CHAPTER 5 TOBACCO SALIENT FACTS ABOUT TOBACCO PROGRAM 1. Maximum number of tobacco growers expected to sign contracts in 1934___ 2. Number of pounds to which 1934 production in continental 3. Estimated collections of processing taxes Oct. 1, 1933, to FLUE-CURED TOBACCO 5. Number of pounds to which total United States production is limited in 1934 under reduction program _ - 6. Total rental and benefit payments with respect to 1934 crop BURLEY TOBACCO 7. Number of pounds to which total United States production is limited in 1934 under reduction program _ _ 8. Total rental and benefit payments with respect to 1934 crop FIRE-CURED TOBACCO 9. Number of pounds to which total United States production is limited in 1934 under reduction program_. 10. Total rental and benefit payments with respect to 1934 crop DARK AIR-CURED TOBACCO 11. Number of pounds to which total United States production is limited in 1934 under reduction program__ 12. Total rental and benefit payments with respect to 1934 crop CIGAR-TYPE TOBACCO 13. Number of pounds to which total United States production is 14. Total rental and benefit payments with respect to 1934 crop: 275,000 1, 000, 000, 000 $48, 395, 805 $40, 740, 000 500, 000, 000 $16, 575, 000 250, 000, 000 $14,950, 000 110, 000, 000 $1,798, 000 35, 000, 000 $767, 000 88, 000, 000 $5, 500, 000 $1, 000, 000 MARYLAND TOBACCO 15. Number of pounds to which total United States production is limited in 1934 under reduction program_ 16. Rental and benefit payments with respect to 1934 crop‒‒‒‒‒ 21, 000, 000 $150,000 41746°-34—6 Listed among the basic commodities named in the Agricultural Adjustment Act, tobacco differs from the others in that the base period for determining price parity is defined, not as the 5 prewar years, but the years from August 1919 to July 1929. When the tobacco problem was considered, it was recognized that separate programs would be needed for the types of tobacco grown in different sections of the country, because these vary greatly in methods of production, price, uses, and characteristics. Some types are exported in large volume; others are consumed almost entirely Chart 11.-Tobacco, Rice, and Flax-Acreage, 1929 within the United States. Different programs are necessary for each of the principal kinds of tobacco. The Secretary of Agriculture therefore defined tobacco under six distinctive classifications, each being designated a basic agricultural commodity. The classifications were as follows: 1. Cigar-leaf tobacco 5. Dark air-cured tobacco The purchasing power of each of these commodities during the base period was different, and the disparities in current market prices varied from one to the other. Overproduction was greater for some kinds of tobacco than for others. Consumer demand was weaker for some than for others. Yet the problems of all types had some common characteristics. Receipts from the sale of all types of tobacco had declined from approximately $286,000,000 in 1929 to $107,000,000 in 1932. This had brought about an acute situation. Some tobacco growers were being forced off their farms. Others sought to shift to other types of farming in which the opportunity to make a living appeared to be greater. It was noted that during the period in which returns to tobacco growers had declined so drastically, the manufacturers of tobacco products were able to increase their profits. The total profits of 52 leading tobacco manufacturers were $146,000,000 in 1932 as compared with $134,000,000 in 1929 and $76,000,000 in 1923. In other words the net profits of a handful of manufacturers in 1932 were Chart 12.-Tobacco, Unmanufactured: Total Disappearance, Domestic Consumption, and Exports, 1923-24, 1932–33 Chart 13.-Tobacco Industry: Returns to Farmers and Manu DOLLARS facturers' Profits 1923 '24 '25 '26 '27 $28 $29 $30 31 '32 $33 '34 nearly 50 percent greater than the gross returns of all the tobacco growers in the United States in the same year. Obviously the tobacco grower was not receiving an equitable share of the tobacco consumer's dollar. When the situation was examined in detail, it was found that large stocks of practically all types of tobacco had accumulated for one reason or another during the last few years and the need for a crop reduction program was evident. I. CIGAR TOBACCO PROGRAM The cigar tobacco industry was given first attention, because the need for production adjustment was most pressing in the cigar tobacco districts. The 1932 prices of cigar types of tobacco had been lower in relation to the base period than the prices of other types. It was concluded also that the cigar types were better adapted than other types to immediate application of a control program under the provisions of the Agricultural Adjustment Act. Cigar types are planted somewhat later in the season than are other types and hence were not so far advanced at the time control measures could be formulated. Practically the entire cigar tobacco crop is consumed in the United States, hence processing taxes on these types would produce revenue sufficient to make payments large enough to cause an immediate reduction in the crop and an improvement in prices. An examination of cigar-leaf supplies and consumption indicated that if no tobacco of these types were grown in 1933 or 1934 there would be, at the end of the 2 years, no shortage of any important grades. While a reduction in the cigar tobacco acreage was indicated in farmers' planting intentions, the 1933 intended acreage with average yields would have resulted in a supply larger in relation to consumption than was the supply a year earlier. Because the districts producing cigar tobacco are widely scattered, with competition among districts, the need for a coordination of farmers' adjustments was very pronounced. After preliminary conferences of the administrative staff, representatives of producers and of the State colleges in the cigar tobacco districts were invited to Washington to discuss the situation and possible plans for improving it. These plans were discussed also with representatives of manufacturers using cigar tobacco. FILLER AND BINDER TYPES The principal features of the program adopted for the filler and binder types of cigar tobacco were: 1. Growers were offered payment in return for reducing their tobacco acreage in 1933 and for maintaining reductions in 1934 and 1935 if so requested. 2. Limitations were placed on the use of the land retired from tobacco production. 3. A tax was levied upon the domestic processing of cigar tobacco. Growers were offered an opportunity to sign contracts with the Secretary of Agriculture wherein they agreed to make reductions in tobacco acreage in return for specified cash payments. (See exhibit 27 of appendix I.) This plan was offered to growers in the following districts producing the filler and binder types: In each district, plans for conducting the sign-up were worked out whereby the Federal, State, and county extension organizations cooperated to the fullest possible extent in presenting the program to farmers. An Committees of growers in each district and each community were set up to assist and advise in the administration of the program. agent was selected in each district to supervise the administrative field work. The campaign for obtaining the signatures of growers to acreage reduction contracts was closed on August 26. About 18,000 growers of filler and binder types of tobacco signed contracts. This is about three fourths of the total number of such growers. The tobacco acreage reduction specified for 1933 in the contract was 50 percent of the base tobacco acreage chosen by the grower for his farm. The contract gave the Secretary the privilege of requiring a reduction in 1934 and/or 1935 not exceeding the reduction specified for 1933. The grower was given the choice of using as the base tobacco acreage for his farm one of the following: (a) Eighty percent of the average tobacco acreage planted on this farm in 1931 and 1932. (b) The entire tobacco acreage planted on this farm in 1932, provided such acreage did not exceed that so planted in 1931. (c) The average tobacco acreage planted on this farm in 1931 and 1932, provided the tobacco acreage planted on this farm in 1932 exceeded that so planted in 1931. The producer was required to limit the use of that portion of the base tobacco acreage not permitted in tobacco. No crop for sale was to be grown on this land. Food crops and feed crops directly or indirectly for home consumption on the farm were permitted on one half of it; but the remainder had to be kept idle or planted to soilmaintenance crops. The payments to growers in each of the above districts were to be made at specified rates per acre retired from tobacco production. Two payments were provided for each year of the effective life of the contract. The rate of the first payment in 1933 was uniform for all producers in each district but varied among districts as follows: These rates represented approximately 20 percent of the fair exchange value of the average production of one acre of tobacco in each district; that is, the variations in rates per acre among the districts were due to differences in the average yields per acre and differences in the fair exchange values per pound of the tobacco. The second payment to each producer for 1933, for each acre retired from tobacco production, was 40 percent of the average market value per acre of the tobacco harvested on his farm in 1933. In cases where no tobacco was harvested, minimum payments were provided. The rates of the first payment per acre of reduction for 1934 and 1935, in case a reduction should be required for those years, were specified at not less than approximately three fourths of the rates per acre in 1933. The rate of the second payment per acre of reduction in 1934 was specified at not less than 30 percent of the average market value per acre of the tobacco harvested on the farm in those years. The reason for making the rates for 1934 and 1935 less than the rates for 1935 was that in 1934 and 1935 the plans for adjustment |