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are two very peculiar circumstances that attach to the penalty rate of exactly 50 percent. The small producer feeling that he did not have enough allotment could go to his neighbor's farm and rent an allotment on a tenant basis. He would receive 50 percent of that tobacco. He feels that he could justifiably remain at home and pay a penalty rate of 50 percent of it as readily and be his own boss, so to speak.

Senator CLEMENTS. The Congress raised the rate from 40 to 50 percent last year. Have you seen any indication that it has been a deterrent at all?

Mr. MILLER. No, sir, it has not. I would say, Senator Clements, that we have had an increase in the raising of excess tobacco.

Senator CLEMENTS. What percent of tobacco under the 40-percent penalty was red card, and what percent under the 50-percent was red card? That might give us an idea whether it had any tendency to slow anybody up from growing red card tobacco.

Mr. MILLER. While Mr. Todd is looking for that figure, if he has it, I can give you a rather definite figure in saying for the first time in history there was produced 8,000 acres more tobacco than was allotted in 1954.

Senator CLEMENTS. Under the highest penalty we have ever had. Mr. MILLER. Yes, sir, it having just been increased from a 40-percent to 50-percent penalty.

Senator CLEMENTS. I am sure you will recall that some of us were very strong for making that penalty 75 percent a year ago. Mr. MILLER. Yes, sir.

Senator CLEMENTS. We did not get any encouragement from the growers' group or from the Department to go above 50 percent. As a matter of fact, I do not believe that the Department took any position to even encourage a 50-percent penalty. If the 75 percent would be effective, I would congratulate you for taking the position this year for a stronger penalty.

Is it your judgment that the one way to really get at the problem is to take the man's quota away from him for the following year if he has overplanted?

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Mr. MILLER. I personally, and I think the Department itself, would take a rather dim view of reducing a man's allotment in a year lowing that year in which he had overproduction of the tobacco. Senator CLEMENTS. The Department would oppose it?

Mr. MILLER. I would think so. I have not explored the possibilities yet. It is a rather harsh penalty to apply. There has been, I might say, Senator Clements, several recommendations from grower groups that have been contained in some of the recommendations of the growers groups.

Senator CLEMENTS. The Department, you think, would take a very dim view of that recommendation?

Mr. MILLER. I would not be in a position to say at the present time, Senator, whether they would or not.

Senator CLEMENTS. Would you be in position before the close of these hearings to express the judgment of the Department on that particular subject?

Mr. MILLER. Yes, sir, we would.

Senator CLEMENTS. Some time during the next week you will be in a position to state the Department's views on that particular question?

Mr. MILLER. Yes, sir.

Senator CLEMENTS. Mr. Chairman, I have no other questions to ask Mr. Miller at this time.

The CHAIRMAN. The Chair would be glad to recognize the Senator from Kansas, Mr. Schoeppel.

Senator SCHOEPPEL. Mr. Chairman, first let me apologize for not being here at the opening of the session. I frankly did not have the information and I did not hear all of the testimony of Mr. Miller, so therefore, I will defer to the other gentlemen of the committee.

There is one question I would like to ask for my own information, While the law was passed for a 50-percent penalty last year-I note you indicated that there were 8,000 acres more of tobacco grown-do you think that there have been commitments made by too many people growing tobacco before they knew that the 50 percent penalty was going to be effective, and just went ahead anyway? In other words, they did not get the information about the penalty early enough?

Mr. MILLER. Senator Schoeppel, I do not think so. I think the grower chose not to destroy this tobacco before marketing time. That is one of the difficulties that we are encountering as we reduce the allotments smaller and smaller, for a man might choose to pay the penalty and raise a little more tobacco, if he thought it profitable.

I mentioned a moment ago that he might view it if he were a small grower, in the light of a tenancy proposition. He is a tenant to the United States Government. Instead of giving half of his production to some other landowner, he raises it on his farm and gives the penalty to the United States Government. It too has been pointed out by a very prominent attorney in the producing area that perhaps a man of better circumstances or a wealthier man with a larger allotment could afford to pay the penalty for raising excess tobacco, because it is a deductible item for income tax purposes. Instead of being a 50 percent penalty, it might have somewhat less than that.

We have not explored that possibility. I do not know anything about it. I cannot state whether that is true or not. But a very prominent attorney held that out.

Senator CLEMENTS. In your judgment how many acres might have been involved in this past year in what you might term hidden acreage?

Mr. MILLER. Senator Clements, that fact is as well hidden probably as the acres were. I have no way of knowing. I have done a good bit of acreage reporting when the program first started a good many years ago. I have seen some of the things happen. There no doubt is some of it. How much, we do not know.

Senator CLEMENTS. You are convinced, though, that in the 1954 crop there was considerable hidden acreage.

Mr. MILLER. I would not say considerable for I do not know the extent of it. I will say there was too much.

Senator CLEMENTS. If it was an acre, I take it that would be too much. I am sure that you would not want to leave the impression that there was just a very small acreage of hidden tobacco.

Mr. MILLER. No, I would not want to.

Senator CLEMENTS. Does that point us to the need for a stronger compliance program?

Mr. MILLER. It does, Senator Clements. You mean compliance on the farm, rather than inspection.

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Senator CLEMENTS. That is right.

Mr. MILLER. I mentioned a moment ago that we had a meeting of the departmental administrative officials, as I termed it in my statement, namely, the ASC chairmen of the State committees met in Lexington, Ky., to explore the possibilities and come to a better understanding of just such a program of tightening up generally on the administration of compliance.

Mr. Bridgforth, the assistant to the Deputy Administrator for Production, is here this morning. Mr. Bridgforth has done a great deal of work on this, especially since the meeting of the 1st of January. Senator CLEMENTS. Are there any needs that can be provided by the Congress to aid in strengthening the compliance program? I have reference to either money or legislation or both.

Mr. MILLER. Would you allow me to step aside and let Mr. Bridgforth talk on the matter?

Senator CLEMENTS. Perhaps I might withhold that until other members have had an opportunity to question Mr. Miller. I will take it up with Mr. Bridgforth when he takes the stand.

The CHAIRMAN. Mr. Miller, for the record, can you tell us the 1954 burley allotment in acres?

Mr. MILLER. The total number of acres was 399,463.

The CHAIRMAN. What is the 1955 allotment as of now?

Mr. MILLER. Congressman Abbitt, we do not have the final figures as the allotments were proportioned according to poundage, and it will be converted to acres in the States. We do not have that until a later period. However, it would approximate about 370,000.

The CHAIRMAN. Mr. Miller, these five recommendations, are they all applicable to burley tobacco or are some general and some applicable to burley tobacco?

Mr. MILLER. The first would be limited to burley for this year. The second would not be, I would say. I see no reason for differentiating between types of tobacco for increasing penalty rate. We have been urged by representative grower groups from all producing areas of all types of tobacco to increase the penalty rate.

The third is also applicable to all types of tobacco, generally having been requested by grower groups. Four would be applicable to all types of tobacco. Five, while it has not been brought up in types other than in Maryland type tobacco would be applicable to all types, also.

The CHAIRMAN. So what we would have would be, No. 1, applying to burley and 2, 3, 4, and 5 would apply to the tobacco program generally?

Mr. MILLER. Yes, sir.

The CHAIRMAN. Í failed to catch what you said about the minimum allotment. The Department did not make any specific recommendation, but you went on to elaborate a little bit. I have in mind the 0.7 acre minimum allotment for burley.

Mr. MILLER. I will read it again, if you please, sir. The Department wishes to direct attention to another condition which applies only to burley tobacco. The so-called minimum acreage provision of the act provides that burley tobacco acreage allotments shall not be reduced below the smaller of (1), the allotment established for the farm for the immediate preceding year, (2) 0.7 of 1 acre, or (3) 25 percent of the crop of the farm. As a result of the application of this

rule, there are at present 64 percent of the growers growing 33 percent of all burley tobacco on allotments that cannot be reduced. If this provision is retained, all future reductions will be borne by the remaining one-third of the producers.

The CHAIRMAN. That is what I had in mind.

Mr. MILLER. Yes, sir.

The CHAIRMAN. Did you say that the Department did or did not make a recommendation?

Mr. MILLER. We have made no specific recommendation on this. We are merely calling attention to the fact that it exists.

The CHAIRMAN. Mr. McMillan of South Carolina desires to ask you a question.

Mr. MCMILLAN. Mr. Miller, in my district we grow no burley tobacco. However, we do grow approximately 175 million pounds annually of cigarette tobacco. We have been very much disturbed in the past few years over the fact that Indonesia and Greece are getting our market for cigarette tobacco. I wonder if that applies to burley tobacco also?

Mr. MILLER. Burley does not export in the quantities that flue-cured does. One dollar out of every three of flue-cured tobacco comes from the export trade.

Mr. MCMILLAN. Do you know whether the Government is doing anything about the trading of cigarette tobacco in Europe?

Mr. MILLER. Yes, sir, they are.

Mr. MCMILLAN. Do you think by passing stricter penalties and regulations on tobacco we are encouraging those countries to grow more tobacco?

Mr. MILLER. That is a very problematic question that the act itself poses. I think there are no restrictions that administratively or legislatively we are considering now that might have any effect on it.

Mr. MCMILLAN. Before the war, I think we exported almost twothirds of the flue-cured tobacco we produce, in fact more than twothirds in my district. At this time I know we are not exporting half that amount. I am wondering if we are doing anything to correct that situation or are we running our foreign market further into the red by passing strict legislation?

Mr. MILLER. Those factors are occasioned by price schedules and multilateral trade agreements made principally between the United Kingdom and her dominions and her colonies. As far as any restrictive legislation on the grower is concerned, we have no reason as yet to believe that that has affected the export trade of tobacco. I mean principally, sir, there is no scarcity of export types of tobacco.

Mr. MCMILLAN. Formerly Germany was one of our greatest export markets. I was hoping they would take over where they left off when they got back on their feet. I am wondering if our own Government officials are promoting the sale of our tobacco in Europe as they should.

Mr. MILLER. It has been generally agreed, sir, that the tobacco merchant is probably the most aggressive merchant that we have overseas. Mr. MCMILLAN. I am glad to hear you make that statement.

Mr. MILLER. The Department itself is attempting to move tobacco under Public Law 480. We have the Foreign Agricultural Service Tobacco Division, whose entire efforts are devoted toward that end. We have recaptured a great deal of the market in Germany since the

war, and especially in the Low Countries on this particular type of tobacco. But as I say, again, the flue-cured tobacco exports a much larger proportion of its total output than does burley.

Mr. MCMILLAN. Do you think we might get this penalty too high and somebody might take it to the Supreme Court?

Mr. MILLER. That is a consideration I would not be able to pass judgment on. An increased penalty rate has been desired by a great many growers.

Mr. MCMILLAN. I believe in it myself. I just ask your opinion.

Mr. MILLER. Personally I don't think it would; no, sir, not at 75 percent. Some people have advocated 100 percent, and that would be monopolistic.

I suppose we might be able to say that the higher the penalty ratings percentagewise, the more dangerous it might become.

Mr. MCMILLAN. We all realize we have a monopoly all right because there are some people that want to plant tobacco and cannot. I was wondering if some of them ever took it to the Supreme Court, they might win their case.

Mr. MILLER. The nearer you come to that confiscatory state, the nearer we would be to such a stage.

The CHAIRMAN. Mr. Miller, getting back to your No. 1 recommendation, if the Congress were to give you authority to take another look at your 1955 allotment, what would be the very latest date you need to have that authority?

Mr. MILLER. Congressman Abbitt, the earliest date for planting time for burley tobacco is somewhere about the 15th day of May in Tennessee. The Department realizes that commitments have been made on this year's crop of burley tobacco, plan beds have been sown in a great many areas, fertilizer bought, contracts made, and for that matter ground prepared in some instances, certainly to the stage of breaking ground in Tennessee, especially. We are at a rather late stage now to enact any such provision. However, I think I would be doing less than my duty if I did not present to you the recommendation that we even at this late date attempt to do something about it, or at least get the proposition before the growers, as we could to get an expression of opinion from them on the matter.

The CHAIRMAN. Do you think that the situation affecting burley is such that regardless of the commitments that might have been made or the preparation made at this late hour, we should still see if something could not be done to give the Department authority to redetermine acreage if it can be done rather speedily?

Mr. MILLER. I think so, yes.

The CHAIRMAN. The Chair will be glad to recognize Mr. Watts. Mr. WATTS. I want to talk to you about your proposals Nos. 2 and 3, Mr. Miller.

I would assume in reading your recommendation on those two proposals that one complements the other.

Mr. MILLER. That is correct.

Mr. WATTS. It is your opinion that in order to stop the production of excess tobacco that it would be necessary to enact both?

Mr. MILLER. I am of the opinion, Mr. Watts. I think one is a complement to the other.

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