in the beginning of my statement, we are not here asking you to guarantee any earnings on this business, although we have just as much right to come to this Congress and plead for a guaranty for a reasonable earning on the business as any other industry in the world. But we do ask that there be something done in improving other conditions so as to help this industry, and if you do not it is going to perish.

If there are any questions that you wish to ask, I will be glad to give you any information I can. I have gone over this hurriedly. I have not pictured this situation any worse than it is, and our farmers are very, very much discouraged. They are saying very little, but they do not know why they should undergo such conditions when they have to walk up here to the store and pay such high prices for machinery, or things of that kind.

The CHAIRMAN. We will now hear from Mr. A. C. Williams, of Fort Worth, Tex.

STATEMENT OF MR. A. C. WILLIAMS, ASSISTANT TO THE PRESI DENT OF THE TEXAS & SOUTHWESTERN CATTLE RAISERS' ASSOCIATION, FORT WORTH, TEX.

Mr. WILLIAMS. I try to be an optimist at all times, but, frankly, gentlemen, I can see little ground for optimism just at this time regarding the future of the cattle business. I had not expected to have the privilege of appearing before this committee, and therefore have no prepared statement to file. I desire to refer briefly to some of the more important problems confronting the cattle raisers of the Southwest.

The organization which I represent, the Texas & Southwestern Cattle Raisers' Association, was organized in 1877. Among its membership are the leading stockmen of Texas, Oklahoma, New Mexico. Colorado, Arizona, and Kansas. This territory is often referred to as the "live-stock breeding ground of the United States," and does furnish a large per cent of the steers that go to the pastures and feed lots of the Northwest, Middle West, and great corn-producing States. Thus it will be seen that the live-stock industry of the Southwest is the most important factor in the Nation's meat supply.

A striking feature of the movement of cattle in Texas and adjoining States during the past few months has been the sacrifice sale and slaughter of valuable breeding herds that represented the work of a lifetime of careful breeding and herd management. That sacrifice has been caused by the inability of the owners of the herds to secure adequate loans through the usual channels. You are perhaps not familiar with the fact that the average stockman operates on such a large scale and is forced to borrow such large sums in times like we are now passing through that the capital and surplus of his home bank is not large enough to permit it to meet his needs. He must therefore go to the large banks and loan companies at the central markets, like Fort Worth, Kansas City, St. Joseph, St. Louis, and Chicago, for a loan. For several months these large institutions have been holding practically all of their borrowers to bare living expenses and have declined to make new loans. Thus many men who have ample security and ordinarily do not require large loans find it dif

ficult to secure funds needed to properly conduct their business, and are frequently forced to sacrifice valuable breeding stock and immature calves and steers.

The situation has become so critical that our executive committee at its recent meeting appointed a committee to come to Washington and endeavor to secure some measure of financial aid through the War Finance Corporation. In order to conserve the breeding herds of the Southwest, which were threatened by a drought and financial stringency, the War Corporation in 1918 established a cattle loan agency at Dallas, Tex., to make loans, through the banks or direct, on breeding herds where the owners were unable to secure funds through the usual channels. It is the consensus of opinion that conditions at this time warrant a revival of that plan. Since arrival in Washington we have been convinced that some measure of relief can come through the Kellogg bill if that measure is properly and liberally administered. Fearing that any fight to secure an amendment. to permit direct loans might delay the passage of the measure until after the summer recess of Congress, and believing that its early passage may prove of great assistance to the agricultural interests of the country, we have concluded not to insist upon the amendment at this time. I desire to say, however, that I do not believe the measure of relief needed will come through any agency which does not provide a means of making direct loans to worthy men who have ample security and are unable because of the present stringency to secure needed loans through the usual channels.

To prove that this sacrifice of breeding herds will, if continued, seriously affect the future meat supply of the Nation, I sent a questionnaire to prominent stockmen in touch with the situation asking them to give certain information. I ask them first whether it was true that the owners of breeding herds were finding it difficult to secure loans to help carry on their business, and the answer without exception was "Yes." Their replies indicated that there has been a heavy forced sale of valuable breeding cattle and immature calves and steers that are needed on the range to consume the surplus of grass and forage that will be wasted. I am convinced by information in our office and replies to this questionnaire that the number of cattle in Texas and adjoining States at this time, compared with the average for the past six years, represents a shortage of approximately 30 per cent on breeding cows, 50 per cent on aged steers-we refer to a steer that is 3 years old or over as an aged steer-333 per cent on 2-year-old steers, 25 per cent on yearling steers, and there will be a much greater shortage of calves if the present heavy movement continues. The records at the Fort Worth market show that while there has been a large decrease in receipt of grown cattle during the first seven months of this year there has been an increase of about 35 per cent in receipts of calves.

The CHAIRMAN. Does that allow for seasonal fluctuation? My recollection is that the receipts of calves vary widely from year to year at certain periods of the year.

Mr. WILLIAMS. Range conditions in our section have been unusually good this year, which under normal conditions would mean that many stockmen would hold their calves to consume the surplus of grass and enhance in value. The movement indicates forced

liquidation. Even men who happen to be fortunate enough not to have excessive loans at the banks-and there are few of them, are forced to ship their calves to get money for operating expenses.

There is not the slightest doubt in my mind that there has been a heavy forced liquidation of breeding cattle from our territory. A man came to my office last week and told me that he had a loan with a large bank in Dallas for in the neighborhood of $50,000, secured by cattle worth on the basis of present values around $80,000 to $100,000. Notwithstanding the fact that the bank could take that loan to the Federal reserve bank, only about three blocks away, and discount it, they urged him to pay. Their only excuse was that they wanted to lighten up their loans, and the best way to do so was to collect some of the largest ones. Now unless that man can place his loan elsewhere, and that will be very hard to do, he may be forced to sacrifice his cattle. When a man is forced to ship immature cattle to market, it not only hurts him financially, but it has a direct effect upon the value of all other cattle on the market that day.

The CHAIRMAN. It is quite possible to get an entirely erroneous impression from the citation of individual cases. How prevalent do you think the citation to which you refer is?

Mr. WILLIAMS. I know of numerous other cases just like the one I spoke of. It is so prevalent that it has already resulted in a great sacrifice of breeding and immature cattle from our territory.

The CHAIRMAN. I do not question your statement, but how do you reconcile the proposition that men are being forced to sell cattle that are not immature, with the fact that you have stated that the receipts are less than normal?

Mr. WILLIAMS. The receipts are less than normal because the supply of cattle in the country is less than normal. The receipts at 69 leading markets of the United States for the first six months of this year are approximately one and a quarter million below the corresponding period of last year. The receipts last year were below the year before. According to your line of reasoning that would mean I am wrong.

Remember this, that in 1918 and 1919 certain southwestern and northwestern cattle raising States suffered from severe droughts. which is forced heavy liquidation of all classes of cattle from those sections. The drought in the Northwest was followed by severe winter weather which caused the shipment of additional thousands of cattle to market which would have been kept on the ranches but for the shortage of feeds. Remember also that large numbers of cattle were being brought into the United States at that time from both Canada and Mexico, and instead of receiving cattle in large numbers from Mexico we are now exporting thousands of cattle weekly for immediate slaughter, the ranges of that country having been depleted of cattle by droughts and followers of the various warring factions.

The CHAIRMAN. It is your judgment, then, I take it, that the reduction of cattle marketed is a reflection of the reduction in herds.

Mr. WILLIAMS. Yes; forced liquidation has been going on for several months. It is my judgment that the true situation is not reflected in the statistics given out by the Bureau of Crop Estimates and the census reports.

The CHAIRMAN. There is quite a wide discrepancy, as I recall, between the census figures and the Department of Agriculture figures, which indicated that the Department of Agriculture figures were very much too high.

When was this conversation that you referred to regarding this $50,000 loan?

Mr. WILLIAMS. About the first of last week. I have had very similar conversations with many other men.

The CHAIRMAN. Has there been any change in policy on the part of the banks down there with respect to making loans in the last six months?

Mr. WILLIAMS. No improvement in the situation. Officers of some of the banks and loan companies have recently stated to me that they would make a few loans to good men under proper conditions. I asked them what they considered proper conditions, and they said loans backed by plenty of security. But under the present deflated values few men can give the margins of security demanded.

The CHAIRMAN. What is the ordinary margin that they require дом?

Mr. WILLIAMS. Well, the War Finance Corporation loans made in 1918 on cattle required a margin of 25 per cent. That was about in line with margins demanded by conservative bankers at that time. The CHAIRMAN. Is a larger margin required now?

Mr. WILLIAMS. Well, they might say they do not, but the values placed on the stock are so low that the margin required is much larger than that. I would say they now require in the neighborhood of about 334 per cent, and even greater in many cases.

The CHAIRMAN. Then you would not agree with Mr. Mercer's statement that the banks are extending themselves as far as they can to meet the situation?

Mr. WILLIAMS. Many banks have already extended themselves as far as they can, and that is back of the trouble. The truth of the matter is some of them went just a little too far; but many did not, I think, go far enough in trying to take care of their customers.

The CHAIRMAN. I gather from your statement that the failure of the banks to loan is a matter of their indisposition and not their inability?

Mr. WILLIAMS. I think it is principally their inability, because of the fact that their surplus and capital is so limited they can not make loans large enough to meet the needs of the average stockmen, and he must go to the larger institutions at the central markets. The CHAIRMAN. Do you think that the position of the larger banks in Dallas, for instance, or Kansas City is a matter of inability or a matter of indisposition?

Mr. WILLIAMS. In many instances it is a matter of inability and in many instances it is a matter of indisposition. I have been told by many men that when they applied to one of the larger banks and loan companies for loans and offered plenty of security they were advised, “We are very sorry, but we are not making any new loans now."

The CHAIRMAN. That is a very strange state of affairs, because, if my recollection is correct, the probabilities are that at the present moment, at least, the banks in Dallas and the banks in Kansas City

are very much less extended than the banks in the country, because they have liquidated to a much greater degree than the country banks.

Mr. WILLIAMS. That is true of the banks in Dallas and the other large cities, but the Texas city banks do not handle as much cattle paper as you would think. Dallas is in the edge of the cotton belt. and the banks there do more mercantile and cotton loan business. There are a few banks in Fort Worth that do quite a bit of cattleloan business, but they are not in position to extend much relief to the cattle business at this time.

Senator CAPPER. The situation in the country banks is still as tight as it was?

Mr. WILLIAMS. Yes; in the cattle-raising sections. There will be some relief in some sections as a result of the sale of wheat. Much money is coming into the panhandle of Texas from the sale of wheat, but in view of the fact that the larger banks at the market centers hold mortgages on their live stock the stockmen are not in very good shape to secure accommodation from the local banks.

Live-stock values are approximately 50 per cent of what they were 12 to 18 months ago. If operating and marketing expenses had dropped accordingly, the live-stock producer would not be in the critical position we now find him. But with his stock worth approxi mately what they were 10 years ago, his expenses have increased about as follows: Railroad freight rates approximately 67 per cent yardage and commission charges at markets 50 per cent; interest rates 2 to 4 per cent; general ranch operating expenses 10 to 15 per cent and very substantial increases in county, State, and national taxes Senator CAPPER. What is the legal interest rate now of the stockmen of Texas?

Mr. WILLIAMS. We have a maximum legal rate in the State of Texas of 10 per cent. The great volume of the cattle loan business in Texas is now carried at the rate of about 9 per cent per annum discount every six months. Some banks and loan companies are charging 10 per cent, six months discount. Many also charge brokerage.

Senator CAPPER. What is the brokerage usually?

Mr. WILLIAMS. Around 2 per cent. I do not care to mention any names, but I was recently reliably informed that many reliable cattlemen in New Mexico whom I know have been paying at the rate of 10 to 12 per cent per annum, discount every six months, with 2 per cent brokerage every six months. No man can expect to profitably continue in the cattle business long and pay such exorbitant rates. They are paying it in the hope that immediate relief may come from some source.

The CHAIRMAN. If the situation is as you say it is, and there is any relief in high prices, relief will come eventually.

Mr. WILLIAMS. There is another angle of the business to which I want to call your attention. The per capita consumption of beef in the United States decreased from 78 pounds in 1910 to 563 pounds

in 1920.

The CHAIRMAN. What year?

Mr. WILLIAMS. 1910 to 1920.

The CHAIRMAN. I think your figures on that are wrong.