Mr. ABBITT. I might say the referendum did not have anything to do with section 2 of the bill, which unties from the burley support.

Mr. McINTIRE. I appreciate the referendum did not have anything to do with section 2. However, are not these producers advised before a referendum-when was the last referendum held? I believe it is on a 3-year basis.

Mr. ABBITT. When did we have the last referendum?

Mr. WILLIAMS. This fall for 1958, 1959, and 1960.

Mr. BASS. This bill will not change the acreage allotments for this year.

Mr. McINTIRE. I appreciate that. But it will change the price.
Mr. WILLIAMS. The price is not set yet.

Mr. BASS. It is not set yet.

Mr. WILLIAMS. You certainly have a moral point. I think you could change it from the legal side. You are bringing out a moral point, whether they vote it with a tie-in on price or that they are separated.

Mr. McINTIRE. When was the referendum held, Bill?

Mr. WILLIAMS. Three years ago.

Mr. McINTIRE. Three years ago.

Mr. WILLIAMS. They voted this year for 1958, 1959, and 1960.
Mr. ABBITT. Joe, would you mind coming around?

All the witnesses other than the Department have already testified. So we will ask Joe to come around.

Mr. McINTIRE. Mr. Chairman, could I do this before he goes into the balance of his testimony? I plead ignorance on a lot of this detail. Mr. WILLIAMS. All right, sir.

Mr. McINTIRE. We do not have much of this problem in northern Maine. The thing I was getting at, Joe, was this matter on the part of the Department when the referendum was made as to what the price formula was to be. Surely, I am sure, in voting a 3-year program that grower realizes that the price is going to vary somewhat within those 3 years depending on the factors that go into the formula. However, he voted 3 years ago, without section 2 applicable, did he not?

Mr. WILLIAMS. Yes, sir.

Mr. McINTIRE. He is now operating on his planning program with the price in mind as related and as developed through the application for control. As you say possibly there is no legal problem in changing that but it occurred to me that there is a substantial moral obligation which was so well put.

Mr. WILLIAMS. It is a commitment under Public Law 167 and not a commitment of the Department. It is automatically under Public Law 167 which was passed in 1945 by Congress that the price support in 1957 would be two-thirds of that of burley.

Mr. McINTIRE. Yes.

Mr. WILLIAMS. So, the commitment is by law rather than by a commitment on the part of the Department and of course if it is a commitment by Congress, Congress can change that.

Mr. McINTIRE. Yes.

Mr. WILLIAMS. And I think it boils back to a moral point rather than a legal point.

Mr. McINTIRE. Yes.

Thank you, Mr. Chairman.

Mr. ABBITT. I am glad you brought that out, Congressman McIntire. I think it is important, and that may have something to do with the position of these other gentlemen.

I wonder at this time, Mr. Williams, if you would like to have something to say.

I would like to say here that we have had the finest cooperation for this committee and as far as I know all committees dealing with the Tobacco Division. Mr. Williams is one of the finest persons I know, a devoted public servant, interested in the welfare of all farmers, particularly the tobacco farmers, on up or down, whichever way you desire to call them, sun-cured, dark fire-cured, air-cured, fluecured, and burley. And I compliment the Department of Agriculture on having a man of the type of Mr. Williams.

Mr. Williams, we will be glad to hear from you at this time.

Mr. WATTS. Mr. Chairman, I would like to associate myself with what you say.

Mr. Bass. Mr. Chairman, I will have to get in on that too. What I want to say is that the cooperation of the Department and the subcommittee and the full committee on agriculture and tobacco stays in line with the same things we have been talking about here. It is the cooperation and the coordination between the various organizations in the field of tobacco all over and certainly Mr. Williams' predecessor, Mr. Miller, and his new assistant from Tennessee, Mr. Johnson, and all of us, try to work this thing out together because that is the reason today the tobacco program is the one program that is not costing a lot of money and is working successfully.

Mr. ABBITT. And we want to keep it that way.

Mr. BASS. And we want to keep it that way. That is right.

Mr. ABBITT. If you can stand all that, Mr. Williams, we will be glad to have you to proceed.

STATEMENT OF JOE R. WILLIAMS, DIRECTOR, TOBACCO DIVISION, COMMODITY STABILIZATION SERVICE, UNITED STATES DEPARTMENT OF AGRICULTURE

Mr. WILLIAMs. Mr. Chairman, after that fine introduction, I am looking forward to what I am going to say. For the record, my name is Joe R. Williams, Director of the Tobacco Division, Commodity Stabilization Service, United States Department of Agriculture.

Before I give my formal statement, I would like to reemphasize some of the points that you people have just mentioned. I would like to also express my thanks to Congressman Natcher for the fine remarks he made this morning.

I think one of the reasons we had the most successful commodity program has been, as Congressman Bass pointed out here, the fine relationship that has existed not only with this subcommittee but the entire Agriculture Committee on both sides of the aisle and working out our tobacco problem. And I do not recall a single instance in the past 4 years where this committee on both sides of the aisle has not been unanimous and that the Secretary of Agriculture has supported you once you made up your mind as to what the tobacco program will be.

Now that has been made possible due to the fact that when it took courage and statesmanship our tobacco Congressmen and Senators

have demonstrated that statesmanship and forgot party politics and met the issue.

Two years ago we had a crisis on burley tobacco. That was just as serious as this crisis that is facing us here today. You people participated in meeting that crisis, and I could not help at the end this year after two short periods when you were in a period of a crisis come through with a record average to write each member of the burley area a letter giving them the results of the marketing season for 1957.

And I know that all of you are proud of the courageous stand that Congress, working with the Department, took in 1955 when it came to that crisis on burley tobacco.

Now you heard a lot of talk about Public Law 167 that was passed in 1945. You heard Clarence Maloney tell about the difficulty that they had and the years they had worked trying to get a common ground to establish a support price on fire-cured tobacco and that they did get together and they came up here in unison. They got together and they passed Public Law 163. At that time two-thirds of the relationship between fire-cured tobacco and burley tobacco could set a fair and reasonable price for the two commodities taking everything into consideration. It was a good piece of legislation. It did an excellent job through the years of bringing up the standards of income for fire-cured producers in line with the producers of other types of tobacco.

As helpful as Public Law 163 has been through the years, I would like to say, Mr. Chairman, that in my opinion H. R. 5002 is just as essential and just as helpful in a modified form today as Public Law 163 was in 1945, and I would like to analyze the net results that Public Law 163 has done in the light of different circumstances and in the light of approximately 12 years of experience.

I realize as to the cost of production of that type of tobacco the relationship is possibly the same, but the net effect of that legislation as applied today supports fire-cured tobacco at over 100 percent of parity as if it had been supported on its own type of tobacco.

There is no consistent reason why you should have this artificial tiein between two different types of tobacco that does not compete with each other, either in the domestic or export trade or if they do compete it is certainly to a very small extent.

Now you have this situation: You have at home, and I regret to say, a diminishing demand unfortunately for snuff and the demands of the market, notwithstanding the tremendous advertising and promotional campaign that our companies are putting out. It is a diminishing business. This tiein and with three-fourths of the price support on burley is also affecting us tremendously in the export trade due to the fact that fire-cured tobacco can probably come near being duplicated throughout the world than any other single type that we have produced in the United States.

We have supported the price up to the extent that we are losing our foreign market and this year by virtue of the tremendously good job that we did in 1955 by Public Law 21 the burley averages above $63. We calculate parity on a 10-year period, and that high average there is not only going to influence the parity of burley for the next 10 years, but it is also going to tremendously influence the support price on these fire-cured tobaccos for the next 10 years and in 1957 and, getting back to the point that was made here just a moment ago, it increases the

support price on these tobaccos, fire-cured tobacco by virtue of that tiein in 1957 approximately 21⁄2 cents a pound.

Now you have heard some outstanding witnesses here this morning, everyone of them, and I have known them through the years. They are genuine friends of the tobacco farmers. They have devoted their lives, they devoted their lives to trying to build a program that would give the farmers a fair and reasonable price out of tobacco. And there is not one of them who wants to cut the price to the farmer. Certainly there is no one in the Department of Agriculture that wants to cut the price that any farmer in this country is getting out of tobacco. However, we are faced with this situation: Due to this tiein in price, the support price is so high that this last year we had one of the largest takes under the loan program that we have ever had. In addition to that we have on hand a tremendous amount of tobacco from 1946 through 1950 crops of this type of tobacco that is unable to be sold. Our associations are unable to sell it. And you heard representatives here, and they are mighty good managers and good salesmen, and they have done everything they could to sell this tobacco. Yet we have been unable to sell it and it reached a point where it was disintegrated.

We were forced to put it on public bid for export trade throughout the world, and we are selling some of this tobacco on public bid for export trade for 55 cents to the dollar as to what we have in it.

Mr. Chairman, I think you have rendered a service by introducing this bill and letting the problems or laying the crisis that we face in fire-cured tobacco before this committee, and I feel that once you have the problem that, by mutual cooperation, as we all had in the past, and I think with mutual cooperation of these gentlemen here today, we can find the answer and meet this crisis that we have in fire-cured tobacco.

Now we are faced with this situation. If we continue the high price support by this artificial tiein in burley tobacco we are going to take more and more under Government loan, and you gentlemen realize the danger of continuing that over a long period of years if we price above that amount at which we in turn can sell it in the market. If we cannot sell it in the market, it piles up in the surplus, and then, when it comes to establishing the 1958 allotment and the 1959 allotment, we are going to have to further reduce these allotments to the individual farmer and the farmer, in turn, is going to suffer by a continuation of reduction in acreage and his total net income is going to be less.

Now on this bill for consideration today, Mr. Chairman, we are with you on one point and we are against you on the other point, and I would like at this time to read the portion of the Department's

Mr. BASS. Mr. Chairman, excuse me for interrupting.

Mr. Williams, I notice that you have addressed yourself primarily and almost totally to section 2 of the bill up to this point.

Mr. WILLIAMS. Yes, sir.

Mr. BASS. And in reading the report of the Department, I notice that very little attention is given to section 1 of the bill.

Mr. WILLIAMS. All right, I am going to cover that right now, Congressman.

Mr. BASS. I would like you to do it.

Mr. WILLIAMS. We do not favor separation of the types.

Mr. BASS. You do not favor separation of the types? And the declaration of Virginia as a kind and setting it aside?

91575-57-9

Mr. WILLIAMS. That is right. We favor leaving them together for referendum purposes. We have no objection to other purposes. Let me complete my statement.

The Department, by letter to the chairman of the Committee on Agriculture dated March 29, 1957, reported favorably on this bill, H. R. 5002, provided it was changed so as to make section 2 of the bill, which deals with the method of determining the price-support level, applicable to the other types of fire-cured tobacco as well as dark aircured and Virginia Sun-Cured tobacco.

With respect to section 1 of the bill, it is noted that the Agricultural Adjustment Act of 1938 provides for treating a type of tobacco as a separate kind if it is found that there is a difference in supplyand-demand conditions as among the types of tobacco which causes separate treatment to be needed in order to maintain supplies in line with demand.

The act also provides for adjustments in the amount of the farmacreage allotments for any type of tobacco within a kind when it is determined that a substantial difference exists in the usage or market outlets and the marketing quota for the kind of tobacco would result in an inadequate supply of any such type being available for market. In connection with determining the amount of the national marketing quota for fire-cured tobacco for the current marketing year, the various types of fire-cured tobacco were considered by the Department in the light of these provisions of the act.

The supply of Virginia Fire-Cured, type 21, tobacco in relation to the reserve-supply level is not as far out of line, that is, the surplus is not as great, as for the combined total of the other two types of fire-cured tobacco. Virginia Fire-Cured yields per acre did not increase in 1956 nearly as sharply as did yields for the other types, 22 and 23, with the result that production in 1956 was below disappearance, while the production of other types of fire-cured tobacco substantially exceeded disappearance. If this pattern of yields per acre should continue, differences in the adjustment needed in farmacreage allotments as between type 21 and the other types may become necessary in the years ahead.

The supply of Virginia Fire-Cured tobacco is, however, substantially in excess of the reserve-supply level, and a reduction in acreage allotments for Virginia Fire-Cured tobacco for the 1957 crop would have been required even if it had been treated as a separate kind. Therefore, we do not believe that the separation of Virginia F're-Cured tobacco is necessary at this time, but we foresee no serious administrative problems if it is treated as a separate kind.

The Department endorses the purposes of section 2 of H. R. 5002 which provides for establishing the support level for Virginia FireCured at 90 percent of parity rather than at 75 percent of the pricesupport level for burley tobacco as provided in Public Law 163, enacted July 28, 1945.

Public Law 163 fixed the support levels for fire-cured and dark aircured (including Virginia Sun-Cured) tobacco at 75 percent and 66% percent, respectively, of the burley support level.

Under the modernized parity formula which became effective for tobacco in 1950, the 10-year moving average price of burley tobacco is reflected in the support level for burley, fire-cured, and dark air