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would not take care of the present trend, and it would not work to the end of abundant supplies, which appears to be the over-all philosophy back of the proposed legislation.
Senator AIKEN. I would say that normal exports would be the previous 10 years.
Mr. BERRY. That would be quite a drastic reduction.
Mr. BERRY. No, sir; but the exports of burley previous to 1938, as I recall, were in the neighborhood of 10,000,000 pounds.
Senator AIKEN. Of course, the production of burley has increased tremendously.
Mr. BERRY. That is because, in part, of the export, which is not yet substantial enough to affect directly production; but your domestic consumption has risen steadily until just recently.
Senator AIKEN. What did you say the export of burley was before the war?
Mr. BERRY. About 10,000,000 pounds.
Senator AIKEN. That is only 1 percent of the average carry-over of the last few years, which has been about 1,000,000,000 pounds.
Mr. BERRY. Well, the total supply takes into consideration the current crop and has been running about 1,400,000,000 pounds; 1,467,000,000 pounds is what I think it ran last year.
Senator AIKEN. Of course, the average carry-over of the 10 preceding years has been steadily increasing. Back in 1938, for instance, it was 600,000,000 pounds. It is up to 755,000,000 pounds for this last year. The carry-over plus the production for the year has been over 1,000,000,00 pounds ever since 1939.
Mr. BERRY. That is true.
The CHAIRMAN. Does your State of Kentucky take the lead in the production of burley tobacco ?
Mr. BERRY. Yes. We also produce dark fire-cured and dark aircured tobaccos.
Such a drastic reduction would mean that domestic requirements alone in a short while could not be met, and the idea of abundant supplies and trends would be utterly ignored.
Senator AIKEN. Suppose we limit it to a reduction of not over 5 percent in any 1 year, how would that meet the situation?
Mr. BERRY. That certainly would not be a drastic one. It would not be in any sense as drastic as the reduction under the terms of the proposed bill.
Senator AIKEN. That suggestion was made by one witness. I do not recall who that was, but that was so there could be no drastic effects of a sudden change in market upon the grower.
Mr. BERRY. The parity concept is the happiest and most fortunate thought that has visited the minds of statesmen of this country in generations. It accords with our way of life and gives real and tangible meaning to the philosophy of equal opportunity. It is a consistent American way of striving for and approaching parity of income without the use of direct subsidy payments by the Government. It must be preserved and effectuated to the end that farmers may con
tinue to enjoy the high standard of living and opportunity which they have had only a taste of.
The definition of "parity price” expanded so as to reflect current interest and tax payments per acre on real estate and freight rates is acceptable; and we would urge adherence to the single standard rather than the adoption of dual parity as the bill provides. We believe no other better rule for determining parity can be devised then the thoughtful selection of some past 5- or 10-year period which, with respect to a given commodity, reflects prices of what the farmer receives and pays in their proper equitable relationship.
In the case of burley tobacco, the use of the 10-year moving-average formula works no substantial reduction presently in the parity price as fixed by the present law. However, tobacco farmers are fearful of its application in some future decade when price history will have been made by a declining market.
We prefer a parity-price measure established upon a fixed-base period of normal and equitable price relationships because it gives it the same characteristic of constancy of any other unit of measure.
Senator AIKEN. Right there, Mr. Berry, some of our nationally famous economists expressed just the opposite fears, that using the 10-year moving average is going to put the price up out of sight.
Mr. BERRY. And they carry an ordinary man so high into the atmosphere of theory that he cannot ever get back down to ground, it seems to me.
Our reaction to the proposal of a moving average formula is that that is at least in the realm of speculation; it is untried; whereas a formula tied to a fixed base period when the economy of a particular group of farmers was at its best or probably at its happiest and most normal time is the safer, saner plan to tie to for the present.
Senator AIKEN. The fact is that, if you have fairly even pricesupport levels, you control the carry-over through providing means of disposing of burdensome surpluses by the adoption of a two-price system if necessary, or whatever method is necessary, that theoretically your 10-year average becomes more stable, assuming that all factors of the legislation work out.
You always have that assumption.
Then we wrote into the bill a proviso that in case of extraordinary circumstances, and I said we had in mind the cancellation of orders by Great Britain and France, the formula could be temporarily set aside so that under the formula you would have a much bigger carryover than you would have had, had you been shipping to the other countries of the world all last fall.
Mr. BERRY. The moving-average formula may have infinitely finer and greater benefits and possibilities. Frankly, we have not developed our thinking on it to the point where we can yet so appraise it.
Senator AIKEN. One purpose of the moving-average formula is to encourage a gradual diversion from crops that are becoming surplus to crops that are in lesser supply. I think that might work in the tobacco business.
It is evident that the consumption of burley has been increasing due to changing habits. I presume that might mean, although I have not looked it up, that the consumption of pipe, plug, and snuff tobacco might be decreasing, in which case it seems only logical to encourage a diversion to the types which are increasing in demand rather than
to continue to support at a high level those types which are decreasing in demand.
Of course, the public is fickle; their fancies may change; they may all want to take to chewing again or smoking cigars. Nobody knows about that.
Mr. BERRY. That is true, but there is one feature of that question I think that should always be taken into consideration in determining the support-level prices. We have contended about it from time to time back through the years. We doubt the wisdom and the soundness of lowering the support levels for tobacco to tobaccos that do not go into the production of cigarettes. The man who produces the lower quality and lower type of tobacco does not do it deliberately and purposely. He never pictures a crop but that he envisions the best one that he has ever raised, yet he is an American citizen, and be he the producer of a low-quality tobacco, for instance, a B-4-F, which is a very troublesome quality and grade of tobacco to dispose of, he is nonetheless entitled to parity of right and partity of share in the national income.
So I think you become involved in that question under the moving. average formula as you interpret its purpose.
Senator AIKEN. Ďuring the years from 1925 up to 1940, say, there was only one year—and that was 1927—when the parity price of tobacco which would be fixed under this bill was not higher than the average price received by the grower. In other words, we tried to provide a greater degree of support for the years when it would be needed most.
You are right when you say it is untried, but we are trying to provide more support for the years when it is needed most, even though it might produce a little less support for the years when the market price is above parity anyway.
I think the greatest disparity is back in 1933 when the average price of burley was 101/2 cents. The parity price under this formula would have been 20.6 cents, or double.
Mr. BERRY. That would have been a godsend at that time, for we were without bargaining power in the market, and the result was that we suffered disastrously in the tobacco country at that time.
Senator AIKEN. It is my impression that we had an improvementwe had improved the support price level for burley tobacco, particularly in the bill, but, when you mention the effect on the acreage, then you have something that I had not considered at all and what I want to know more about.
Mr. BERRY. Senator, in the next paragraph we deal briefly with the question of the support price as it turns out under the formula in this bill.
The parity concept, however, will be ineffectual in the case of burley tobacco under present market conditions unless it is applied by the use of higher nonrecourse loans than will result from the computation of support prices under this bill. The price of burley tobacco on the basis of parity for March 15, 1948, would be supported at only $29.83 per hundred pounds under the provisions of this bill, whereas under the present law it would be supported at $31.94 per hundred pounds.
Senator AIKEN. You say $29.83!
Such a drastic drop in the floor under burley tobacco prices would nave a most demoralizing effect and in the present state of price relationships bring financial hurt, and likely disaster, to a high percentage of the producers of this basic commodity. Obviously, we greatly prefer a plan which guarantees a higher loan rate.
Until this time the administration of the price-support program at 90 percent of parity has not cost the Government a cent; and, if we may have quotas provided for by law, burley tobacco farmers will by the use of them regulate their own production behavior in keeping with the law of supply and demand and thus continue their own affairs in order and at the same time safeguard their Government's interest under such loans to the maximum of 90 percent parity.
In the final analysis, any farm program to be successful and effective must be popular with those for whose benefit it is enacted. The elements of such a program which we have emphasized in this statement are those which account for the popularity of the present program with tobacco farmers. We advocate the continuation of the program with respect to quotas, parity, and support loans either by the extension of the act of 1938, as amended, or by the inclusion of these features in such legislation in lieu thereof as may be enacted by the Congress for the establishment of a long-range agricultural program.
The CHAIRMAN. That is a fine statement.
Senator AIKEN. That reduction in the support price is due almost wholly to the large carry-over, according to the formula set up here.
Mr. BERRY. I presume so, under the table set up.
Senator AIKEN. Parity on burley type 31 is 46.6 cents. At present, under the new formula, without wages, it is 45.9 cents; with wages, 48.5 cents; or about the same.
But, as I said, the committee wrote that escape provision into the bill having in mind the cancellation of the tobacco exports.
Mr. BERRY. Senator, we saw and at the same time we appreciated your statement at the time the bill was introduced, when you said it was a commencement or beginning place; and, of course, we want to be of any assistance we can in perfecting the bill from a national standpoint and at the same time from our own industry standpoint.
Senator AIKEN. What we hope to do is to get a bill which covers agriculture generally, because no commodity wants to be pointed out as receiving special legislation.
Mr. BERRY. That is true, Senator, and we do not want to be in the class of receiving special consideration, but it seems to us that it is a solution, an over-all solution, that you would achieve by the bill, and that the means, so long as it is permissible, of achieving that solution is not a matter about which we should disagree so strenuously. Therefore, we take the position that a favorable constant base period, even though it not be the period 1910 to 1914, is not heresy, but that it is simply a means of achieving for burley tobacco in the over-all national picture a fair share in the national income.
Senator AIKEN. One of your potential troubles seems to be due to the fact that in 1946 you had an all-time high production of burley.
Mr. BERRY. That is right.
We have a carry-over, but it is disappearing with unforeseen satisfaction.
Senator AIKEN. We have been working on that, too, as you know.
Senator COOPER. Is it not correct that that large carry-over which you found in 1946 resulted in part because of the tremendous acreage and production that was build up at the behest of the Government during the war, and at the close of the war some of those outlets closed, and you found in that year that large carry-over?
Mr. BERRY. That is true, Senator, and it is also due to the other uipredictable factor of climatic condition.
Senator AIKEN. Well, it looks as though the rest of the world, if they do not already know it, will soon learn of the superiority and advantages of American tobacco.
The CHAIRMAN. Our next witness is Mr. Carl Hicks, of Raleigh, N. C., president of the Flue-Cured Tobacco Stabilization Corp., Inc. STATEMENT OF CARL T. HICKS, PRESIDENT, FLUE-CURED TOBACCO
STABILIZATION CORP., INC., RALEIGH, N. C. The CHAIRMAN. We have a very fine showing here from Kentucky and we shall be glad to have the North Carolina people come in and tell us how their situation compares with Kentucky.
Mr. Hicks. Thank you, sir.
I am Carl T. Hicks, Walstonburg, N. C. I am a tobacco grower, chairman of the tobacco committee of the North Carolina Farm Bureau, and president of the Flue-Cured Tobacco Stabilization Corp.
Today I have been asked to speak for tobacco growers of all fluecured tobacco-producing States. I will present essentially the same views as have already been presented by tobacco growers at hearings of the Senate and House Committees on Agriculture at Columbia, S. C., and Rocky Mount, N. C., respectively,
I want to express appreciation for myself and for tobacco growers for the work that this committee has done in connection with a longrange farm program. I think you have made a good beginning, and I hope you will continue to give attention to this matter until a bill is perfected and enacted into law.
The CHAIRMAN. Is tobacco the most important crop in North Carolina?
Mr. Hicks. About 57 percent of our entire farming income in North Carolina in the year 1946 was derived from flue-cured tobacco.
The CHAIRMAN. It exceeded cotton?
In general, tobacco growers are satisfied with most of the tobacco marketing quota provisions of the Agricultural Adjustment Act of 1938. However, flue-cured tobacco growers favor a few changes in this law.
First, they favor the elimination of the requirement that supplies be in excess of the reserve supply level before quotas are voted upon. Flue-cured tobacco growers prefer to maintain quotas continuously irrespective of supplies. Quotas have been in effect on flue-cured tobacco since 1934, with the exception of 1 year-1939. We got into enough trouble that year to require several years to correct the situation.