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Senator AIKEN. Do you think you should include the cost of labor in estimating the price formula?

Mr. CLAY. Yes, sir; we do.

Senator AIKEN. If that should be done and the matter of determining supply ironed out or we keep the present method of determining supply, the bill would then provide at least in 9 years out of 10 a higher support level than that which existed at the present time.

Mr. CLAY. Yes, sir.
Senator AIKEN. I think it would, even without labor.

Mr. Clay. Yes; but as all the witnesses so far have said, we are vitally concerned with this fluctuating percent of loan. I recognize why that makes sense, generally, but in tobacco we must cope with powers over price that we have no earthly way of dealing with.

Senator AIKEN. But you understand that if we change the parity formula and include the cost of labor, 90 percent support price is considerably more than 90 percent as figured at present.

Mr. Clay. The parity would be more, therefore the 90 percent would be more.

Senator AIKEN. A higher support level.

Mr. CLAY. I do not know how that would work out but we need the current loan values in order to realize an income adequate to be anything like on a parity with other producers.

Tobacco has not enjoyed the prosperity that has come to some commodities as a result of the war and postwar condition. We are pretty far down the scale, as table G of the National Wool Growers Association shows.

Senator Aiken. Suppose the old method of determining supply is used and we should include the cost of labor in the parity formula and bring it up to date, would you not be entitled to approximately the same support values you are getting now?

We are having the Bureau of Agricultural Economics do some work on that now.

Mr. CLAY. I have not seen that calculation of course, either, so I do not know, but we are delighted with it as it is, and that is why we have not recommended any change.

We do feel that with any commodity such as tobacco where marketing quotas are to be in effect, noncooperators should not have the benefit of the loan program and accordingly we believe that whenever quotas are in effect, that 90 percent of parity is not an unreasonable

We do not want the Government to accumulate huge stocks of tobacco in securing nonrecourse loans.

We will come in asking for a change in this program if the program as it now exists begins to bankrupt the pools of our marketing association that are handling this crop and Commodity Credit Corporation, because we know we are going to lose our program, once it begins to cause huge financial losses to the Government. We do not want that any more than you do, but tobacco is one of the commodities under which you can have a 90-percent loan without cost to the Government.

Senator AIKEN. As a matter of fact, if you have controls over production and you have a fair floor, the chances are that the market price would remain satisfactory anyway, and that you would only use the support floor for the purpose of getting loans, just as you are doing this year.


Mr. CLAY. No, sir. I did not make myself clear on that. That is what happens in an Adams & Smith market where the laws of suppply and demand set the price, but we do not work that way in tobacco; we have three or four big boys that fix the price and when you have 90-percent parity program that says you have to pay above the price, so the higher the parity price is does not mean necessarily and probably not at all that more tobacco is coming to the Commodity Credit Corporation.

It simply means that these three or four big boys are going to pay more for the crop.

Senator AIKEN. It means that the grower can borrow money and hold his crop until he gets that price.

Mr. Clay. Yes, sir; it means that, too, but this year a relatively small part of the crop went into the pool even though we had a huge crop.

Senator AIKEN. What has become of it? Is the individual grower selling direct to the buyer this year? I know there is about $190,000,000 on loan on tobacco now.

Mr. Clay. I had better explain how the program works. Our burley tobacco is sold at auction. If at that auction the grower fails to receive a price equivalent to the loan price, then he has the right to consign that tobacco, and he usually does, to a marketing association which operates to carry into effect the nonrecourse provisions of the statute; the marketing association advances the grower money which it obtains from Commodity Credit Corporation in a sum equivalent to the loan price, then the marketing association which is a grower cooperative, disposes of the crop. The grower does not retain it himself. It goes into the marketing association where it is held for him.

Senator AIKEN. Does the marketing association have an arrangement with Commodity Credit Corporation whereby any loans it makes are guaranteed!

Mr. Clay. Yes, sir.
Senator AIKEN. Just as a bank?
Mr. CLAY. Yes, sir.
I thank you gentlemen very much for your courteous reception.

The CHAIRMAN. Our next witness is Mr. Paul Rudolph, of Springfield, Tenn., manager of the Eastern Dark-Fired Tobacco Growers Association.



Mr. RUDOLPH. Mr. Chairman and members of the committee, the gentlemen who appeared before me were speaking for flue-cured and burley tobacco, or the cigarette type, and I come before you speaking for dark-fired and dark-air-cured types, which by nature are different, but our problems are similar.

Before giving you my report I would like to say that we concur in the recommendations that these gentlemen have brought to you this morning.

The CHAIRMAN. How does the volume of production compare?

Mr. RUDOLPH. The volume of the dark-fired and dark-air-cured is very much smaller than the burley and flue-cured. The consumption is limited, and since the war, the beginning of the war, our export markets have been cut off, so it has further curtailed the consumption of our types of tobacco.

I appear before you representing the following six organizations:

Eastern Dark Fired Tobacco Growers Association, Springfield, Tenn., membership, 30,000 tobacco growers.

Western Dark-Fired Tobacco Growers Association, Murray, Ky., membership, 20,000 tobacco growers.

Stemming District Tobacco Association, Henderson, Ky., membership, 20,000 tobacco growers.

Virginia Dark-Fired Tobacco Growers Marketing Association, Farmville, Va., membership, 8,000 tobacco growers.

Virginia Dark Tobacco Warehousemen Association, Lynchburg, Va., membership, 7,000 tobacco growers.

Virginia Sun Cured Cooperative Association, Richmond, Va., membership, 1,500 tobacco growers.

The CHAIRMAN. You mentioned about four States.
Mr. RUDOLPH. That is right.
The CHAIRMAN. Your interest is not confined to any one State ?

Mr. RUDOLPH. Kentucky, Tennessee, Virginia, and Indiana are the four States.

The CHAIRMAN. Kentucky is the leading State?

Mr. RUDOLPH. Kentucky and Tennessee, I believe, are about equal. I have forgotten the exact figures on production, but they are about the same.

The above associations represent 86,500 producers of fire-cured and dark air-cured tobacco in the States of Kentucky, Tennessee, Virginia, and Indiana in the handling, processing, and marketing of

These associations, with one exception, have served producers continuously since 1932 and are now actively engaged in these operations. These organizations represent more than 90 percent of all farmers who produce fire-cured and dark air-cured tobacco in the United States.

The CHAIRMAN. Generally speaking, is the industry in a more successful or more prosperous position now than at any other time? What is the general condition of the industry?

Mr. RUDOLPH. Due to the support price and the market, our farmers for the past 2 years have received satisfactory prices for their tobacco.

We appreciate this committee's realization of the need for a longterm agricultural program and commend their efforts to obtain this purpose. It is our wholehearted desire to cooperate and assist in the formulation of this legislation.

We feel, however, that certain provisions of S. 2318 would not operate to the best interests of fire-cured and dark air-cured tobacco growers. We make this statement after careful consideration, and for the following reasons:

1. The proposed amendment to section 301 of the Agricultural Adjustment Act of 1938 would result in national marketing quotas for fire-cured and dark air-cured tobacco in excess of domestic and export requirements.

2. S. 2318 provides for support prices to cooperators and noncooperators alike, which is equivalent to the limination of quotas.

their crops.

3. We are not in agreement with the determination of parity as provided in section 402 of S. 2318.

The CHAIRMAN. Are you going to tell us in what respect you are not in agreement !

Mr. RUDOLPH. We concur with the gentlemen who have appeared before me, Senator, and I believe Senator Aiken quizzed them rather closely on that, and I am perfectly willing to abide by his and their agreement on those points.

4. S. 2318 provides, in section 403, for the repeal of Public Law 163. We, on behalf of the producers of fire-cured and dark air-cured tobacco, strongly protest against such action.

5. The repeal of Public Law 163 would result in support prices below the cost of production for these types of tobacco. The Congress passed Public Law 163 to provide equitable support prices to protect producers of these types.

We, in consultation with producers of other types of tobacco, submit the following recommendation; and, Mr. Chairman, this recommendation I would like to have read by the man who represents the Virginia types of tobacco. He is going to present it.

I have it attached to my report which I will file, if that is agreeable with you. Mr. Hall, from Farmville, Va., represents the type of tobacco which is principally affected by this recommendation that we all make.

Senator AIKEN. Is the wide difference of a few years ago between the parity values of dark-fired and burley due to the price or the cost of growing?

Mr. RUDOLPH. Will you restate your question, please.

Senator AIKEN. I notice that since you have been tied to burley or, rather, since dark-fired tobacco has been tied to burley tobacco, that the difference between them seems to have been lessening.

Mr. RUDOLPH. That is right.

Senator AIKEN. Is that because the buyers were squeezing the darkfired people before?

Mr. RUDOLPH. Yes, sir.

Senator AIKEN. And they were not well enough organized and did not have legislation to protect them?

Mr. RUDOLPH. That is right, and we had no parity formula.

Senator AIKEN. What is the difference in the yield between darkfired and burley?

Mr. RUDOLPH. I do not know that. Maybe some of these fellows have the State figures on that and can tell the difference between the yield of dark-fired and burley.

Senator AIKEN. The cost of production is not so far different as to warrant a wide spread in the price which was received by the producers?

Mr. RUDOLPH. According to Public Law 163, the cost of production, the basis of the loan rates, as compiled by the University of Kentucky and the University of Tennessee, was 75 percent of burley for firecured and 6623 of burley for the air-cured types. That was the basis for the loan as compiled by those two States.

Senator AIKEN. But they never did get, up until then, two-thirds the price of burley, did they?

Mr. RUDOLPH. No, sir.

Senator Aiken. That was simply manipulation of the market by the buyers ?

Mr. RUDOLPH. That is right.
The CHAIRMAN. Thank you, Mr. Rudolph.

Mr. RUDOLPH. Thank you, Mr. Chairman and members of the committee.

The CHAIRMAN. We have Representative Chapman, of Kentucky, who, I think, has some witnesses from that State that he would like to present. We would also be glad to hear from the Congressman.



Representative CHAPMAN. Thank you, Mr. Chairman and gentlemen of the committee.

I shall not make any statement or attempt to elaborate on the state. ments that have already been heard by the committee except to say that I endorse those statements by Mr. Berry, Mr. Hicks, Mr. Royster, Mr. Clay, and Mr. Rudolph.

First, I should like to introduce some representatives of numerous other tobacco associations and the Farm Bureau, the Grange, and other farm organizations from the States of Tennessee, Kentucky, Virginia, and North Carolina, after which I will ask the indulgence of the committee to read into the record of this hearing a brief summary of the five points on which the representatives of flue-cured, firecured, dark air-cured, burley, and Virginia sun-cured tobaccos are in agreement. They are points that have already been discussed ably by these gentlemen to whom you have listened.

First, I would like to introduce Mr. J. Frank Porter, of Columbia, Tenn., president of the Tennessee Burley Tobacco Growers Association.




Mr. PORTER. Mr. Chairman and gentlemen of the committee, I will not sit down because I will take only a few minutes.

First, I want to express our appreciation for the interest that the committee has taken.

I do not think I have ever seen a committee that has watched the witnesses any more closely than you gentlemen have this morning, indicating your determination to get us a good bill.

I agree with all that has been said by the various witnesses, and I would like to emphasize one thing, particularly, Senator Aiken, in the bill, and that is, in order to get a price for tobacco we must watch the trend if we are going to use the 10-year average. However, as Mr. Clay and others have indicated, we like the old plan better than we do the 10-year moving average.

There is one other point that I would like to indicate to those gentlemen from the Middle West whom I have the honor to know and whom I have worked with some in the past–Senator Capper, Dr. Wolf-who do not think too much of the quota system on wheat and things of that sort. We raise some wheat in Tennessee. We do not particularly like the quota system as it affects wheat and some other crops, but

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