561.311F1/125: Telegram
The Acting Secretary of State to the Chairman of the American Delegation to the Monetary and Economic Conference (Hull)
80. For Morgenthau from Tugwell.22 Your 71 June 27 10 p.m. There is no way of telling yet how much the 1933 wheat crop has been reduced. The probabilities are that recent reports exaggerate the damage to the growing crop in Europe. Increased yields in Danube basin and Russia will probably offset a material part of lowered yields elsewhere in Europe. Canada had started season with fairly good ground moisture and her crop may come near to last years, in spite of recent dry weather. Even if the United States crop should fall below our domestic requirements and Canada should produce a small crop, carryover reserves are tremendous in both countries. Higher wheat prices would check feeding to livestock here and decrease wheat consumption in the Orient, and offset much of the reduction in crop.
You should therefore continue your efforts to secure agreement on acreage reduction. A proviso might be added that the reduction agreed on was a maximum, and the exact per cent of reduction would be subject to reconsideration prior to planting time if it developed later that there had been a world-wide calamity in wheat production. Continue your unofficial canvass of European countries and report their [Page 803] attitude to Washington. Emphasize the need of concerted action, and remind them that the present improved world prices may be only temporary if fundamental readjustments in the production and supply situation are not carried through. The great need is to establish the principle of adjustment and to provide for continued planning in concert so that there may not in future be such situations as that existing now.
For information of the delegation: We announced yesterday our processing tax on wheat. Processors pay 30 cents per bushel beginning July 9. Tax refunded on flour exports at 98 cents per barrel whole wheat and graham flour and $1.38 per barrel other flour. Stocks of flour in hands of dealers pay floor stock tax of same amount per barrel. Imported flour is required to pay a compensating tax of same amount prior to release from customs control. Imposing the tax at equivalent rates on domestic processing, domestic flour, and imported products does not change the relative advantage as between domestic and foreign producers, and so is consistent with the tariff truce.23 [Tugwell.]