course, that is very advantageous from paper's standpoint because it cuts down the reuse market for textile bags. You people speaking of cotton, as well as burlap suffer by that. They have always been used when they were cheap. Burlap has also been used for curing concrete on State Highway Contruction. Now the paper industry has developed a paper which works pretty well on that and they are getting the State engineers to change their specifications so as to permit the use of paper for curing concrete.

Mr. ANDRESEN. Most of the cement goes in paper bags now.

Dr. REED. Yes. It has gone into paper bags almost entirely. Strangely enough the first day that I was in Calcutta a man from the cement industry came to my hotel. He heard I was in town and he came to see me. He said, "Why is this: I can import six-ply paper bags all the way from France to Calcutta-and I make cement in Calcutta-and I can get them cheaper than I can get jute bags right here in Calcutta.

That shows the price advantage of paper, and the eight ball you are behind with regard to cotton.

Mr. ANDRESEN. Has the Government in India taken over the jute industry there?

Dr. REED. No; the jute industry is privately owned and operated. There are approximately 100 mills, most of them, with the exception of three or four located on the Hoogly River outside of Calcutta. However, in the partition of India 70 percent of the jute production, the raw fiber, is now in Pakistan rather than in India. Of course, Pakistan has been trying to take as much advantage as possible of having that source of 70 percent of the raw material, and they have put on some export taxes and have been trying to route it around by way of Chittagong instead of the old cheap way of Calcutta, which adds to the cost.

Wages have increased in India. There have been a number of arbitrations recently and the manufacturing costs of the jute mills have gone up considerably.

Mr. PACE. Doctor, let's get into that feature. What is the Indian Jute Mills Association? Is that confined to India, or is that over in Pakistan?

Dr. REED. The Indian Jute Mills Association is made up of the Indian jute mills. I think there are 95 out of the approximately 100 in the association. These individual mills buy the jute from Pakistan and also from sources in India and they make most of their sales in advance of production in an attempt to relieve themselves of the risk of future trading. Then it is exported all over the world. We are the largest market for the burlap manufactured from it. We are a relatively small market for raw jute itself and only about 20 percent of our total imports of jute and jute materials are really raw jute,