Senator AIKEN. Are you folks satisfied, Mr. Clay, to have the Secretary announce goals, the production goals and the requirements, at the beginning of each year? Is that method satisfactory to you? It has worked extremely well. Senator AIKEN. If that is done that way, then I do not see why the formula as proposed in this bill would not at least maintain support prices equal to what you now get and in the case of most types of tobacco actually increase them a little bit. There would not be too much difference. Mr. CLAY. Yes, Senator Aiken, we have no quarrel whatsoever with the alternative parity-price formula. As a matter of fact and policy, we wonder whether there is any probability of enactment of an alternative formula. We do not care so much which parity formula is used because the result, as you pointed out this morning, would be substantially the same. We are vitally concerned, however, with the sliding scale of loan values, the percent of loan available. Senator AIKEN. That is right. We recognized at the beginning of our study of agricultural problems that the two crops tobacco and cotton-presented problems which were not common to the other basic commodities, and that it was even considered at one time working out different formulas completely for the crops. Yet we have been trying all the time to get some formula that would cover them all fairly. You cannot look at just the parity formula alone but you have to take into consideration all those other factors which enter into a well-rounded program such as the means of disposal, taking off the market. I do not know what else we would do to the market in the way of diversion of it to other uses. Mr. CLAY. Senator Aiken, we are certainly in entire accord with the desirability of enacting a long-range agricultural program which will have an understandable uniformity if possible in applicability to all commodities. That goal would be conceded. At the same time we must recognize that tobacco is distinctly different and we do not want to be crucified upon the alter of uniformity. Senator AIKEN. I do not think you are going to be crucified. I think we can assure you that. Mr. CLAY. I know you are not. I did not mean to imply that was the purpose but we would not suggest that you flue-cure or fire-cure wheat or corn. The crops are different in their every aspect and we believe from these discussions you will discover that necessarily, unfortunately, yes-but necessarily tobacco must be given a different treatment. Senator AIKEN. We have been trying to work out some way of including wool under a general agricultural law because the wool growers are in a peculiar position, too, producing a necessity as far as national security is concerned, and yet having to meet an unusual type of competition. I think we are going to be able to work that out because the wool growers do not like to come in here every year or every 2 years or at all and ask for legislation applicable to wool alone. We realize that tobacco people don't want to do that either, in fact they have told us they do not like to come in and ask for special legislation affecting tobacco alone. So I think that after we hear your testimony today and working with you, it may be entirely possible to work in one bill adequate protection for the tobacco growers in such a way that he will lose nothing and at the same time not be conspicuous as the beneficiary of special legislation. Mr. CLAY. Thank you, sir. We are grateful for your statement of your objective. We do not want, Senator Aiken, any special treatment and I think that is rather well evidenced by comparison with a commodity which you just cited, wool. I took exhibit G from the testimony filed on behalf of the wool people, the National Wool Growers Association, and I discover there that among 23 commodities, tobacco percentagewise has increased in price between September 15, 1941, and January 15, 1948, twentieth on the scale. We are not seeking any special price advantage whatsoever. We do not want special treatment although it may require special legislation to give us equal treatment. In the years of experience which we have enjoyed, the Commodity Credit Corporation has not been forced to take a loss on tobacco. The tobacco program has worked and worked.well. SENATE BILL 2318 Senate bill 2318 is a well-conceived outline for a long-range agricultural program; but, as the sponsors of this bill undoubtedly recognize, the measure itself is designed as a pattern for discussion, as a place of beginning in the development of a program that can be accommodated to the problem of each particular agricultural product. In its present form, Senate bill 2318 is addressed primarily to products which do not possess supply and price problems comparable to those of tobacco. Under the Agricultural Adjustment Act of 1938 as amended, reserve supply level is calculated on the basis of principles which are firmly established in the tobacco trade itself. The reserve supply level computed under the existing tobacco program is the actual reserve supply level required to produce an adequate but not excessive supply of burley tobacco. Senator THYE. What has been the history of your acreage in the past 10 years in the over-all total tobacco production? Mr. CLAY. Are you interested in the acreage or poundage or both? Senator THYE. The question was, what has been the history of your total acreage in the growing of tobacco in the past 10 years? Mr. CLAY. Beginning with the year 1936, burley acreage was 302.500,000 pounds. Senator THYE. Pounds? Mr. CLAY. Yes, sir. Senator THYE. That is not acreage. Mr. CLAY. I take that back. I read that wrong. In 1936 the acreage was 302,500. In 1937 the acreage was 443,300. Senator AIKEN. You will find the production in pounds, Senator Thye, on page 11 of this pamphlet. Senator THYE. I know, but I was interested in the total over-all acreage that has been planted to tobacco annually for the past 10 years. It would give me information as to whether you have increased, held to a normal acreage, or decreased. With that history we could try to anticipate what could be done in the future. If you had a fixed high parity-price structure, and it were possible to go up in acreage the ultimate end would be such extensive overproduction that the maintenance of a support price would be utterly impossible from the standpoint of the Treasury. That is the reason I asked the question. Mr. CLAY. It is a good question and we are certainly in entire accord with you. We believe in marketing quotas. Senator THYE. Have you been going uphill with your total acreage in the past 10 years? Let us catch the last year. Mr. CLAY. 1946, 489,000. Senator THYE. You see, you are up considerably over 1936, and you are up over 1937. Senator AIKEN. That is for burley alone? Mr. CLAY. Yes. Senator AIKEN. Has the increase in acreage been at the expense of other tobacco types? Mr. CLAY. No, sir; except to some; except producers of dark tobacco have converted to burley. Senator THYE. Have the other varieties followed the same pattern of increase that the burley tobacco has? Mr. CLAY. I do not know, but I can determine the pattern from an examination of the statistics. Senator THYE. Your tobacco crop is not in every sense identical to other commodities but we have recognized in other commodities that if it were not for the European needs this year we would have had a surplus problem with wheat. Mr. CLAY. Yes. Senator THYE. The war coming as it did in the early 1940's did assist greatly in reducing the tremendous amount of grain that we had in storage under the ever-normal granary provision of the Agricultural Adjustment Act. We, of course, do not look forward to another war to bail us out of a similar high inventory of any commodity. Therefore, in writing our legislation, as we are attempting to write it today, we must look back in order that we may have some knowledge from past experience in trying to formulate a future program. That is one reason why in the other commodities there consideration was given to the carry-over in relations to what the parity level would be for the future. Mr. CLAY. In burley tobacco, sir, we did not have substantial exports during the war years. In fact, they were below those of the prewar years. Since then we have developed a substantial export market, but that is not a fly-by-night market. We believe it has been built on a rather firm foundation.' Senator THYE. We just hope so. Mr. CLAY. There has been a conversion of taste in Europe from a straight type of cigarette to a blended type such as we have in this country. That is not an unusual condition. Senator THYE. Have the tobacco people attempted to study what might take place in the economy of the European countries as to the type of tobacco that they might develop or turn to in order to get the blend that has been accomplished here in America? Mr. CLAY. Fortunately, it is almost impossible to duplicate the American blend without the American tobaccos. That is especially true of burley tobacco. It is an indigenous product of American agriculture. Senator THYE. Could they take your seed. Mr. CLAY. No, sir; they could grow burley the first year but thereafter they would have to buy some seed from us? Senator THYE. Is it impossible for them to acquire the seed here annually? Mr. CLAY. I do not know whether it is or not, but if we get in trouble on that, we certainly would make it impossible. So far we have not encountered world competition on burley tobacco. Representative CHAPMAN. There is a law against that. Mr. CLAY. There is a law against it. Senator COOPER. In Europe there is a climatic condition that prevents the growing of burley tobacco? Mr. CLAY. That is true. We are not anxious to develop a world market which will evaporate on us overnight. Senator THYE. That is the reason I asked the question because it will enable us to try to envision what the trend might be in the future. Mr. CLAY. We certainly hope that we never become stupid enough to seek a world market that we cannot retain or to fight for a price for tobacco which will result in the long run in our losing our world market. Senator THYE. I am happy to get that information, too, because it is the length of our vision that keeps us out of trouble. Mr. CLAY. It is, sir. Senator AIKEN. The increased world market for burley is the direct result of the war and getting the people of the rest of the world accustomed to American-type cigarettes. Mr. CLAY. That is true, Senator Aiken. After the First World War there was a conversion in Europe from a Turkish type to a Virginia type and after the Second World War there has been an equally decided conversion to our American blend. Senator AIKEN. After the First World War was when we folks up in Vermont all stopped raising cigar wrappers. Mr. CLAY. You are familiar then with the conversions that took place. Senator AIKEN. But I do not think it hurt the farmer at all, because I recall every farm in my town would have a half acre to 2 acres in tobacco and as a rule all the fertility made on the entire farm went on that tobacco field and the rest of the farm suffered. Mr. CLAY. As I have already indicated, the reserve supply level is calculated on the basis of principles accepted in the trade itself. In Senate bill 2318, however, the reserve supply level is to be calculated on an entirely different basis. This results from a fact that normal supply is taken as being not that dictated by trade experience but as the adjusted average total supply for the 10 preceding marketing years, computed by determining the actual average total supply for such period and increasing such actual average by 10 percent of the amount by which the total supply for each marketing year used in 75470-48- -27 computing such actual average was less than 80 percent of such actual average and decreasing such actual average by 10 percent of the amount by which the total supply for each marketing year used in computing such actual average exceeded 120 percent of such actual average. The effect of the Senate bill 2318 supply formula is that "normal supplies" would always be below necessary supplies to cases of rising trends in production and disappearance, and "normal supplies" would always be above necessary supplies in cases of declining production and disappearance. This is not only the logical consequence of the Senate bill 2318 formula, but the actual consequence thereof. In the case of burley tobacco we know from application of the trade formula, which is also the formula of the Agricultural Adjustment Act of 1938, as amended, that 514,000,000 pounds of burley tobacco must be produced in 1948 to maintain the reserve supply level. On the face of it, therefore, Senate bill 2318 would prevent growers from producing 200,000,000 of the 514,000,000 pounds required to maintain an adequate reserve supply level. Gentlemen, that is significant. Let me repeat. Senate bill 2318 would authorize a production insufficient for domestic requirements. We would be forced to import leaf to meet our own requirements. The CHAIRMAN. Are you pretty sure of that? Mr. CLAY. Yes; I am confident because last year our consumption of burley tobacco was 526,000,000 pounds and this bill would authorize us to produce only 314,000,000 pounds. We could not begin to take care of domestic requirements. Senator AIKEN. That is the effect of paragraph (b) on page 37? Is that the paragraph that would produce that undesirable effect? Mr. CLAY. Let me get a copy of the bill, sir. Senator AIKEN (reading): (b) "Total supply" of tobacco for any marketing year shall be the carry-over at the beginning of such marketing year plus the quantity produced in the United States during the calendar year in which such marketing year begins and the quantity imported into the United States during such marketing year, except that the production of type 46 tobacco during the marketing year with respect to which the determination is being made shall be used in lieu of the production of such type during the calendar year in which such marketing year begins in determining the total supply of cigar filler and cigar binder tobacco. I am wondering whether instead of looking up all these things now and tying page 11 to page 41 and tying it back to page 26, if some of you folks would prepare an amendment or point out to us exactly in writing what changes should be made in there so as to avoid a reduction of that nature, a reduction greater than that which the country could stand. Mr. CLAY. Senator Aiken, we would like to retain the existing provisions of the Agricultural Adjustment Act for the calculation of reserve supply level. Perhaps the committee would like for me to explain just why we have obtained such an entirely different result under the two. I might be able to clarify it better extemporaneously than by referring to the statement. Under S. 2318, reserve supply level as a technical term is applied axactly as it is under the old, that is, you add to a normal supply a 5 percent reserve. The difference between the two bills comes in the |