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We can understand why producers of other commodities and the public generally would question the continuation of marketing quotas from year to year on tobacco. The nature of the crop is such that tobacco lends itself to control more easily than do most other commodities.
For one thing, tobacco is grown on a small proportion of the farm acreage and its production can be easily expanded. For another, sizable stocks are carried. by manufacturers in order that they may make products of uniform quality. Manufacturers want at least 2 years stock on hand at the beginning of each marketing season. This practice of carrying stocks prevents us from getting into trouble when yields per acre are poor. We can simply increase the
the following year, and in the meantime stocks can be reduced slightly below the normal level.
The statement that tobacco lends itself easily to controls is supported by the fact that tobacco production has been controlled in many countries for a long period. These controls take several forms. In many countries licenses for the growing of tobacco are issued to producers.
Tobacco production is controlled through scientific associations of producers in several countries. In some other countries, production is controlled by contracts made by producers with manufacturers or with a governmental agency prior to planting time.
The provisions of the Agricultural Adjustment Act of 1938, as amended, relating to marketing quotas on peanuts do not require that the total supply be in excess of the reserve supply level before quotas can be proclaimed and the growers be afforded an opportunity to approve or disapprove marketing quotas. This can be accomplished for tobacco by adding the following proviso at the end of the sentence of section 312 (a) of the Agricultural Adjustment Act of 1938: Provided, That the Secretary shall, notwithstanding the total supply or the reserve supply level, proclaim a national marketing quota for any kind of tobacco for which a national marketing quota was proclaimed for the immediately preceding marketing year and, beginning on the first day of the marketing year next following and continuing throughout such year, a national marketing quota shall be in effect for the tobacco marketed during such marketing year.
The CHAIRMAN. How long have you had that?
Senator AIKEN. I think it has been understood that the quota system has worked better with tobacco than any other crop. Has there been any difficulty in a young man getting into tobacco growing?
Mr. Hicks. Not at all.
Senator AIKEN. There has been no trouble with respect to anyone going into tobacco growing because of the quota system?
Mr. Hicks. Not at all. He comes in on a formula that is provided in the act.
Senator AIKEN. I had not heard of any complaint. I wondered if there were any.
Mr. Hicks. It is very democratic in its process of allowing quotas for new growers.
Senator HOEY. I think the tobacco quota has been the most satisfactorily administered quota of any of them.
Mr. Hicks. Second, tobacco growers favor the continuation of the loan rate at 90 percent parity. We have not incurred any losses in
connection with the loan operations on flue-cured tobacco and propose, when supplies accumulate, to cut back productions we have in the year 1948 until the supply is in line with the demand. The Flue-Cured Tobacco Stabilization Corp. holds about 200,000,000 pounds of tobacco now, but we believe by keeping production in check we can move this tobacco in the next year or two.
We favor the present method of determining parity for tobacco. We recognize the need for modernizing parity for some commodities, but believe that the parity for tobacco has already been modernized by the use of the 1937–39 base period. Even though some of the formulae that have been suggested would give tobacco a higher parity than the 1935–39 base period, we do not believe there has yet been worked out a general formula to apply to all commodities that would be an improvement over the present method when the problem of other commodities are considered.
We are convinced that the definition of normal supply in S. 2318 is unworkable for tobacco. As a matter of fact, we don't see how it could work out for any commodity, but it may fit some commodity. We prefer the method of determining the normal supply in the Agricultural Adjustment Act of 1938, as amended. This matter was covered in some detail by Secretary Anderson when he appeared before this committee. We believe his illustration was from tobacco, and we agree with his conclusion on this point.
The foregoing statement represents the considered judgment of the flue-cured tobacco growers, and we sincerely hope you gentlemen will give serious consideration to the importance of this matter. Thank you very much.
The CHAIRMAN. Do you have any competition from foreign countries?
Mr. HICKS. Oriental tobacco is one of the great competitive tobaccos in the foreign countries-oriental, Turkish, and Greek. There are numerous countries that grow tobacco, but none grow the fine fluecured tobacco that we produce.
We are informed that the oriental tobacco going into the German occupation zone now is costing 21/2 times more than the flue-cured tobacco that we could market over there.
The Germans tell the people that they have contact with that they much prefer the flue-cured tobacco with a mixture of burley.
The CHAIRMAN. Thank you, sir.
Mr. Berry, you stated that under the formula in the proposed bill the production in 1948 would have to be reduced about 200,000,000 pounds from the Secretary's goal. I am wondering where that is provided for in the bill or whether you mean that it would have to be reduced 200,000,000 pounds in order to get the same support level?
Mr. BERRY. I presume that is true, Senator.
Mr. BERRY. Your bill does not provide for taking into account or the determination of a reserve supply level.
Senator AIKEN. Maybe that will be brought out as the testimony proceeds anyway.
Mr. BERRY. You relay solely on the 10-year moving average under
Senator AIKEN. That is right.
Mr. BERRY. And that effects the reduction that we complain of, of 200,000,000 pounds.
We have a computation here or comparison of computations of national marketing quotas under the provisions of your bill, as compared to the Agricultural Adjustment Act of 1938, as amended. I do not know whether it has ever been filed in any previous hearing but I would like to file that as part of my statement.
Senator AIKEN. We will be glad to have it, because I do not think this information has been filed for the record so far.
(The information referred to is as follows:)
Tobacco: Comparison of computation of national marketing quotas under provisions of S. 2818 and the Agricultural Adjustment Act of 1938, as amended
I. COMPUTATIONS UNDER S. 2318
Senator AIKEN. Mr. Kline's testimony for the Farm Bureau, which I referred to, reads as follows:
The estimated supply for a given year is defined as the current year's production plus actual carry-over. The estimated market requirements are the sum of the domestic disappearance of the previous year, the estimated exports for the current crop year, and an allowance for carry-over. The supply percentage would be the estimated supply for a given year as a percentage of the estimated market requirements. In event no better information is available for estimating the current year's exports, the Secretary should use the exports for the previous year.
It seems to me if a formula of that nature is adopted that it would be quite applicable to the tobacco production, making due allowance for unusual conditions such as Europe's stopping buying.
The CHAIRMAN. The next witness is Mr. Fred S. Royster, president, Bright Belt Warehouse Association, Inc., Henderson, N. C.
STATEMENT OF FRED S. ROYSTER, PRESIDENT, BRIGHT BELT
WAREHOUSE ASSOCIATION, INC., HENDERSON, N. C. Mr. ROYSTER. I am F. S. Royster, of Henderson, N. C., and am president of the Bright Belt Warehouse Association, Inc., which comprises in its membership all tobacco warehouses in the flue-cured growing area.
Since all flue-cured tobacco is marketed by the auction system, the warehouseman is the marketing agent or commission merchant of the grower. Therefore, it is quite natural that what affects the grower of flue-cured tobacco is of vital concern to the warehouseman. Hence, my appearance in the interest of farm legislation affecting the growers of flue-cured tobacco.
The CHAIRMAN. Will you explain to us what flue-cured tobacco is, Mr. Royster?
Mr. ROYSTER. It is a processing term used, Senator, to designate flue-cured or what we call bright tobacco goes through a different process in preparation for market than the other types. The other types that are air cured are cured by various ways.
Flue-cured means cured by heat.
Mr. ROYSTER. It is in general use in the bright area. Burley, of course, is not flue-cured.
I appreciate the opportunity of appearing before this committee and wish to express the appreciation of my association for the efforts which the members of the committee are exerting on behalf of the permanent farm program. I sincerely hope that you will be successful in formulating and enacting legislation which will continue the progress made by the growers of flue-cured tobacco in recent years.
I am in agreement with the statement made by Mr. Hicks, representing flue-cured tobacco growers, concerning details that we feel should be embodied in the legislation.
I desire to call to the attention of the committee the fact that the growers of flue-cured tobacco have, on every occasion which they have had the opportunity to vote for quotas since 1933, except 1939 approved the present program by overwhelming majorities, thereby showing their satisfaction with and support of the program.
I think it should be pointed out that in the operation of the present program there has not resulted any financial loss to the Federal Government in carrying out the provision whereby the price has been supported at 90 percent of parity and that under the program the growers have met all market requirements for flue-cured tobacco, expanding production from an average of approximately 800,000,000 pounds annually, 5 years ago, to a record production of 1,351,000,000 pounds in 1946.
The CHAIRMAN. That is the best production you have ever had?
Mr. ROYSTER. Yes, sir.
To emphasize further the support which the growers themselves have given the program, in 1947, by an overwhelming majority of more than 98 percent of those growers voting in a referendum, they voluntarily levied an assessment upon themselves of 10 cents per acre to be used in expanding markets principally in foreign countries for tobacco.
May I again express my appreciation for the consideration of the committee, and respectfully request the continuation of adequate legislation for the furtherance of the flue-cured tobacco program.
Thank you, sir.
Senator Alken. May I ask whether any reduction in the acreage of flue-cured and burley tobacco is contemplated for this year?
Mr. RoYSTER. For the year 1948?
Mr. ROYSTER. The reduction is 27.52 percent in flue-cured acreage, which of course is a drastic reduction brought about by the developments in foreign markets during the war.
Senator AIKEN. Is that not a greater reduction than would be required under S. 2318?
Mr. ROYSTER. Senator, I do not have that paper with me. As I recall it, I believe that it would not require as much reduction under your bill as was proclaimed in 1948.
Senator AIKEN. I notice in the table which Mr. Berry presented a computation under AAA as amended would require in 1948 an amount of 955,000,000 pounds and the amount under S. 2318 as computed here would be 797,000,000 pounds, or a reduction from 955,000,000 to 797,000,000 pounds.
As a matter of fact, the growers are going to produce a little more than that amount themselves.
Mr. ROYSTER. Well, you understand, of course, that figure is the amount which we need to produce during this year in order to proclaim quotas under the present act in 1949.
Senator AIKEN. These figures would show that burley would have to be reduced, would be reduced under S. 2318 about one-third, or from 474,000,000 pounds to 314,000,000 pounds. Is burley being reduced, too, this year, and can you tell me what percent?
Senator COOPER. Two percent.
Senator AIKEN. That is probably as a result of the failure of the foreign countries to buy burley. Do you export flue-cured, too?
Mr. ROYSTER. I would not agree that it is too heavy, but we export of course a great deal larger percent of flue-cured than is exported of the other types. That has been customarily true down through the years. It has gone as high as 50 percent in the years past.
Senator AIKEN. Under this bill there would be, instead of any reduction an increase of about 80 percent in the production of firecured and an increase of about one-third in the production of dark air-cured.
Mr. Shaw. That increase represents 27.52 percent taken out.
Senator AIKEN. That represents a cut taken out? That explains it. Otherwise, I was wondering why you were objecting to a formula that was doing almost exactly what you were willing to do anyway.
That would mean additional cut anyway.