ACREAGE-POUNDAGE MARKETING QUOTAS FOR

TOBACCO

THURSDAY, FEBRUARY 11, 1965

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TOBACCO OF THE COMMITTEE ON AGRICULTURE, Washington, D.C. The subcommittee met, pursuant to notice, at 10:20 a.m., in room 1310, Longworth House Office Building, Hon. Harold D. Cooley (chairman of the full committee) presiding.

Present: Representatives Cooley (presiding), McMillan, Stubblefield, and Vigorito.

Also present: Representatives O'Neal, Tuck, Bonner, Kornegay, and Tuton.

Christine S. Gallagher, clerk; Hyde Murray, assistant clerk; John J. Heimburger, general counsel; Robert Bruce, assistant counsel; and Francis LeMay, consultant.

The CHAIRMAN. The subcommittee will please come to order.

Mr. Abbitt, the chairman of the Tobacco Subcommittee, is unavoidably delayed. We have as our first witness the Honorable Charles S. Murphy, Under Secretary of Agriculture.

Mr. Murphy, we are very glad to have you with us today.

(H.R. 4532 introduced by Chairman Harold D. Cooley follows (similar bills were introduced by Mr. Bonner, H.R. 4707; Mr. Lennon, H.R. 4783; and Mr. Henderson, H.R. 5186) :)

[H.R. 4532, 89th Cong., 1st sess.]

A BILL To amend the Agricultural Adjustment Act of 1938, as amended, to provide for acreage-poundage marketing quotas for tobacco

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Agricultural Adjustment Act of 1938, as amended, hereinafter referred to as the Act, is amended by adding immediately following section 316 a section 317 to read as follows:

"SEC. 317. (a) For purposes of this section—

"(1) 'National marketing quota' for any kind of tobacco for a marketing year means the amount of the kind of tobacco produced in the United States which the Secretary estimates will be utilized during the marketing year in the United States and will be exported during the marketing year adjusted upward or downward in such amount as the Secretary in his discretion determines is desirable for the purpose of maintaining an adequate supply or for effecting an orderly reduction of excessive supplies in order to achieve the policy of the Act. "(2) 'National average yield goal' for any kind of tobacco means the yield per acre which on a national average basis the Secretary determines will improve or insure the usability of the tobacco and increase the net return per pound to 1

the growers.

In making this determination the Secretary shall give consideration to such Federal-State production research data as he deems relevant. "(3) 'National acreage allotment' means the acreage determined by dividing the national marketing quota by the national average yield goal.

"(4) 'Farm acreage allotment' for a tobacco farm other than a new tobacco farm means the acreage allotment determined by adjusting uniformly the acreage allotment established for such farms for the immediately preceding year prior to any increase or decrease in such allotment due to undermarketings or overmarketings and prior to any reduction under subsection (f) so that the total of all allotments is equal to the national acreage allotment less that part of the reserve provided in subsection (e) of this section reserved for new farms with a further downward or upward adjustment to reflect any adjustment in the farm marketing quota for overmarketing or undermarketing and to reflect any reduction required under subsection (f) of this section.

"(5) 'County average yield' means in the case of Flue-cured tobacco the fiveyear average yield of tobacco per acre in the county for the five consecutive years beginning with the 1959 crop year as determined by the Secretary and in the case of other kinds of tobacco the five-year average yield of tobacco per acre in the county for the five most recent crop years for which data are available, as determined by the Secretary.

"(6) (a) 'Preliminary farm yield' in the case of Flue-cured tobacco means a farm yield per acre of tobacco determined by averaging the yield per acre for the three highest years of the five consecutive crop years beginning with the 1959 crop year and adjusting such yield to: (i) 130 per centum of the county average yield if the average yield so computed exceeds 130 per centum of the county average yield, or (ii) 70 per centum of the county average yield if the average yield so computed is less than 70 per centum of the county average yield.

"(b) 'Preliminary farm yield' means in the case of kinds of tobacco other than Flue-cured, a farm yield per acre of tobacco determined by averaging the yield per acre for such of the five years used in determining the county average yield as the Secretary determines to be representative and will result in a fair and equitable relationship among farms. In determining the preliminary farm yield, the Secretary may provide maximum and minimum percentage levels in relation to the county average yield.

"(7) 'Farm yield' means the yield of tobacco per acre for a farm determined by multiplying the preliminary farm yield by a national yield factor which shall be obtained by dividing the national average yield goal by a weighted national average yield computed by multiplying the preliminary farm yield for each farm by the acreage allotment determined pursuant to paragraph (4) for the farm prior to adjustments for overmarketing, undermarketing, or reductions required under subsection (f) and dividing the sum of the products by the national acreage allotment.

"(8) 'Farm marketing quota' for any farm for any marketing year shall be the number of pounds of tobacco obtained by multiplying the farm yield by the acreage allotment prior to any adjustment for undermarketing or overmarketing, increased for undermarketing or decreased for overmarketing by the number of pounds by which marketings of tobacco from the farm during the immediately preceding marketing year, if marketing quotas were in effect under the program established by this section, is less than or exceeds the farm marketing quota for such year: Provided, That the farm marketing quota for any marketing year shall not be increased for undermarketing by an amount in excess of the number of pounds determined by multiplying the acreage allotment for the farm for the immediately preceding year prior to any increase or decrease for undermarketing or overmarketing by the farm yield. If on account of excess marketings in the preceding marketing year the farm marketing quota for the marketing year is reduced to zero pounds without reflecting the entire reduction required, the additional reduction required shall be made for the subsequent marketing year or years. The farm marketing quota will be increased or decreased for the second succeeding marketing year in the case of Maryland tobacco, and for any other kind of tobacco for which the Secretary determines it is impracticable because of the lack of adequate marketing data, to make the increases or decreases applicable to the immediately succeeding marketing year.

"(b) Within thirty days after the enactment of this section the Secretary, pursuant to the provisions of subsection (a) of this section, shall determine and announce the amount of the national marketing quota for Flue-cured tobacco for the marketing year beginning July 1, 1965, and the national acreage allotment

and national average yield goal for the 1965 èròp of Flue-cured tobacco, and within thirty days after the announcement of the amount of such national marketing quota shall conduct a special referendum of the farmers engaged in the production of Flue-cured tobacco of the 1964 crop to determine whether they favor or oppose the establishment of marketing quotas on an acreagepoundage basis as provided in this section for the marketing years beginning July 1, 1965, July 1, 1966, and July 1, 1967, in lieu of quotas on an acreage basis in effect for those marketing years. If the Secretary determines that more than 66% per centum of the farmers voting in the special referendum approve marketing quotas on an acreage-poundage basis, marketing quotas on an acreagepoundage basis as provided in this section shall be in effect for those marketing years and the marketing quotas on an acreage basis shall cease to be in effect at the beginning of such three-year period.

"(c) Whenever, during the first or second marketing year of the three-year period for which marketing quotas on an acreage basis are in effect for any kind of tobacco, including Flue-cured tobacco, the Secretary in his discretion determines with respect to that kind of tobacco that acreage-poundage quotas under this section would result in a more effective marketing quota program for that kind of tobacco he shall at the time the next announcement of the amount of the national marketing quota under section 312(b) of this Act determine and announce the amount of the national quota for that kind of tobacco under this section of the Act and at the same time announce the national acreage allotment and national average yield goal and within thirty days thereafter conduct a special referendum of farmers engaged in the production of the kind of tobacco of the most recent crop to determine whether they favor the establishment of marketing quotas on an acreage-poundage basis as provided in this section for the next three marketing years. If the Secretary determines that more than 66% per centum of the farmers voting in the special referendum approve marketing quotas on an acreage-poundage basis as provided in this section quotas on that basis shall be in effect for the next three marketing years and the marketing quotas on an acreage basis shall cease to be in effect at the beginning of such three-year period.

"(d) If marketing quotas have been made effective for a kind of tobacco on an acreage-poundage basis pursuant to subsections (b) or (c) the Secretary shall, not later than December 1 of any marketing year with respect to Flue-cured tobacco, and February 1 with respect to other kinds of tobacco, proclaim a national marketing quota for that kind of tobacco for the next three succeeding marketing years if the marketing year is the last year of three consecutive years for which marketing quotas previously proclaimed will be in effect. The Secretary in his discretion may proclaim the quota on an acreage-poundage basis as provided in this section or on an acreage allotment basis, whichever he determines would result in a more effective marketing quota for that kind of tobacco, and shall conduct a referendum in accordance with the provisions of section 312(c) of this Act. If the Secretary determines that more than one-third of the farmers voting oppose the national marketing quotas the results shall be proclaimed and the national marketing quota so proclaimed shall not be in effect. If the Secretary proclaims the quotas on an acreage-poundage basis he shall determine and proclaim at the same time the national marketing quota, national acreage allotment, and national average yield goal for the first year of the three years for which quotas are proclaimed. Notice of the farm marketing quota which will be in effect for his farm for the first marketing year covered by the referendum insofar as practicable shall be mailed to the farm operator prior to the holding of any special referendum under subsections (b) or (c) or a referendum on acreage-poundage quotas under this subsection. The Secretary shall determine and announce the national marketing quota, national acreage allotment and national average yield goal for the second and third marketing years of any three-year period for which national marketing quotas on an acreage-poundage basis are in effect on or before the December 1 with respect to Flue-cured tobacco and the February 1 with respect to other kinds of tobacco immediately preceding the beginning of the marketing year to which they apply. Whenever a national marketing quota, national acreage allotment, and national average yield goal are determined and announced the Secretary shall provide for the determination of farm acreage allotments and farm marketing quotas under the provisions of this section for the crop and marketing year covered by the determinations.

"(e) No farm acreage allotment or farm yield shall be established for a farm on which no tobacco was produced or considered produced under applicable provisions of law for the immediately preceding five years. For each marketing year for which acreage-poundage quotas are in effect under this section the Secretary

in his discretion may establish a reserve from the national acreage allotment in an amount equivalent to not more than 1 per centum of the national acreage allotment to be available for making corrections of errors in farm acreage allotments and for establishing acreage allotments for new farms, which are farms on which tobacco was not produced or considered produced during the immediately preceding five years. The part of the reserve held for apportionment to new farms shall be allotted on the basis of land, labor, and equipment available for the production of tobacco, crop-rotation practices, soil and other physical factors affecting the production of tobacco and the past tobacco-producing experience of the farm operator. The farm yield for any farm for which a new farm acreage allotment is established shall be determined on the basis of available productivity data for the land involved and farm yields for similar farms.

(f) Only the provisions of the last two sentences of subsection (g) of section 313 of this Act shall apply with respect to acreage-poundage programs established under this section. The acreage reductions required under the last two sentences shall be in addition to any other adjustments made pursuant to this section, and where acreage reductions are made the farm marketing quota shall be reduced to reflect such reductions. The provisions of the next to the last sentence of such subsection pertaining to the filing of any false report with respect to the acreage of tobacco grown on the farm shall also be applicable to the filing of any false report with respect to the production or marketings of tobacco grown on a farm for which an acreage allotment and a farm yield are established as provided in this section. In establishing acreage allotments and farm yields for other farms owned by the owner displaced by acquisition of his land by any agency, as provided in section 378 of this Act, increases or decreases in such acreage allotments and farm yields as provided in this section shall be made on account of marketings below or in excess of the farm marketing quota for the farm acquired by the agency. Acreage allotments and farm marketing quotas determined under this section may be leased under the terms and conditions contained in section 316 of this Act, except that (1) the adjustment provided for in the last sentence of subsection (c) of said section shall be based on farm yields rather than normal yields, and (2) any credit for undermarketing or charge for overmarketing shall be attributed to the farm to which transferred. "(g) When marketing quotas under this section are in effect provisions with respect to penalties for the marketing of excess tobacco and the other provisions contained in section 314 of the Act shall apply, except that—

"(1) No penalty on excess tobacco shall be due or collected until 100 per centum of the farm marketing quota for a farm (105 percentum for the first year a national marketing quota established under this section is in effect if the acreage harvested from the farm is not in excess of the farm acreage allotment) has been marketed, but with respect to each pound of tobacco marketed in excess of such percentage the full penalty rate shall be due, payable, and collected at the time of marketing on each pound of tobacco marketed.

"(2) When marketing quotas established under this section are in effect the provisions with respect to penalties contained in the third sentence of subsection 314(a) shall be revised to read: 'If any producer falsely identifies or fails to account for the disposition of any tobacco, the Secretary, in lieu of assessing and collecting penalties based on actual marketings of excess tobacco, may elect to assess a penalty computed by multiplying the full penalty rate by an amount of tobacco equal to 25 percent of the farm marketing quota plus the farm yield of the number of acres harvested in excess of the farm acreage allotment and the penalty in respect thereof shall be paid and remitted by the producer.'

"(3) For the first year a marketing quota program established under the provisions of this section is in effect, the words 'normal production' where they appear in the fourth sentence of subsection (a) of such section shall be read 'farm yield' and the said fourth sentence shall otherwise be applicable. For the second and succeeding years for which a program established under the provisions of this section is in effect, the provisions of subsection (a) (8) shall apply when penalties, if any, on carryover tobacco are computed, and the provisions contained in the fourth sentence of subsection 314(a) shall not be applicable.

"(h) Price support under the Agricultural Act of 1949, as amended, shall not be made available for tobacco sold in excess of the farm marketing quota (105 per centum of the farm marketing quota for the first year a national marketing quota established under this section is in effect if the tobacco harvested from

the farm is not in excess of the farm acreage allotment), or for any tobacco harvested from a farm from which tobacco is harvested from acreage in excess of the farm acreage allotment."

SEC. 2. Subsection (j) of section 313 of the Agricultural Adjustment Act of 1938, as added by Public Law 361, Eighty-fourth Congress, approved August 11, 1955, is amended by inserting immediately following the language "(g) hereof" wherever it appears in said subsection the language “or section 317".

The CHAIRMAN. I would suggest to the members of the subcommittee that we hear the witness without interruption until he has finished his statement.

STATEMENT OF CHARLES S. MURPHY, UNDER SECRETARY OF AGRICULTURE; ACCOMPANIED BY HORACE GODFREY, ADMINISTRATOR, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE; CLAUDE TURNER, DIRECTOR, TOBACCO POLICY STAFF, ASCS; HOWARD ROONEY, OFFICE OF GENERAL COUNSEL; ARTHUR CONOVER, ECONOMIC RESEARCH SERVICE; AND HUGH KIGER, DIRECTOR, TOBACCO DIVISION, FAS, U.S. DEPARTMENT OF AGRICULTURE

Mr. MURPHY. Thank you, Mr. Chairman. We are glad to have this opportunity to appear here and to express the views of the Department of Agriculture on this legislation.

I am Charles S. Murphy, Under Secretary of Agriculture. I have with me Horace Godfrey, Administrator of the Agricultural Stabilization and Conservation Service; Claude Turner, Director, Tobacco Policy Staff, ASCS; Howard Rooney, from our Office of General Counsel; Arthur Conover of our Economic Research Service; and Hugh Kiger from our Foreign Agricultural Service.

We are glad to appear before this committee to present the Department's views with respect to H.R. 4532, a bill to provide for acreagepoundage marketing quotas for tobacco. It provides for a shift, or at least the possibility of a shift, from the present program.

I want to point out that acreage-poundage quotas could never be in effect under this bill for any kind of tobacco unless the producers voting in a special referèndum favored acreage-poundage quotas in preference to quotas on an acreage basis as they are now operated. The bill authorizes and directs the Secretary to determine and announce an acreage-poundage program for Flue-cured tobacco within 30 days following its enactment. It also directs the Secretary to conduct a special referendum to determine whether the growers favor acreage-poundage in lieu of quotas on an acreage basis. Thus, the final decision as to which program is to be in effect rests with the growers themselves. The Department is in full accord with this principle.

I would like to comment briefly about the present marketing quota program for tobacco which has been in effect for the principal kinds of tobacco continuously during the past 25 years on an acreage basis. It has received the wholehearted support of all segments of the tobacco industry-growers, warehousemen, dealers, exporters, and manufacturers. The support of the growers has been shown by their votes in referendum after referendum. Often, as many as 97 or 98 percent of the growers voting have favored quotas. In the last burley refer