Mr. WILLIAMS. Nothing except rumor. I have heard it stated from a rumor standpoint that they did not want to buy looseleaf other than what they were buying at the present time.

Mr. LENNON. I wonder if the gentleman could answer if he could ascertain the feelings of the companies so that our farmers would know what to do.

Mr. WILLIAMS. We could ask them. I do not know what kind of an answer we could get.

Mr. LENNON. I think you are in a position where you could do it. I would like to communicate that information to our farmers.

Mr. COOLEY. Mr. Royster, with regard to what Mr. McMillan mentioned, splitting the tobacco and selling half of it in Georgia and the other half in South Carolina at different prices, that actually happens right in the market in my own State. You do not have to go across State lines to find that situation.

Mr. ROYSTER. That would happen to any article sold at auction. You cannot take 1 or 2 instances and judge a market by it. That happens from one row to another.

Mr. COOLEY. Right in the same warehouse.

Mr. ROYSTER. I recognize the problem, which certainly is not new, that has existed for a long time as to the sale of tied and untied tobacco. I tried diligently many years ago to get some remedy for it and got what we thought was a remedy, and had the Department agree at that time to put it into effect, but the South Carolina people objected to it. My suggestion was not to support anything in Georgia and Florida except type 14, which is produced in Georgia and Florida. That would have, in my humble judgment, cured the problem many years ago.

Now I want to be perfectly clear on this matter of price: I made the public prediction before any of the markets opened anywhere that this crop of tobacco would average 60 cents. I still think it will average 60 cents, barring one thing, and that is a sudden drop in the consumption of cigarettes. However, I cautioned the warehousemen in all the area before the markets opened not to expect too strong a market for bottom prunings. Those are the tobaccos lower in nicotine content, and not to expect an increase in the price of top-grade tobacco, but I did think that they would have a substantial increase in the body of the plant in the medium tobaccos. I still think that. While the situation that existed in the border in South Carolina in the last few days is unfortunate, however, in my opinion, when you get into the other tobaccos the differential will become manifest as it has done in prior years.

Mr. COOLEY. Mr. Chairman, if I may be permitted to do so, I think it would shorten this hearing by asking if there are other witnesses who would corroborate Mr. Royster's testimony. Time is running out

on us.

Mr. Hicks, do you corroborate what Mr. Royster has said with reference to the administration of this program in North Carolina? Mr. HICKS. Yes, sir; I do.

Mr. COOLEY. Mr. Weeks?

Mr. WEEKS. Yes, sir; Mr. Royster made a very fine statement. Mr. COOLEY. I would like the record to show that Mr. Hicks is the president of the Stabilization Corporation and that Mr. Weeks is the general manager.

Off the record.

(Discussion held off the record.)

Mr. COOLEY. Are there any other persons here from North Carolina who would like to make a statement in support of or in corroboration of the statement made by Mr. Royster?

Mr. FOUNTAIN. Mr. Jesse Jones is here from Kinston, N. C. He said he would like to make a statement clearing up some information. Mr. COOLEY. We will try to get those who are corroborating Mr. Royster's testimony first.

I think Mr. Royster made an emphatic and clear statement, and there is no need for a lot of repetition.

Mr. EAGLES. My name is Randolph Eagles, president of the North Carolina Farm Bureau. I would like to corroborate Mr. Royster's testimony.

Mr. COOLEY. So far as your observation has gone, the program is being administered fairly and well?

Mr. EAGLES. Yes, sir.

Mr. EDWARDS. I also would like to corroborate Mr. Royster's statement. I think it was very clear.

Mr. COOLEY. Is there anybody else who wants to corroborate his statement?

(No response.)

Mr. ABBITT. I have one question I would like to ask of Mr. Royster. Some question was raised here about when tobacco was being sold at auction on the auction floor, a buyer bidding it in and keeping it at the end of the row and then withdrawing his sale. Can he do that, or when he buys it is it his tobacco?

Mr. ROYSTER. All flue-cured tobacco is sold with the understanding that the warehouse owner is responsible for the tobacco that he sells. If you are familiar with the operation, and I am sure you are, you know that a purchaser, if he gets a pile of tobacco, and ascertains after he gets it that it is damaged, or that it is false packed, he has the right to send it back to the warehouse.

Likewise on these tobaccos, if he got a pile of this tobacco, if he got a pile of this tobacco with a striped ticket on it, the responsibility would be on the warehouseman.

Mr. ABBITT. I wanted to clear that up.

I have a telegram here from Mr. Roy B. Davis, Jr., president of the Virginia Farm Bureau Federation. I would like to have that inserted in the record at this point. The substance of it is along the line of the question I just asked of Mr. Royster.

(The telegram referred to is as follows:)

Sorry we unable to attend hearing on tobacco discount variety program. We had no complaint from producers on operation of discount variety program. May receive reaction when market opens. We hold our final decision until then. We accept recent decision to allow producers, who unknowingly mixed varieties, to pool their tobacco sell later on own merit. We feel it a fair compromise. If this information will assist you, enter it in proceedings.

Mr. ABBITT. We will recess until 2: 30 in this same hearing room. (Recess taken at 12: 25 p. m. until 2:30 p. m.)

AFTERNOON SESSION

Mr. ABBITT. The hearing will come to order.

I will ask Mr. Cooley to introduce the next witness.

Mr. COOLEY. Mr. Marsh W. Knott, will you come forward, please? Mr. Chairman and members of the committee, Mr. Knott is a very prominent citizen of my district, an outstanding gentleman and farmer, and well thought of by everyone who knows him. He is a dirt farmer, knows the problems of a tobacco farmer, and I am delighted to have him here to express his views concerning the administration of the program, or any other views he might desire to express. I am glad to present Mr. Knott to the committee at this time.

STATEMENT OF MARSH W. KNOTT

Mr. KNOTT. Thank you, Congressman Cooley.

Mr. ABBITT. We will be glad to hear you at this time.

Mr. KNOTT. Gentlemen, I represent a group of tobacco growers who are intentional planters of the variety that was approved for 45 percent of parity. There are reasons why this group shows under the program announced to us the reasons why we chose to plant these varieties of tobacco, and I believe in the course of this statement our position can be clarified.

The statement declaring marketing policy of discounted varieties of flue-cured tobacco inequitable, is the statement to which I refer.

The flue-cured tobacco growers voted for a tobacco program in a general referendum that was understood by them as guaranteeing 90 percent of parity so long as the farmers complied with the acreagecontrol-allotment rules.

Now within the framework of this program and still based on the vote of the last referendum, as understood at that time, farmers face an entirely different program and an entirely different set of rules.

This new program, believed to be worked out under strong influence of buying and marketing interests, if not directly by them and the United States Department of Agriculture, now has a two-price system of price support. One is at 45 percent of parity and 1 at 90 percent of parity. Those growers eligible to have their tobacco supported at 90 percent of parity have the privilege of offering their tobacco for sale at an auction supposedly free and competitive, while those growers eligible only to have the sale of their tobacco supported at 45 percent of parity do not enjoy the same privilege.

The latter growers are required to have their tobacco identified, a rule not made known to them until after seeding time-which identification is used to fix in advance the price of their tobacco and to suppress its proper sale at auction on the warehouse floor. This rule for marketing this tobacco was first learned by farmers who planted it when it was offered for sale at the time the market opened.

Tobacco growers face problems of production, such as tobacco diseases severe enough to wipe out an entire crop of tobacco. This is true as to growers whose farms previously had been successful in growing any variety of tobacco without fear of its loss from disease. Then, too, soil types differ, so that on some farms a given variety of tobacco does well while the same variety grown on another farm turns out to be a failure.

Farmers must choose varieties of tobacco which prove best for their soil and other operating situations. The ASC rules for administering the tobacco allotment program do not provide a tolerance for such factors or situations, but follow a rigid rule which admits to no exceptions.

For example, tobacco allotted to a given farm must be grown on that farm regardless of whether the soil on that farm has a history of diseases or not. A grower is not allowed even temporarily to plant the tobacco allotted to such a farm on other land free from disease in order to cope with drastic action-type programs, such as the one imposed on tobacco growers this year.

As an example, many small growers own 15 to 30 acres of land with a tobacco allotment of about 2 to 5 acres.

Under the presently administered ASC rules, this allotment must be planted within these 15 to 30 acres regardless of proven history on this land as to disease infestation and also as to soil types that may prove more favorable to certain varieties of tobacco than to other varieties. Faced with such a decision, many growers elected or chose to plant one of the varieties this year approved for only 45 percent of parity rather than to face production disaster.

These growers had to overcome the problem of production in the fields. These were met by choosing a variety of tobacco that would both live and produce. Advertent to the fact that certain varieties of tobaccos which could be counted upon to live and produce were to be supported at only 45 percent of parity, these growers through necessity chose to plant those varieties of such tobaccos which they found would best meet the problem at hand.

They were also aware of producing a quality of tobacco that would meet the acceptance of buying interests. These growers had the records of the past selling season from their farms which indicated that very little, if any, of their tobacco of these varieties went into the storage program under stabilization.

Further, this year additional caution was given by these growers in the proper time of planting, proper spacing between rows and between plants so as to enable sufficient sunlight to get to the entire plant during the growing season. Proper fertlization and cultural practices were also followed so as to nurture a fine crop that could prove its merit and worth in any competition if allowed to be unhampered by prejudice and restriction. The present method of identification only insures the buying interest that they will get this tobacco at half of the support price or about one-third of its auctionprice value.

The example as given by Mr. Quinton Stroud, of Pink Hill, N. C., illustrates this situation. His offerings of 16 piles of tobacco on a Georgia market were identified by striped cards. Fifteen piles were passed up without a bid being placed on them. Misplacement of the striped identification card allowed the bidding of the sale of the sixteenth pile of tobacco at a price of 64 cents per pound.

When it was called to the attention of the buyers that this pile of tobacco was of the same lot as the 15 piles passed by, the bid was rejected and the price fell to 20 cents per pound, or less than one-third of the fair competitive auction bid.

Why would the companies want to bid on any tobacco if they knew by apparent agreement that they could get the tobacco at one-third of the indicated auction prices?

The only proper conclusion that growers of these varieties of tobacco can come to is that an unfair, un-American, and sinister conspiracy has been entered into by and between the United States Department of Agriculture and the buying interest to suppress the price of these varieties without any logical reason for such action.

I invite your committee to continue this investigation and to take it out to farmers where the grievances are. Then I believe you will know where the injustices are and the adjustments are to be made.

I have with me the signatures and their stated allotments as to the kind of tobacco they planted. This was the result of one notice in our paper, the News and Observer, that a meeting was being called in Wendell, directed to the attention of those farmers who intentionally reviewed the rules and chose to exercise their free privilege in planting the type of tobacco that they felt best met the problem at hand.

On that one notice in the paper 232 farmers spontaneously came to Wendell. They came all the way from Reidsville, N. C. through Beaufort County.

They listened to how tobacco might be marketed best in the face of the present drastic and unfair situation. Those rules were gotten by me through the assistant county agent in a special and hard-to-get manner in order that we would know the problem we faced in marketing, to clear certain tobaccos from blue cards and be able to get white cards to market by.

After reviewing the situation at hand as to marketing this tobacco under the present program they entered into another phase of the meeting which dealt with the injustices which they felt should be corrected.

They were asked to sign this paper as to how many acres they planted. Gentlemen, I have the signatures of these farmers and their stated amount. That totals over 300 acres of tobacco, intentionally planted, discounted in my locality.

These people are not outlaws. These people are not outside of the program. I myself have complied with every rule from beginning to end, and I am within the program. I feel that I am entitled to the just rights that should be preserved for any farmer who is willing to abide by the program.

Mr. COOLEY. Mr. Knott, I want to congratulate you on a well presented statement, a very intelligent statement, and one which I think this committee can very easily understand.

I agree with you. What you complain about is that the Department, in administering this program, has gone far beyond the rules as you understood them to be at the time you planted your crop. Mr. KNOTT. Yes, sir.

Mr. COOLEY. You understood at the time you planted your crop that you would only have a support price of 45 percent of parity? Mr. KNOTT. Yes, sir.

Mr. COOLEY. Because you were planting varieties which you thought were adaptable to your own farm and your own situation? Mr. KNOTT. That is correct.