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Mr. MILLER. Which he could not economically do.

Senator CLEMENTS. He would raise the tobacco at a loss if recommendations 2 and 3 were put into effect.

Mr. MILLER. Yes, sir. Senator, we have recognized that this 50 percent is almost a breaking point because of the tenancy proposition. It is just about the breaking point of an economic operation.

Mr. BASS. I appreciate your bringing that out because speaking of the breaking point, I personally know of people who have bought farms and they have a couple of acres here, and they say to a tenant, you come here and raise the tobacco and get the 50 percent, so it has not cost the landowner anything to get an acre of base by overplanting. If it would eliminate that, Senator, I am glad you brought it up. I am interested in eliminating the red-card tobacco. I think that is part of our problem. Of course, we have about 20 percent of other types of illegal tobacco going on the market.

Mr. MILLER. Yes, sir.

Mr. Bass. I certainly would like to see this committee and the Department make a very thorough investigation of the compliance situation. It is getting out of hand. I have had letters like this. A man owns a city lot of 100 feet by 200 feet, and has a quota and a marketing allowance that will market him an acre and a half or 2 acres of tobacco. There are several situations like that existing. What he does is go out and pick up some of the tobacco that is illegally brought in and makes a few hundred dollars by just being a second cousin or brother-in-law of somebody on the county committee. We have had a lot of that going on because I have letters to substantiate my statement. I am interested in strict compliance with the law. Mr. MILLER. We are, too, sir.

Mr. BASS. On the pound situation you from the Department send out an allotment in pounds?

Mr. MILLER. Yes, sir.

BASS.

Mr. Bass. Do you think any of our problems were eliminated with the pounds continued down to the farm level?

Mr. MILLER. I would say that the ultimate goal is to control pounds of production. Whether we can ever control pounds of production by a poundage quota allotment or not I seriously doubt because of the administrative difficulties.

Mr. BASS. Why not, sir, if you issue a man a marketing card for 1,000 pounds of tobacco, and that is all he could sell?

Mr. MILLER. We have made a study and analysis of the shortcomings of a poundage-not the shortcomings of a poundage-allotment program but the difficulty of administering equitably a poundage quota program of tobacco of all types. We had such a quota in the year 1938 in all types of tobacco. At the end of that year when the referendum was held, that year and only that year were quotas voted out for the year 1939.

Mr. BASS. It was on a poundage basis that year?

Mr. MILLER. It was on a poundage basis that year. Some types of tobacco had a very difficult formula attached to the establishment of their allotment, and it was certainly impractical.

In burley, I might add, it was probably the most successful operation that we had. Even that being so, burley tobacco producers rejected marketing quotas for the year 1939 as a result of a poundage quota and its inequities resulting from it.

Mr. BASS. We still have a problem where one farmer raises 1,700 pounds on an acre and another farmer raises 800 pounds on an acre. Mr. MILLER. Yes, sir.

Mr. BASS. I want to ask you a little about the exporting of our tobacco. Have we made any attempt to export some of the better grades of burley in recent years?

Mr. MILLER. Yes, sir. In the Department we have attempted to increase the amount of burley tobacco exported.

Mr. BASS. Most of it is the low grade or the short leaf tobacco that we export now?

Mr. MILLER. There is a great deal of that type of tobacco that moves. Its ability is predicated on its price. There is another type of tobacco that moves in quality for its ability to upgrade. We move some of the very lowest and some of the very best.

Mr. BASS. We only export the really best and some of the worst. The middle good leaf we do not export very much?

Mr. MILLER. I would say the concentration is within the better and lower. I do not have figures on that. We don't have the exact figures on the exports by graded tobacco. As a matter of fact, they are not available. We do export many of both kinds, high and the low.

Mr. BASS. I would like to see the Department explore the possibility of exporting more of the good and middle grades tobacco, and see if perhaps by getting this type of tobacco in the foreign cigarettes, realizing we raise the best tobacco almost, as far as grades go in making good cigarettes, and we have a monopoly on it pretty well in America in our type of cigarettes-so that even if we have to put this on the market and lose a little money on it, we might build up a world trade of our type of tobacco if we compete in some of the world markets that we are not competing in now. I would like to see the European cigarette smokers making demands for our type of tobacco. That is the point I am trying to get in. I do not believe we have actually explored the possibility of exporting our good cigarette tobacco as it could be done, and opening up the world market.

Mr. MILLER. Mr. Bass, a great deal of work has been done along that line, not only by the Department, but by the trade itself. There has been a concentrated effort made since the Second World War to export more burley tobacco. We have one organization that is dedicated to that purpose. As I understand, we have an expert on blending of American type cigarettes for the increased use of burley tobacco in Europe permanently.

Mr. BASS. There is only one other point I would like to make and then I am finished. When we start talking about cutting the quotas, Mr. Watts, my friend from Kentucky, and I both have these problems of reducing all of the people over an acre and a half and putting more people in the protected groups, but then we have a problem when we cut this seven-tenths-of-an-acre man and the 1-acre man below, we are cutting the basic necessity of income for a family group. That is the problem we have to take into consideration, that is, the economic and social problem dealing with the income level of the family.

Therefore, I am more interested in seeing if the quota program cannot be worked out by eliminating red card tobacco and eliminating the excess planting, not within the confines of our group-because we certainly cannot cut the farm family in my district or Mr. Watts' district below the level of the necessary income for farm family sur

vival. Do you not agree with me on that, that that is also one of our problems?

Mr. MILLER. The Department recognizes there is a problem in the small allotments.

The CHAIRMAN. The Chair recognizes Mr. Jennings, of Virginia. Mr. JENNINGS. Mr. Miller, I have one problem that has not been covered. In the discussions has any consideration been given to the quotas basing it on the occupation of the people who have the quotas? For instance, I know in my district a number of people work in factories. Their women folks and their neighbors, after they get through from their work in the factory, raise their tobacco crop. They are in competition with the farmer who farms and that is his only means of livelihood. Has any consideration been given to the marketing or quotas based on the percent of income they actually get from the farms?

Mr. MILLER. No, sir. There has not. No study has been made of the breakdown of the figures that Mr. Watts mentioned a moment ago of the size of the allotment as to income from either on or off farm income or into total income they receive.

Mr. Bridgforth asked me to recall to your mind that allotments are established for farms or for land and do not affix or attach to an individual in tobacco. You cannot transfer an allotment in tobacco by the moving of the owner or the possessor of that allotment at the time he owned the farm.

Mr. JENNINGS. I recognize that. But if the program continues to go in the direction that it is going, we will not have any quotas for any farms, because the thing will fall of its own weight. In looking at it from the objective standpoint, do you think we might be able to work toward the end of putting some restrictions on this based on the percent of income that they have from the farm? In other words, what I am trying to explore here is an idea that the people who actually do the farming and who make their principal income from the farm will not be in competition with someone who is making his livelihood from a factory and obtaining their spending or side money as a result of this allotment.

Mr. MILLER. It would be a rather difficult thing to administer. Might I say that there are a great many people who use tobacco allotments as their principal farm income and subsidize that farm income by off farm employment in submarginal areas. That is one consideration that we have. We have a great many people I know that you are particularly thinking of, sir, who are so-called town lot producers who probably may come from a small town, such as a town banker or town lawyer who has an allotment in his back yard, so to speak, based legitimately on historical background of production. Under the present regulations he is entitled to an allotment. There is a great deal of that produced.

Mr. JENNINGS. I would like you to comment on No. 5 recommendation. I think I understand what you mean, but what do you hope to gain by that?

Mr. MILLER. No. 5 requests an amendment to the act to permit the voting of marketing quotas on a 3-year basis instead of 1. Only can we vote in an interim period when allotments are not in effect upon the presentation of a petition by two-thirds of the growers or by at least

one-third of the growers. The reason for that is this. In some types of tobacco, they have been voting allotments in on a 1-year basis only. Quotas are in effect for 1 year. The price is supported. Commodity takes that tobacco that does not move at a figure greater than 90 percent of parity. The next year if the growers vote out marketing quotas and increase their production without any restrictions whatever they can in effect lower the value of the tobacco that the Commodity Credit Corporation holds in stock that was pledged to them in the support price program of the preceding year. Not only does it do that, but it works to the growers' disadvantage, because the Commodity Credit Corporation must merchandise this tobacco at the best price available, the desired price being the support price, which is not always obtainable. So he is in competition with the grower in the ensuing year. It places the grower in competition with the very agency that he is attempting to use to support the price of his tobacco.

The CHAIRMAN. We are glad to welcome our colleague, Mr. Chelf, and if he wishes the Chair would be pleased to recognize him at this time.

Mr. CHELF. Mr. Chairman, I really appreciate your courtesy. I really came over to listen and learn about this great problem that the people at home are confronted with.

I am not a farmer basically. Fundamentally I am an attorney. But I do represent a great agricultural section of Kentucky. One of my good friends once said to me, "Frank, what do you know about tobacco growing?" I told him I didn't know a great deal, but I knew how to vote right. I think that answered the problem. That is why I am here this morning. I want to know how to vote on this thing, and what to do to be able to help my people.

I was wondering as I was listening to this discussion what you think about the situation from the standpoint of raising the penalty? Do you feel an increase in the penalty from 50 to 75 or 80 percent is the answer to the problem?

Mr. MILLER. Congressman Chelf, that is one of the answers to the problem. That in conjunction with the elimination of the credit for overplanting. There are a great many factors involved in this whole situation, administrative and legislative.

Mr. CHELF. Do you feel if we had stiffer penalties in the past few years, that we would not be in the shape we are in today?

Mr. MILLER. And the elimination of the credit for overplanting would have gone immeasurably to eliminating the problem. I do not think we would have the problem today if they had been in effect. Mr. CHELF. I notice it is almost 12 o'clock. The hour is growing late. Mr. Chairman, I am deeply grateful to you and the committee for an opportunity to sit here. As time goes on, if I might be permitted to come and sit with you, I would be most grateful. I am sure from time to time I will have some more questions. That is all I have now. The CHAIRMAN. We are delighted to have you with us. I am hoping one day next week we will have an opportunity to hear from all our colleagues.

Mr. CHELF. Yes. I am getting a lot of mail on it but frankly I have not been able to take all the mail and get it in the shape I wish it.

The CHAIRMAN. Mr. Miller, we thoroughly appreciate your being here this morning, and giving us this information together with your recommendations.

Mr. McConnell, do you think it would be convenient for your people to meet with us at 2 o'clock this afternoon?

Mr. McCONNELL. Yes, sir.

The CHAIRMAN. The House meets at noon, but I am sure all House members can get back by then.

Senator CLEMENTS. Mr. Chairman, whether I can be here at 2 o'clock or not, I hope the committee will go right ahead with the hearings. If I am not here, somebody from my office will be sitting in on the hearings.

The CHAIRMAN. That will be fine.

The committee will adjourn until 2 o'clock this afternoon.

(Thereupon at 12 o'clock noon, a recess was taken until 2 p. m., the same day.)

AFTER RECESS

The CHAIRMAN. The committee will please come to order.

STATEMENT OF CLARENCE L. MILLER, DIRECTOR, TOBACCO DIVISION, COMMODITY STABILIZATION SERVICE-Resumed

I wonder, Mr. Miller, in view of everything that has been said, if we assume that we do all the things that the Department has recommended that we do, would that get the job done, or is there something further we should do?

Mr. MILLER. Congressman Abbitt, we have not mentioned one very important phase that enters into the overproduction. That is the vast amount of tobacco per acre increase we have had in production. The CHAIRMAN. Of course, that is a problem.

Mr. MILLER. Yes, that is true, sir, to a certain extent. The Department always attempts to get more efficiency in production. Whether it be by pounds per acre or by quality per acre, but not an increased production poundagewise to the detriment of first the support-type program, and second the quality of the tobacco that is being produced. The CHAIRMAN. I think you have something there. If it affects the quality of the tabacco we do not gain anything by adding pondage. Mr. MILLER. There is a strong feeling in many circles that that has been done. I do not have the ability or knowledge to say whether that has or has not been done. But as allotments have been produced, and as they become progressively smaller, the tendency to offset any projected reduction has been the attempt to increase pounds per acre by the producer.

The CHAIRMAN. Do you think the Department would be in a position later, a little later on after you have heard from the growers, to make a recommendation about the minimum acreage?

Mr. MILLER. I would not be in a position to say that, Mr. Abbitt. The CHAIRMAN. I do not mean to pin you down. I am just trying to find out where we are going.

Mr. MILLER. I understand, sir.

The CHAIRMAN. Let us assume that the burley tobacco gets in a serious situation, if it is not already there, such a situation that it might cause the growers to go out of the program; would that or would not that have an adverse effect on the program for other types of tobacco?

Mr. MILLER. I think unquestionably, Congressman Abbitt, that it would. There is apprehension in other types of tobacco at the present

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