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In the third place, if quotas are in effect and if total supply exceeds normal supply, growers should not be penalized because of the occurrence of that situation when obviously it would arise through no fault of the growers themselves but solely because of an injudicious proclamation of quotas or a change in general economic conditions.
Under S. 2318 whenever total supply exceeds normal supply, the grower is doubly penalized, both production and parity prices are slashed. The grower is placed in a position of privation, not of parity.
Parity income becomes a crucified concept and the grower becomes a candidate for relief and that is inevitable, gentlemen, when you permit the grower to produce an inadequate quantity of the product and penalize him by slashing the parity price.
Finally, and of the greatest significance of all, there is the fact that the tobacco program of the United States is the only method available to growers for meeting the power over price held by the major buyers of burley leaf tobacco. As we observed in the very beginning, burley tobacco is sold in a market where there are many sellers and only a few buyers. Without Government help many sellers-growers—are unable to control production or to bargain on price. They are left at the mercy of the buyers of leaf tobacco.
A 90-percent-nonrecourse loan places a floor under price which affords burley tobacco growers a protection comparable to that given the factory employee by a minimum wage law and by the bargaining power which he acquires through union organization. Once upon a time there were those who contended that a minimum wage law would result in unemployment. It was argued that employers would be unable to pay the applicable minimum wage and that consequently the employee would suffer rather than benefit from having a floor under his pay check. Now, undoubtedly there are those who contend that tobacco manufacturers may be unable to purchase tobacco at a price equal to or above a floor price and that the growers or their Government might suffer from the placing of a floor under price.
Experience has proven the fallaciousness of this argument, both for the laboring man and for the farmer. The Commodity Exchange Corporation has not suffered a loss in its administration of the tobacco program and buyers have continued to purchase burley tobacco at a price equal to or above the floor price.
In almost every year the cost of tobaccos used in an American cigarette is less than the cost of advertising that cigarette. In 1 year the major tobacco companies decreased the wages of their employees, paid growers less than the cost of producing leaf, increased the wholesale price of cigarettes, and reaped the largest earnings in history up
In almost every year the cost of tobacco used in the American cigarette is less than the cost of advertising that cigarette.
These unrestricted powers over price continue to exist in the tobacco industry. They can be met only by a tobacco program comparable to the Agricultural Adjustment Act of 1938 as amended. If the workingman is entitled to a wage-hour law and to a National Labor Relations Act, the tobacco grower, by the same token, is entitled to a workable farm program that will afford him protection equivalent to that which has been so readily extended to the laboring man.
Under Senate bill 2318 the burley grower as of March 15, 1948, would receive a support price of only $29.83 after application of the 60
until that year.
percent, as compared with a support price of $41.94 under the Agricultural Adjustment Act of 1938, as amended.
Under Senate bill 2318 the búrley grower would be permitted to produce in 1948 only 314,000,000 pounds of tobacco as compared with 514,000,000 pounds under the present act. Enactment of Senate bill 2316, if a similar bill were enacted for other commodities, would be equivalent to a Federal statute requiring all producers and manufacturers to curtail production to 60 percent of current levels of what they could sell although demand might well absorb current production.
Enactment of Senate bill 2318 would injure the burley grower more than the laboring man would be damaged by repeal of the wage-hour law, the National Labor Relations Act, the Social Security Act, and the unemployment compensation statutes.
On behalf of burley growers, the Burley Auction Warehouse Association recommends reenactment of those provisions of the Agricultural Adjustment Act of 1938 as amended which relate to computation of marketing quotas and to 90 percent nonrecourse loans for growers of burley tobacco.
Senator THYE. Mr. Clay, I want to say that it seems to me our first thought in an agricultural program is to maintain a floor so that we do not have ruinous prices.
Then we must have full production and, if anything, increased production. We have a national debt of more than 250 billion dollars and we will never be able to maintain our standards of living and rcontinue to reduce that debt unless we can do it on the basis of full production here in America.
We must find European markets wherever we can for whatever surpluses we have, but always bearing in mind that we have always to go forward. That is the only way be can find employment for everybody and have a well-rounded economy here in America. So do not worry
about the members of the committee that we will try in any sense to shrivel or dry up our national economy.
We will endeavor to expand your tobacco industry if we possibly can, and that endeavor will apply to every other phase of agriculture,
Mr. Clay. Senator, I thank you for your statement of your objective. I knew that was your objective and we are in accord with it. I think that you are as much surprised as we were that instead of achieving that, this bill would develop an economy of scarcity as applied to tobacco.
Senator THYE. That is one of the reasons why public hearings are held on the bill as drafted. If there are features of this bill that need correction, this committee wants to get that information. I am confident it is the purpose of every member of the committee to seek to provide legislation that will benefit every segment of the agricultural economy.
Mr. ČLAY. We certainly appreciate the approach you are taking. It is reassuring to us. It makes me feel more warm inside that we are together on our objectives.
Senator THYE. Senator Cooper and I sit very close together in the Senate Chamber and we frequently discuss the agricultural question and I think we both recognize and appreciate the varying problems relating to agriculture in our respective States. In connection with
the hearing today I personally am very happy to get this over-all explanation of the tobacco growers' problem.
Mr. CLAY. As I said, the enactment of Senate bill 2318 would be as ruinous to us as the repeal of the wage-hour law, the National Labor Relations Act, the Social Security Act, and the unemployment compensation statutes would be to the laboring man.
Let me repeat this analysis that I gave you. Let us assume that the entire 1948 crop is placed under the loan program, and none of this testimony appears in the printed statement that I have filed. Under the present act, growers with a 514,000,000-pound crop would receive $215,571,600. Under Ser:ate bill 2318 the growers with a lesser loan value would receive only $93,666,200.
Senator AIKEN. That, however, is the loan that they would receive from-provided they put it all into loan.
Mr. CLAY. Yes, sir. I will carry the matter further to show where it will not happen, but show the fact that these ratios are significant.
Senator AIKEN. The market price is generally above parity.
Mr. Clay. Yes. The difference between $215,000,000 and $93,000,000 is a huge and appalling sum. It is the difference between parity and disparity.
It is the difference between abject poverty and the common decencies of life.
I do not mean to imply, as you construed my testimony, Senator Aiken, the possibility of any tobacco crop being placed under the loan program. There is no substitute for tobacco in the manufacture of our luxurious necessity, the cigarette. The bulk of every crop of burley will move into the normal channel of trade, but it will move at a price intimately related to the parity price.
One follows the other as imperceptibly perhaps, but as surely as the lips of Edgar Bergen, moves with those of his little wooden man, and that is because of that power over price I spoke about in the beginning.
Now we recognize, gentlemen, that for certain commodities quotas have proven unsatisfactory. We do not for a moment begrudge the right of the producers thereof to seek an escape from a bondage that has proven intolerable.
For certain commodities existing parity formulas have created inequities that shock the sensibilities of farmers and consumers alike. We do not even for a fleeting second suggest that those concerned are without a right to remedy an evil apparent to all, but with leaf tobacco there is not a soul with the temerity to suggest that the existing tobacco program possesses a single vital fault. In referendum after referendum growers have voted almost unanimously their unqualified support of the present act and today with a single voice growers and all of their representatives urge you to hue closely to the program which you have already created for them, to a program which to them is a Magna Carta of economic salvation with a heritage and a promise comparable only to our Bill of Rights.
I thank you.
The CHAIRMAN. I wish to say you have made a most impressive appeal here. We seldom have a statement presented here in a more effective way than you have presented your statement today.
Mr. CLAY. Senator Capper, I am a country boy and a country lawyer and I really appreciate that.
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.
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.
The CHAIRMAN. Our next witness is Mr. Paul Rudolph, of Springfield, Tenn., manager of the Eastern Dark-Fired Tobacco Growers Association.
STATEMENT OF PAUL RUDOLPH, MANAGER, EASTERN DARK-FIRED
TOBACCO GROWERS ASSOCIATION, SPRINGFIELD, TENN. 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