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FUNCTIONS AND OPERATIONS OF THE TOBACCO

AUCTION MARKETS

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HEARING

BEFORE THE

SUBCOMMITTEE ON TOBACCO

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

EIGHTY-EIGHTH CONGRESS

FIRST SESSION

NOVEMBER 13, 1963

Serial DD

Printed for the use of the Committee on Agriculture

U.S. GOVERNMENT PRINTING OFFICE

26-833 WASHINGTON: 1964
COMMITTEE ON AGRICULTURE

HAROLD D. COOLEY, North Carolina, Chairman

W. R. POAGE, Texas, Vice Chairman

GEORGE GRANT, Alabama

E. C. GATHINGS, Arkansas

JOHN L. McMILLAN, South Carolina

THOMAS G. ABERNETHY, Mississippi

WATKINS M. ABBITT, Virginia

PAUL C. JONES, Missouri

HARLAN HAGEN, California

LESTER R. JOHNSON, Wisconsin

D. R. (BILLY) MATTHEWS, Florida

FRANK A. STUBBLEFIELD, Kentucky

RALPH R. HARDING, Idaho

G. ELLIOTT HAGAN, Georgia

GRAHAM PURCELL, Texas

JAMES H. MORRISON, Louisiana

BENJAMIN S. ROSENTHAL, New York

ROBERT B. DUNCAN, Oregon

ALEC G. OLSON, Minnesota

ROBERT L. LEGGETT, California

SPARK M. MATSUNAGA, Hawaii

MTS. CHRISTINE S. GALLAGHER, Clerk

HYDE H. MURRAY, Assistant Clerk

JOHN J. HEIM BURGER, General Counsel

ROBERT C. BRUCE; A8.1iitant Counsel

FRANCIS M. L;EMA Y, Staff Consultant

CHARLES B. HOEVEN, Iowa

PAUL B. DAGUE, Pennsylvania

PAGE BELCHER, Oklahoma

CLIFFORD G. McINTIRE, Maine

CHARLES M. TEAGUE, California

ALBERT H. QUIE, Minnesota

DON L. SHORT, North Dakota

CATHERINE MAY, Washington

DELBERT L. LATTA, Ohio

RALPH HARVEY, Indiana

PAUL FINDLEY, Illinois

ROBERT DOLE, Kansas

RALPH F. BEERMANN, Nebraska

EDWARD HUTCHINSON, Michigan

RESIDENT COMMISSIONER

A. FERNOS-ISERN, Puerto Rico

SUBCOMMITTEE ON TOBACCO

WATKINS M. ABBITT, Virginia, Chairman

JOHN L. McMILLAN, South Carolina

D. R. (BILLY) MATTHEWS, Florida

FRANK A. STUBBLEFIELD, Kentucky

BENJAMIN S. ROSENTHAL, New York

ROBERT L. LEGGETT, California

PAUL B. DAGUE, Pennsylvania

DON L. SHORT, North Dakota

DELBERT L. LATTA, Ohio

EDWARD HUTCHINSON, Michigan
CONTENTS

Statement of: Page

Brandon, S. J., Brunswick County, Va 27

Dunn, Charles R., III, representing the Virginia Flue-cured Tobacco

Growers Association 36 Edmunds, Maj. Paul C., III, past president, Bright Belt Warehouse

Association, president, South Boston Warehouse Association 23 Goode, M. A., mayor, Town of Virgilina, Va 25

Hall, A. Jack, president, Virginia Farmers Union 28

Harper, Red 38 Loftis, Page, secretary, South Boston Tobacco Board of Trade 24

Love, J. Cobel, representing Kenbridge Warehouse Association 35

Moore, S. T., chairman, Virginia Farm Bureau Federation 30

Myers, George A., Jr., vice president, Danville Tobacco Association,

and vice president, Virginia-Carolina Old Belt Association 16

Pell, Joe, Winston-Salem, N C 39

Shorn°, S. Hollis, director, division of markets, Virginia Department

of Agriculture, Richmond, Va 47

Terry, Nat, president, Danville Tobacco Association 6

Thomerson, Harold 37 Communications submitted to the subcommittee:

Gee, J. S., Kenbridge, Va., letter of November 12, 1963 45,

Harrelson, William L., commissioner of agriculture for South Carolina,

letter of August 4, 1963 43

Maury, Greenhow, Jr., Maury Leaf Tobacco Co., Inc., letter of

Novermber 11, 1963 44

Rosen, Meyer, Georgetown, S.C., telegram of August 7, 1963 43

Stanton, D. B., Mullins, S.C., letter fof August 28, 1963 43

Stevens, James P., the Senate, State of South Carolina, letters of

August 9 and September 4, 1963 41

FUNCTIONS AND OPERATIONS OF THE TOBACCO

AUCTION MARKETS

WEDNESDAY, NOVEMBER 13, 1963

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TOBACCO OF THE

COMMITTEE ON AGRICULTURE,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10:15 a.m., in room

1310, Longworth House Office Building, Hon. Watkins M. Abbitt

(chairman of the subcommittee) presiding.

Present: Representatives Abbitt, Cooley, McMillan, Matthews,

Leggett, and Hutchinson.

Also present: Representatives Poage, Fountain, Watts, Kornegay,

Lennon, Tuck, Hemphill, and Taylor.

Christine S. Gallagher, clerk; Francis LeMay, consultant; and

Martha Hannah, staff.

Mr. ABBITT. Originally, this hearing was scheduled for 10 o'clock,

and then later changed to 10:30, but we will start now, at this time,

10:15, since I do not think that anybody will be hurt or put out if we go

ahead, because we want to hear all of the witnesses.

I might state briefly that the purpose of the meeting is to go into

this situation on the sales in the old belt. The reason that we are

having this hearing is that there have been a lot of complaints received

by Members of the Congress, including myself, on the purchase of

tobacco by the tobacco companies on the auction floor. Some of the

complainers state that on occasion the buyers will not even walk down

the aisles to where the tobacco is piled.

We do not know what to do, but in compliance with the requests

of the people who are vitally affected, that is, the growers, we felt that

it was proper to have this exploratory hearing so that we might know

where to go from here.

I understand that Congressman Lennon had something he wanted

to say, but before you proceed, let me state that we are glad to have

you and the other Members of Congress from North Carolina with us.

And while not actually members of the subcommittee, you are most

welcome. And we appreciate all of the support that we can get and

will receive from your being here.

Mr. LENNON. I want to express my appreciation for the opportunity of being able to attend these hearings. While we recognize

that the particular purpose of this hearing is to determine this question

as to the sales on the auction floors of the old belt where in the last 2

weeks better than 50 percent has been taken by the Stabilization.

I am hopeful the Subcommittee on Tobacco will conduct a general

review of the growing and the marketing season in the Fire Flue-cured

Belt, so that this committee, at least, can anticipate such decision as

1
2 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

the Secretary might have to make come December to set the acreage

quotas for the growing season of 1964. And I would like to make

an earnest plea for those that I represent in North Carolina that at

some future date, as early as possible, this Tobacco Subcommittee

review both the marketing season and other problems of the Fluecured Belt. And I think that our good friend, John McMillan, who

represents a district in South Carolina, is very much interested in

this.

Mr. MCMILLAN. The real trouble seems to stem from this new

grading system for tobacco. I just want to say at the beginning

that if people want to bring out a new tobacco program here to help

the grading situation, it would be of great assistance to the tobacco

farmer.

Mr. ABBiTT. There is no reason that we cannot go ahead with this.

Mr. LENNON. I think that it is appropriate since we are here. In

about another 10 days all of the Flue-cured markets will have closed,

including those of the old belt. I think now is the most appropriate

time to review both the growing and the marketing seasons and the

experiences that we have had with respect to the grading system and

some other factors that have entered into this total picture.

Mr. ABBITT. Is there anyone here who has not given his name to

the clerk or to someone up here, desiring to speak?

Mr. THOMERSON. Mr. Pell and Mr. Harper would like to be heard.

Mr. ABBITT. We appreciate your being here, and we hope to hear

from you. We will now hear from our colleague, Mr. Tuck.

Mr. TUCK. I just want to express to you, as the chairman of this

subcommiteee, my deep appreciation of your concern with this problem that confronts us. And I think it also concerns, as these gentlemen have said, the tobacco growers and the tobacco interests in all

areas. I think that I was one of those who conferred with you and

the distinguished chairman of your full committee, and who decided

to have this meeting, and to relate to you some of the difficulties

which we were having down there in southside Virginia and in the

northern part of North Carolina, in fact throughout the old belt.

Frankly, I have no quarrel or dispute with anyone. But I do say

that this is a serious problem, one that does require some action.

And I hope that as the result of the hearing that some departmental

action, and if necessary, legislation of a meritorious nature may come

forth, either at this session or at the next session of the Congress, in

order that a situation of this kind may not arise again.

The tobacco growers now may not wish to dissertate on the subject,

but I remember that when I was a young man the tobacco growers like

myself did not know much about grading and marketing, but now

most of them are educated and highly trained. In fact the growers

of tobacco, exercise not only the most painstaking skill and diligence in

growing tobacco, but it requires, also, a higher type of mentality to

grow the type of tobacco that we need.

We were told last year what kind they wanted and our growers

made an earnest and diligent, and, I think, a fairly effective effort to

grow the type of tobacco that the buyers wanted.

I have some gentlemen here from the Fifth Congressional District

of Virginia. They are men engaged in the tobacco business. They

have come here to testify, although they might better be at home, but

be that as it may, they are here and they want to testify and they will
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 3

make their statements as brief as possible. One of them has a brief

written statement, and the other two have no statement prepared at

all. I would like to introduce them and I would like to have them be

recognized. You can call them at such time as you like.

Mr. ABBITT. That will be fine.

-Mr. TUCK. I would like to present first Mr. W. Nat Terry, president

of the Danville Tobacco Association, a tobacco grower in Pittsylvania

County, and a tobacco warehouse operator in Danville, Va., which he

has been for many years. He is president of the tobacco association

and is one of the largest tobacco growers in the State of Virginia.

And he, also, operates a large tobacco warehouse. He has been in

the tobacco business all of his life and knows tobacco all of the way

from the seed up to the very maturity of the crop.

Next is Mr. George A. Myers, Jr., vice president of the Danville

Tobacco Association and vice president of the Virginia-Carolina Old

Belt Association. Mr. Myers is a farmer, a tobacco warehouse man.

His father, too, was for many years in the tobacco business in Danville.

And then we have Maj. Paul C. Edmunds, III of Halifax, Va., who

is the past president of the Bright Belt Warehouse Association and

president of the South Boston Warehouse Association. He is a man

who has engaged in the tobacco business all of his life.

Then we have the Honorable Page Loftis, who is secretary of the

South Boston Tobacco Board of Trade and former member of the

Halifax County Board of Supervisors. Ile is a fine, patriotic citizen.

. Then we have the Honorable M. A. Goode, who operates a tobacco

warehouse and is a tobacco grower.

And then we have Mr. William S. Atkinson, Jr., who. is a member of

the Tobacco Committee of the Farm Bureau of Virginia. He is one

of our largest tobacco growers, one of our finest citizens and one of

my warm personal and, political friends. He is very much interested

in this subject. He has not asked to. testify.

• And if you could, in view of the interests of these people, who have

come away from their warehouses and their offices, where their

presence is required, call them and they will make their testimony just

as brief as possible, in order that they may return home.

Mr. ABBITT. I appreciate your cooperation with this committee.

You have always been most cooperative. I want to extend to your

constituents a warm and hearty welcome.

Unless there is some objection, we will, I assume, go along with

this list of witnesses.

Mr. TUCK. I would not ask for this privilege except for the extreme

circumstances which I have related.

• Mr. ABBITT. If there is no objection, we will call as the first

witnesses, those from the Fifth Congressional District of Virginia, and

then later those others here from the Flue-cured tobacco district.

Mr. TUCK. If there are other persons here similarly situated, you

may go ahead with them—I do not ask to have you give us any

preference, and I am sure that everybody knows this.

Mr. ABBITT. We will be glad to hear from you, M owever, the chairman of the full committee migh nt to in a

statement first. A:t.• *0

Mr. COOLEY. I just want to compliment Go 'nor Tuck for 114

interest in the subject of tobacco in behalf of his L.,nstitioPits./‘ Whil$

HATfik
4 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

he is not a member of this committee, he always meets with us when

we talk about tobacco or anything else related to agriculture that

affects his constituents. He is held in high esteem by all Members

of the Congress.

As he stated here this morning, he and Mr. Abbitt talked to me

some time ago about this subject, and it was felt that this was a very

good forum in which we might receive your views regarding the

tobacco program.

I am sure that you know there is a meeting in Raleigh today and

tomorrow on this subject. The farmers from the Flue-cured area will

meet with the Government officials who are in charge and who have

the responsibility of administering the program for an exchange of

views at that time. Just what can be accomplished by this hearing,

I, frankly, do not know.

I want to say to you, and I say it without any fear of contradiction,

that our committee, I think, would hesitate to bring out legislation

on the floor of the House at this time concerning the tobacco program,

because I feel that while other parts of the farm program are in

danger, our tobacco program is safe. If you come in with a resolution, which has been adopted by the farm organizations, you can tell

the inconsistency and the frustration that is existing when they come

out and say, "We are for the tobacco program," meaning that they

are for the adjustment program, and the price support program and in

the very next resolution they will say, "We are against the grain

program, we are against wheat, we are against a dairy program,"

but they are all for the tobacco program. Just how long will our

tobacco program be able to survive if we are against everything

else? That is exactly what we are up against. I have seen these

resolutions come up and they are as inconsistent as they possibly

can be.

I know that this program is the best program of any of them and

it costs the Government less money. If there is any crop or group of

producers in the country who are entitled to consideration, it is the

tobacco producers, because, as you know, tobacco brings in a terrific

revenue to the Federal Treasury, and to the States and municipalities.

While we are unhappy at the moment--I know that down in my

district, my farmers are unhappy, particularly the small ones—we

must be patient and realize that we did not get into this trouble in 1

year and we are not going to get out of it in 1 year. We started to

get into trouble back in 1955 and 1956 and we have been in trouble

ever since and we are in bad trouble now. I am not alarmed about it,

because I think that the people who have been administering this

program have acted in good faith and are trying to keep the supply in

line with the usual demand. They have tried in every way possible

to find foreign markets for our tobacco.

The grading system has made a lot of people unhappy, but I still

believe that the people in this program have acted in good faith, and if

we come out against the grading program we may have difficulty.

We are in a deficit area. We do not produce enough grain to

feed our livestick and poultry. But what can we do about it? I do

not know. I know one thing and that is that I am going to be slow

in bringing out any legislation that will throw this program to the
FUNCTIONS OF THE TOBACCO AUCTION MAEKETS 5

wolves on the floor of the House. Mr. Abbitt, our distinguished

chairman of the subcommittee, knows that we have been threatened

by people from the Great Plains and by the people from the Corn

Belt, and even the livestock people and the dairy people. They are

screaming that we have a program that will work. We will have to

work with each other. But when we have a dispute among ourselves

and fall out, we can lose this program, and when we lose this program

we will all face bankruptcy the warehouses, the farmers and all of the

professional businessmen—everybody, especially in my part of the

State, will be in distress. But for this program, in my opinion, tobacco

would be selling at 8 cents a pound.

I am not disturbed because of the stabilization program on tobacco.

We took a 5-percent cut this year. And as I said the other day, if

you apply the formula strictly across the board we will take a 22-percent cut and that is too harsh and too cruel, and I know that the

Department is not going to impose any such reduction on us this year.

I am satisfied of that. They make their decisions, in part, based

upon the export of tobacco, and they have plenty of leeway to get us

out of trouble in the most painless way possible. I am willing to take

a cut this year and next year and next year to keep this program. I

am not going to lose my head and at the same time lose a program.

This tobacco acreage is built into the land value. The only way to

get acreage down my way is to marry the acreage or buy the acreage

or inherit the acreage. You can inherit it or buy it or marry it.

I am not going to throw the program overboard. I do not want you

to come in here and lose your heads and tell us to bring out legislation

that will mean that our heads will be chopped off.

A Member of the House from California stood up on the floor of the

House and offered an amendment to a bill to do away with all price

support programs.

We have a man running for President right now who has advocated

doing away with all price support programs. He is against all farm

programs, and he wants to sell TVA and REA. I do not recall his

name, but he is in the Senate of the United States.

That is what we are faced with. We could lose our program right

quick. We know what the score is down our way. We have peanut

controls and controls on cotton and tobacco.

I do not want to lose our program. I do not want to do anything

to bring it into disrepute.

That is all I have to say, but I hope that you will bear in mind that

we have to be patient and that we have to work with the Stabilization

Corporation in an effort to bring about a better judgment between

supply and demand.

Mr. ABBITT. Thank you very much, Mr. Chairman.

Mr. TUCK. We have no objection to this program. Our people are

almost 100 percent for it, and they are still for it.

Mr. COOLEY. I know that. I know that there is no better friend in

the whole Congress for this program than Governor Tuck, but there

are many people who would like to destroy this program.

Mr. ABBITT. We understand just what you say, is what could

happen here.

Now, Mr. Terry, we will appreciate hearing from you.

26-833-64 2
(i FUNCTIONS OF THE TOBACCO AUCTION MARKETS

STATEMENT OF W. NAT TERRY, PRESIDENT, DANVILLE

TOBACCO ASSOCIATION

Mr. TERRY. Mr. Chairman and gentlemen of the committee, I

appreciate your giving me this time. I do not want to take up too

much of it. I am, certainly not here to break up the tobacco program.

My sole purpose in being here is to try to enlighten you gentlemen as

to what is happening down in the old belt in which I am presently

interested.

Conditions on the Danville tobacco market are the worst I have

ever encountered, every day the buying companies purchases are less

and the stabilization take increases. I have on sale every day in

large quantities some of the most usable and desirable tobacco that I

have ever had the privilege to offer for sale; tobaccos that I have

always been able to sell to the domestics, exporters, and domestic

dealers. I have stopped my sales on numerous occasions and tried to

find out from the buyers why they are not interested. The answers

vary from no expression to too much nicotine, too much chlorine,

color is just a little too-too something, last and most frequent and

plausible answer in my opinion (the barrel is full). These answers

do not add up to me or the growers.

The old belt growers made an outstanding effort to grow a ripe

desirable crop in 1963 as near as possible to what the buying companies

said they wanted. In my opinion, they accomplished vv-hat they set

out to do, which makes the situation so heart rending.

I urge you for the old belt tobacco growers, to spare no effort to

find out what is causing this deplorable marketing condition in the

old belt, so we will not have it happen again in the future.

I have with me, records from my warehouse and the Flue-Cured

Tobacco Stabilization Corporation that will substantiate my statements.

If you gentlemen will indulge me, I will give you this and try to

call your attention to some of the things that might bring a little more

light on what the situation is like, if you desire it.

Mr. MCMILLAN. Proceed.

Mr. COOLEY. Have you finished your statement?

Mr. TERRY. Yes, sir.

Mr. COOLEY. That reminds me of a statement made by Mr. W. E.

Fenner, who is the largest independent warehouseman in North

Carolina, or in the country. I heard him make a speech one time

when he said, "The crop this year is a too crop—either too light or too

heavy or too green or too something. There is too damn much

tobacco."

I think that we have a "too" crop in 1963. In one of the markets

down home 80 percent one day went into the Stabilization Corporation,

and in the old belt over 50 percent is going in now.

Mr. TUCK. About 60 percent. As I understand it, the tobacco

companies last year did not have enough of certain grades, and this

year they have too much.

Mr. TERRY. Gentlemen, if you will look on the first page of the

tabulations I have given you, if you will drop down to what we in

the tobacco trade consider as a very desirable type of tobacco, distinguished as B-4F in the Government grading, you will see that on

September 23 the stabilization take was nothing; on September 30,
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 7

it was nothing, on October 30, it was 15 percent; and on November 8,

it was 50 percent.

Now I will not take any more of your time to go through all of

these grades but you have this copy in front of you and you can go

through it and it will give you the examples. You can see just

exactly what has happened since the Danville market opened on

September 3, up through last Friday, and in my opinion it is a true

picture, as true a picture as you can get.

These are sales made in my warehouse. They are actual records.

Mr. ABBITT. What do you think is the difficulty-what, in your

opinion, is the difficulty?

Mr. TERRY. Mr. Chairman, acreage control has proven unsatisfactory. It tends to focus the growers' efforts toward growing

pounds, rather than growing quality. And the net yield from acreage

reductions, accumulated, since 1955, has been very small.

No. 2, the releasing of the Stabilization Corporation stocks of 1955

and 1956 tobacco at fire sale prices.

No. 3, large stocks held under loan by the Stabilization Corporation available to both domestic and foreign manufacturers

through domestic dealers at all times.

(The tabulations referred to follow:)

Comparative percent of grades going under loan, from Sept. 28 to Nov. 8, 1968

[Taken from the records of Virginia-Carolina warehouse, Danville, Va.]

Date Grade Total sales Company

purchase

F. C. purchase

F.C. percent

Sept. 30 B-3L 866 866 0 0

Oct. 30 B-3L 1,876 1,276 600 32

Nov. 8 B-3L 702 556 148 21

Sept. 30 B-4L 698 698 0 0

Oct. 30 B-4L 3,386 2,542 844 25

Nov. S_ B-4L 1,184 1,020 164 14

Sept. 30_ B-5L 102 102 0 0

Oct. 30 B-3LV 616 616 0 0

Nov. 8 B-3LV 1,042 1,042 0 0

Oct. 30 B-2F 1,120 1,120 0 0

Sept. 30 B-3F 1,394 1,394 0 0

Oct. 30 B-3F 2,466 2,186 282 11

Nov. 8 B-3F 2,366 2,204 162 7

Sept. 23 B-4F 1,166 1,166 0 0

Sept. 30 B-4F 1,820 1,820 0 0

Oct. 30 B-4F 2,836 2,414 422 15

Nov. 8 B-4F 3,968 1,984 1,984 50

Sept. 23 B-5F 602 602 0 0

Sept. 30 _ B-5F 76 76 0 0

Oct. 30 B-5F 2,798 2,222 576 21

Nov. 8 B-5F 3, 658 426 3, 232 88

Oct. 30 B-2FR 88 88 0 0

Do B-3FR 1, 798 1,498 300 17

Sept. 23 B-4FR 300 300 0 0

Sept. 30 B-4FR 192 192 0 0

Oct. 30 B-4FR 15, 866 9, 578 6, 288 40

Nov. 8 B-4FR 4,246 170 4,076 96

Oct. 30 B-5FR 4, 514 2, 550 1,966 44

Nov. 8 B-5FR 4,270 1, 182 3,088 72

Oct. 30 B-6FR 2, 500 1, 164 1,336 53

Nov. 8 B-6FR 348 228 120 34

Sept. 23 B-5FV 176 176 0 0

Oct. 30 B-4FV 1,148 600 548 48

Sept. 30 B-5FV 138 138 0 0

Nov. 8 B-4R 2,746 762 1,984 72

Oct. 30 B-5R 5, 814 708 5, 106 88

Nov. 8 B-5R 7, 458 286 7,172 96

Sept. 30 B-6R 124 124 0 0

Oct. 30 B-6R 1,000 690 310 31

Nov. 8 B-6R 3,346 1,666 1,680 50

Nov. 8 B-5RR 806 266 540 67

Oct. 30 B-40L 292 292 0 0

Nov. 8 B-4GL 528 382 146 28
8 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Comparative percent of grades going under loan, from Sept 23 to Nov. 8, 1963-Con.

[Taken from the records of Virginia-Carolina warehouse, Danville, Va.]

Date Grade Total sales Company

purchase

F.C. purchase

F.C. percent

Sept. 30 B-50L 28 28 0 0

Oct. 30 B-60L 52 52 0 0

Nov. 8 B-5GF 288 46 242 84

Oct. 30 B-4GF 636 272 364 57

Do B-5GF 1,444 298 1,146 79

Do B-60F 860 240 620 72

Nov. 8 B-6GF 1,010 496 514 51

Do B-50R 1,550 578 982 63

Oct. 30 B-6GR 1,808 748 1,060 59

Nov. 8 B-6GR 1,446 632 814 56

Sept. 23 B-60K 94 91 0 0

Oct. 30 B-60K 4(1 104 350 78

Nov. 8 B-6GK 518 196 322 62

Sept. 23 B-4K 956 956 0 0

Sept. 30 B-4K 3,350 3,359 0 0

Oct. 30 B-4K 3.028 1,634 1,394 46

Nov. 8 I3-4K 2.962 774 2,188 74

Sept. 23 I3-5K 980 980 0 0

Sept. 30 B-5K 2,396 1,910 486 20

Oct. 30 B-5K 6,502 2,778 3,724 57

Nov. 8 B-5K 3,732 1,134 2,598 70

Sept. 23 B-OK 1,262 1,262 0 0

Sept. 30 B-6K 1,320 708 612 46

Oct. 30 B-6K 2,806 912 1,894 67

Nov. 8 B-6K 1,982 810 1,172 59

Sept. 23 B-4KL 158 158 0 0

Sept. 30 B-4KL 248 248 0 0

Oct. 30 B-4KL 2,044 1,478 566 28

Do B-5KL 442 130 312 71

Do B-3KF 1, 162 354 808 70

Sept. 30 B-4KF 678 678 0 0

Oct. 30 B-4KF 5,262 2,150 3,112 59

Sept. 23 B-5KF 1,180 674 506 43

Sept. 30 B-5KF 614 298 316 51

Oct. 30 B-5KF 7,792 6,238 1,554 20

Sept. 30 B-6KF 214 214 0 0

Oct. 30 B-6KF 1,462 200 1,262 86

Sept. 23 B-5KV 686 310 376 55

Oct. 30 B-5K V 554 256 298 54

Sept. 23 B-6 KV 332 322 0 0

Sept. 30 B-6KV 208 134 74 36

Oct. 30 B-6KV 408 132 276 68

Nov. 8 B-6KV 736 168 568 77

Oct. 30 B-3KM 76 28 48 63

Sept. 23 B-4KM 354 354 0 0

Sept. 30 B-4KM 594 594 0 0

Sept. 23_ B-5KM 24 24 0 0

Oct. 30 B-5KM 1,052 822 230 22

Nov. 8 C-3L 300 300 0 0

Sept. 30 C-4L 880 880 0 0

Nov. 8 C-4L 280 280 0 0

Sept. 23 C-5L 226 226 0 0

Sept. 30 C-5L 2,328 2,328 0 0

Nov. 8 C-5L 1,148 1,148 0 0

Do C-4LV 240 240 0 0

Sept. 30 C-4F 880 880 0 0

Oct. 30 C-4F 290 290 0 0

Nov. 8 C-4F 74 74 0 0

Sept. 23 C-5F 854 854 0 0

Sept. 30 C-5F 1,286 1,286 0 0

Nov. 8 C-5F 44 44 0 0

Sept. 30 C-4KL 68 68 0 0

Nov. 8 C-4KF 570 570 0 0

Sept. 30 11-4L 1,622 1,622 0 0

Oct. 30 H-4L 570 570 0 0

Nov. 8 H-4L 152 152 0 0

Sept. 23 H-5L 766 766 0 0

Oct. 30 H-5L 230 230 0 0

Nov. 8 H-5L 320 320 0 0

Sept. 30 H-4F 2,006 2.006 0 0

Oct. 30 H-3F 1,110 1,110 0 0

Do H-4F 1.606 1.606 0 0

Nov. 8 H-4F 2,508 1,784 724 29

Sept. 23 H-5F 1,238 1,068 170 14

Sept. 30 H-5F 5,052 5,052 0 0

Oct. 30 H-5F 2,898 898 2.000 69

Nov. 8 H-5F 1,650 290 1,360 82

Sept. 23 H- 6F 2,804 2,804 0 0

Sept. 30 H-6F 238 238 0 0

Oct. 30 H-6F 982 682 300 31

Sept. 23 II-4FR 678 420 258 38
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 9

Comparative percent of grades going under loan, from Sept. 23 to Nov. 8, 1963-Con.

[Taken from the records of Virginia-Carolina warehouse, Danville, Va.]

Date

Oct. 30 

Sept. 30 

Oct. 30 

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 22_ 

Sept. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 23 

Nov. 8 

Sept. 30 

Oct. 30 

Do 

Sept. 23 

Sept. 30 

Nov. 8 

Sept. 25 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 23 

Oct. 30 

Sept. 23 

Do 

Sept. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Oct. 30 

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 30 

Nov. 8 

Sept. 2 

Nov. 8 

Sept. 23 

Sept. 30 

Sept. 23 

Sept. 30 

Nov. 8 

Sept. 23 

Sept. 30, 

Oct. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Nov. 8 

Sept. 30 

Sept. 23 

Sept. 30 

Oct. 30

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Oct. 30 

Nov. 8 

Sept. 23 

Sept. 30 

Sept. 23 

Sept. 30 

Oct. 30 

Sept. 23 

Sept. 30 

Oct. 30_ 

Nov. 8 

Sept. 23 

Grade Total sales Company

purchase

F.C. purchase

F.C. percent

1I-4FR 1,912 808 1, 104 58

II-5FR 392 392 0 0

H-5FR 1,448 1,276 172 12

H-6FR _ 482 390 92 19

II-6FR 46 46 0 0

1I-6FR 1,122 822 300 27

II-6FR 462 462 0 a

:--3L 1.334 1,334 0 0

X-3L 4, 770 4. 770 0 0

X-3L 372 372 0 0

X-4L 1,310 1.310 0 0

X-4L 882 882 0 0

X-4L 1,342 1.174 168 13

X-4L 4, 572 4, 572 0 0

X-5L 1,606 1,606 0 0

X-5L 790 790 0 0

X-3LV 86 86 0 0

X-3LV 94 94 0 0

X-4LV 350 144 206 59

X-3F 1,1:18 1,218 0 0

X-3F 1,474 1,474 0 0

X-3F 928 928 0 0

X-4F 4,202 4,084 118 3

X-4F 3,942 3,822 120 3

X-4F 1,710 1,080 630 37

X-AF 6, 924 5,866 3,058 44

X-5F 1,068 1,068 0 0

X-5F 96 96 0 0

X-5F 1.082 320 762 70

X-5F 618 226 392 63

X-4FV 248 248 0 0

X-3FV 72 72 0 0

X-4 G 122 122 0 0

X-50 406 406 0 0

X-50 78 78 0 0

X-5 G 204 66 138 68

X-4KL 766 766 0 0

X-4KL 112 106 6 5

X-4KL 1,054 344 710 67

X-4K F 1.834 1,566 268 15

X-4KF 1,558 1, 558 0 0

X-4KF 874 672 202 23

X-4KF 4, 048 3. 070 978 21

X-4KV 720 488 232 32

X-3KM_ 1,142 276 866 76

X-4KM_ 58 58 0 0

X-4KM_ 674 652 22 33

P-2L 844 844 0 0

P-2L 428 428 0 0

P-3L _ 596 596 0 0

P-3L 4,160 4.160 0 0

P-3L _ 262 262 0 0

P-4L 5,424 4,602 822 15

P-4L 5, 594 5, 372 222 39

P-4L 1,374 1,374 0 0

P-4L 1,610 1,610 0 0

P-5L _ 5,860 5,680 180 31

P-5L_ 1,620 1,520 100 6

P-5L 944 944 0 0

P-2F_ 1,116 1.116 0 0

P-3F_ 1,340 1.340 0 0

P-3F 1,590 1,590 0 0

P-3F 284 284 0 0

P-4F 7,968 7,730 238 30

P-4F 3, 598 3, 598 0 0

P-4F 1,012 774 238 24

P-4F 746 746 0 0

P-5F 8,020 7,648 372 46

P-5F 3, 158 2,636 522 17

P-5F 1, 574 1,278 296 19.

P-5F 680 680 0 0

P-40 564 244 320 57•

P-4G _ 328 244 84 26

P-5G 242 148 94 39

P-SG 560 72 488 87

P-SG 176 176 0 cP

N-1L 1,926 1,814 112 6

N-1L_ 3,220 2, 764 456 14

N-1L 1,828 1,038 790 43

N-1L 1,490 1,310 180 12'

N-1LX 1.432 1.432 0 n
10 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Comparative percent of grades going under loan, from S6pt. 23 to Nov. 8, 1963—Con.

[Taken from the records of Virginia-Carolina warehouse, Danville, Va.]

Date Grade Total sales Company

purchase

F.C. purchase

F.C. percent

Sept. 30 N-1LX 958 958 0 0

Oct. 30 N-1LX 936 528 408 44

Nov. 8 N-1LX 1,372 1,198 174 13

Sept. 23 N-1F 68 68 o o

Sept. 30 N-1F 52 52 0 0

Oct. 30 N-1F 374 374 0 0

Nov. 8 N-1F 306 28 278 91

Sept. 23 N-111 52 52 0 0

Oct. 30 N-1R 298 298 0 0

Sept. 23 N-1 GL 582 400 182 31

Sept. 30 N-1 GL 192 112 80 42

Oct. 30 N-1 CIL 1,092 224 868 79

Nov. 8 N-1GL 152 04 58 3E

Oct. 30 N-1 GF 716 304 412 5E

Nov. 8 N-1 GF 1,276 514 762 6C

Oct. 30 N-1GR 1,348 538 810 6C

Nov. 8 N-1 GR 2,452 584 1,868 70

Do N-10 0 470 254 216 40

Sept. 23 B-4L 0 582 

Do B-4KF 0 222 

Do N-1GF 0 304 

Oct. 30 B-5F 0 576 

Do B-4FV o 548 

Do B-4GR 0 232 

Do B-5GR 0 1,436 

Do B-50K o 354 

Do B-3KL 0 278 

Do B-4KV 0 484 

Do B-4KM 0 674 

Do C-4KL 0 826 

Do X-3F 0 250 

Do_ __ X-4FV 0 290 

Do X-4G 0 244 

Nov. 8 13-6F 00 236 

Do. B-3FR 00 566 

Do B-3F V 00 248 

Do B-5FV 00 524 

Do B-50K 00 222 

Do B -3KL 00 768 

Do B-4KL 00 1, 198 

Do B-5KL 00 1, 216 

Do B-3KF 00 658 

Do B-4KF 00 1, 266 

Do B-5KF 00 4, 548 

Do B-6KF 00 3, 082 

Do B-5KV 00 464 

Do B-4KM 00 1,070 

Do B-5KM 00 676 

Do H-5FR 00 786 

Do X-4KM 00 840 

Do P-5G 00 346 

Do N-111 00 614 

Flue-cured tobacco acreage and production, 1955-63

Year

1955 

1956 

1957 

1958 

1959

1960

1961

1962

1963

Acreage

Percent Production

change from (million

previous year pounds)

Percent

change from

previous year

990, 700

875, 300

662, 700

639, 400

693, 300

691,800

698. 500

729, 800

693, 600

—5.0

—11.5

—24. 3

—3.6

+8.2

—. 2

+1. 0

+4.2

—4.8

1,483

1,423

975

1,081

1,081

1, 251

1,258

1,408

1 1, 308

+12.9

—4.0

—31.6

+11.0

0

+15.7

+-5

+11.8

—7. 1

1 Estimate, Oct. 1, 1963.

NOTES

1963 acreage 34.5 percent less than 1954.

1963 estimated production 0.5 percent less than 1954.

Acreage shown is based on harvested acreage figure and will differ slightly from allotments.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 11

Mr. ABBITT. Going back to your No. 2 reason

'

what type was that?

Mr. TERRY. When it was reduced or released, when it was offered

at the price that it was, anything would have been in it.

Mr. COOLEY. I agree with you. I think that we should find out,

Mr. Abbitt, what percentage of that 1955-56 crop went into domestic

transactions.

A few years ago I asked the head of the Reynolds Tobacco Co. what

he thought we should do with that tobacco, and he said that it Was no

good, to take it out and dump it in the ocean. He was telling the

truth. We spent more money on it from that time until we disposed

of it than we had invested in it.

They tried to sell it at one price but it did not move and after lowering the price further it did move. I think they did the best they could

to get rid of it. I am glad they got rid of it. I hope that we get rid

of some more that we have on hand now. I am glad that they are

moving some of it behind the Iron Curtain. I saw in the newspapers

that Bulgaria has purchased some tobacco, and I think that some of

the other countries will purchase some of it. I do not think that the

Government is dumping.

You referred to this as a fire sale, but they reduced the price in order

to move the tobacco—it was either that or to pay the storage on it

year after year after year.

Mr. TERRY. Well, the words "fire sale" might be the wrong words.

Mr. COOLEY. I am not criticizing you on that account.

Mr. TERRY. It was at a tremendously reduced price.

Mr. COOLEY. I find no criticism of that. They had to get rid of it.

They had to reduce the price. I do not know how much we have left

out of the 1955-56 crop. Do you know?

Mr. TERRY. Very little—a very small amount. In fact, at the end

of this year, we will have not over 600 million.

Mr. COOLEY. That is about one-half year's supply, is that about

right? I do not think that is too much.

Mr. TERRY. A little better than one-half of that they will buy from

this crop of tobacco in the 1963 crop.

Mr. COOLEY. What do you mean—I understand that they have a

surplus of about 60 million pounds.

Mr. TERRY. That the companies will buy of this crop.

Mr. COOLEY. All right.

Mr. TERRY. And I would be highly in favor of this tobacco being

sold or bartered to some of our good friends across the Pacific or the

South Atlantic, and to have a subsidy used in that manner, but in pay

opinion Stabilization is now just a holding organization for the manufacturers. At any time they desire to buy the tobacco it is right there

for them to walk in and purchase it.

Mr. COOLEY. Under the cotton program some years ago we had a

provision in the law that they could sell cotton only for 105 percent.

And we made a net profit of $268 million which we turned over to

the Treasury.

Now if we would put this provision in this law we could make a

profit on the tobacco program. But I do not know whether we should

do it or not. I do know that we did have a successful program in

cotton.

Mr. MCMILLAN. I want to congratulate the gentleman from Virginia on his fine statement. I think Virginia farmers have experienced

the same trouble we have experienced an South Carolina this year.
12 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

We had people all over the State produce quality tobacco last year.

And thereby they reduced the poundage to the extent that we sold

19 million pounds less tobacco in South Carolina than we did the

previous year. And the price was not as high in 1963 as in 1962.

I do not know that we can talk those farmers into such a program

again next year. I know that Stabilization purchased at 61 cents a

pound, quality tobacco.

I talked with one of the company's representatives, who advised

me that they did want this tobacco; however, since it carried a grade S

tag he could not make a bid.

Thank you.

Mr. ABBITT. Thank you very much.

Mr. TERRY. Thank you very much. If you will indulge me for just

a second, if you will look at the last sheet of the tabulation that I have

given you, you will see that if the companies did not buy a single

pound on those days which, I think, is a rather outstanding example

of the way that Stabilization got 100 percent of those grades on those

days.

Mr. ABBITT. Thank you again.

Mr. TERRY. Thank you.

Mr. MATTHEWS. I would like at this point to interpose a thought

that has already been expressed. I am glad as a member of the subcommittee to be with these distinguished gentlemen this morning.

As I recall it, this past year in Florida there was less than 3 percent

of tobacco that was put into the Stabilization Corporation. So that

I know that we can all see as the chairman has said this morning

that we have a variety of problems facing us. We in Florida don't

feel we should take a tobacco cut. These are problems that must

not cause us to become discouraged. I do not think that we want to

give up our program. My farmers are very much concerned that

with only 3 percent of their tobacco going into the Stabilization

C n-poration, they must suffer a cut in acreage along with everybody

else.

Thank you very much.

Mr. ABBITT. 'thank you very much.

Would you care to make a statement, Mr. Leggett?

MT. LEGGETT. No, thank you.

Mr. CooLEY. Perhaps Mr. Watts would care to make a statement

or ti ask some questions.

Mr. ABBITT. Would you care to make a statement or to ask some

qu3stions?

Mr. WATTS. I do not want to ask a question. I represent the

largest burley producing area in the world, I guess, in Kentucky. We

have listened to the same pains in other years. In order to work out

of that proposition, we have to go before this committee, offering

legislation and asking permission for the Secretary of Agriculture at

the time to cut our acreage allotment 25 percent. It had already

been cut 50 percent before that time.

I agree with Chairman Cooley that it would be disastrous to put

tobacco legislation on the floor of the House to affect the support

program. They would say that we had begun to cost the Government

a little bit of money. I think it would be disastrous to get out there

with such.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 13

I remember last year when Mr. Roosevelt offered a motion on the

floor—an amendment to a bill—to cover all price support programs.

It was not a rollcall vote.

The only way we did solve our problem in burley was to cut production down in line with consumption. No support program in the

world will continue to work unless you want to pile up tremendous

costs on the Government. You must cut the production down to

the point where you can get supply and demand pretty much in

balance with decent reserves to take care of bad years.

And if the tobacco companies are waiting to get tobacco from the

association at a sacrifice price, that should be looked into and looked

into very thoroughly, because if they are doing that, why the Department ought to take such action as is consistent with the assistance

of this committee and the tobacco people to see that they should not

be permitted to lay off the market deliberately for the purpose of

buying it cheaper later on. If that is going on, that is bad. I am

not saying that it is. I have not seen any evidence that it is.

I come back to the old saying that you cannot run any program

successfully unless you keep supply and demand pretty much in line.

I appreciate being here. I am not expressing any views to the

Flue-cured people, but these are my ideas.

Mr. ABBirr. Thank you very much. I know of your great interest

in this program. No one has been of more help in the tobacco program

than you.

Mr. MCMILLAN. I would like to ask the gentleman one question

while we are on this subject. Is it true that foreign countries have

increased their acreage every time we have reduced our acreage?

Mr. WATTS. No; I do not think so. Our market is a little bit

different than yours.

I know that when I was abroad I found this, first, the fact that we

have to sell higher than their prices and, second, the quality of our

Flue-cured tobacco is another. Those are two important items.

Mr. MCMILLAN. What is the reason?

Mr. WATTS. It did not have the flavor; it does not have the aroma;

it does not have the smoking quality. That is what they told me

all over Europe was the trouble with Flue-cured tobacco.

Mr. COOLEY. May I interrupt for 1 minute on that question? Do

you think that there is anyone in this room who believes that decreasing the production will keep them from using stems and the like in

homogenized tobacco?

Mr. WATTS. You can help get rid of this situation by reducing the

acreage.

Mr. COOLEY. May I make one more remark for the record here?

I have some figures that have been presented to me about the reductions in acreage. In 1940, the first time that we had a control program after the collapse of the whole program in 1939, we had a total

acreage in round figures of 758,000 acres. After 23 long years that

acreage has only been reduced 6.6 percent, and I would like to put

these figures in the record.

Mr. ABBITT. Without objection, that may be done.

(The document referred to follows:)
14 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Flue-cured tobacco program

National allotment in 1940, first year of acreage allotments (acres) 758,210

National allotment in 1963 (acres) 708,489

Overall acreage cut in 23 years (percent) 6. 6

Number of farm allotments in 1940 196,014

Number of farm allotments in 1963 201, 198

Due primarily to the increase in the number of allotments, the average reduction

for the producer who has had no adjustments for underplanting or overplanting

his allotments has amounted to approximately 21 percent over the 23-year period.

The year-to-year changes in the national acreage allotments for Flue-cured

tobacco follows:

1941:

1942:

1943:

1944:

1945:

1946:

1947:

1948:

1949:

1950:

1951:

1952:

No change.

10-percent increase.

5-percent increase.

20-percent increase.

No change.

10-percent increase.

2%-pereent decrease.

27 -percent decrease.

5-percent increase.

No change.

15-percent increase.

No change.

1953: 8-percent decrease.

1954: No change.

1955: 5-percent decrease.

1956: 12-percent decrease.

1957: 20-percent decrease.

1958: No change.

1959: No change.

1960: No change.

1961: No change.

1962: 434. percent inerease.

1963: 5-percent decrease.

1964: (?).

In 1940, the first year the acreage allotment program was in effect, the average

yield was 1,025 pounds to the acre, and total Flue-cured production amounted to

668,600,000 pounds; this year-23 years later—the yield per acre is estimated at

1,916 pounds and the total production at 1,329 million pounds'.

On 10 acres in 1940, the average production was 10,250 pounds which, at 16.4

cents a pound prevailing that year, returned the farmer $1,681; in 1963, assuming

this original 10-acre producer has had no adjustments for underplanting or overplanting, his allotment is 7.9 acres, which produced on the average an estimated

15,136 pounds and, at the 58.3 cents a pound estimated 1963 price, is returning the

farmer around $8,824.

Thus, under the tobacco production and price stabilization program, the

farmer who had 10 acres in 1940 received on the average $1,681 for his crop, while

this year, with his allotment at 7.9 acres, the return on his crop is approximately

$8,824.

Through November 8, 1963, gross sales of Flue-cured tobacco in all belts have

totaled 1,336,500,000 pounds farm weight, at an average price of 58.31 cents a

pound. Of the gross sales, Stabilization has taken 206,257,000 pounds, or 15.4

percent. For the comparable period in 1962, gross sales of Flue-cured tobacco in

all belts had totaled 1,445 million pounds, at an average price of 59.84 cents a

pound. Of the gross sales, Stabilization had taken 214,790,000 pounds, or 14.9

'percent. The Stabilization takeover in the old belt this year as of November 8,

amounted to 33.9 percent, compared to a 28.1-percent takeover in the comparable

period last year.

(Information supplied by the Tobacco Division—ASCS (USDA), Nov. 13,

1963.)

Mr. COOLEY. This table shows the increases and the decreases

through the years. In 1948, we took a 27.5 percent decrease in acreage.

To go back to 1944, we had an increase of 20 percent, and in 1946 we

had another 10-percent increase.

The following 2 years we had a decrease.

The net result is that in the 23-year period we only reduced our

acreage 6.6 percent. But where we got into trouble is that we had

some gimmicks in the law which permitted a grower to buy a farm that

had no acreage and to build up a history and then get a base. He

could also plant over his allotment and increase the base.

Five thousand new farmers came into this program. And with all

of the acreage that they got, they took it away from the old farmers.

That was in 1955.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 15

So the program is better now than it was then. And I think that

when we look at the program for the past 23 years, we ought to be

proud of the record. The 27.5-percent reduction in 1948 was devastating. It was a change in the pattern of tobacco farming, but we took

it. I do not believe you will have to take anything like that this year.

Although I have used the figure of 22.5 percent, I hope that everybody

gets it straight that I am not in favor of a 22.5-percent reduction in

acreage. I will do everything I can to keep it from being a burdensome reduction, but we must take a reduction. I do not think there

is any question about it.

The members of the Farm Bureau in my county are in favor of an

8-percent cut. I think the Department came out for a 10-percent

reduction. We cannot keep on and on growing all of the tobacco

that we want unless we can sell it. It affects other programs. All

of the rest have gone by the board. We have already lost our wheat

and corn and dairy programs.

We took a 20-percent decrease in 1957. I did not realize this until

I got the figures. I do not think we should become excited about

taking 8 or 10 or some such percent cut this year. I think my farmers

will be glad to do that.

That is all I have to say.

Mr. ABBITT. Does anybody else have any statements?

Mr. TERRY. If you will indulge me for another moment.

Mr. ABBITT. Yes.

Mr. TERRY. Gentlemen, I have here figures that were given to me

by the Division of Markets, Department of Agriculture of the Commonwealth of Virginia. In 1955 the acreage was 990,700,000 and it

produced a 1,483 million. In 1963 the acreage was 693 million.

Mr. MATTHEWS. Do you not mean thousands instead of millions?

Mr. TERRY. Well 

Mr. ABBITT. That is in thousands.

Mr. MATTHEWS. That is in thousands. I think he must mean

thousands, Mr. Chairman. We do not have that many acres in total

farm production.

Mr. TERRY. Excuse me, you are right—I am sorry, it is 693,600

acres of tobacco. We produced an estimate for the 1963 crop of

1,308 million.

The acreage reduction since 1954 is 34.5. And in 1963 we are getting,

if the estimate is right, 11.9 reduction.

Mr. COOLEY. Will you let me make this one observation that I

think is appropriate? For example, a man had 10 acres of tobacco in

1940. He at that time got about 1,000 pounds per acre. And right

.at that time the price was about 16 cents a pound. He got about

$1,600 for the 10-acre crop.

Take the same 10 acres at the present time, with a similar situation,

and reduce it to 7.9 acres, instead of getting $1,600 he receives $8,852

on this year's prices.

While we were taking a reduction, we almost doubled our per-acre

yield. The per-acre yield is about 1,900 pounds instead of 1,000. So

we have improved our production per acre—there is no doubt about it.

We have taken these reductions, but when you take the reductions and

relate them to your production, you will find that we have been

doing pretty well, I think.
16 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Mr. ABBITT. You said something in your original statement that

acreage allotments, probably, would not be the answer. I wanted to

ask you about that at the time.

Mr. TERRY. It is our opinion these figures substantiate that, in

other words, the net yield from the acreage cut is not realistic in

relationship to the figure that the various crops have been cut since

1955.

Mr. ABBITT. You think that it will be bad?

Mr. TERRY. Yes.

MT. ABBITT. Thank you. Are there any other questions? If not,

we will next hear from Mr. George A. Myers, Jr., vice president of

the Danville Tobacco Association and vice president of the VirginiaCarolina Old Belt Association.

STATEMENT OF GEORGE A. MYERS, JR., VICE PRESIDENT, DANVILLE TOBACCO ASSOCIATION, AND VICE PRESIDENT, VIRGINIA-CAROLINA OLD BELT ASSOCIATION

Mr. MYERS. Mr. Chairman, in my estimation, the real trouble

with the Virginia-Carolina old belt tobacco markets this season is too

much tobacco. The Flue-cured tobacco stabilization corporation's

take this season will be around 245 million pounds. Added to the 430

million pounds of tobacco already on hand, this will give them a

stock of between 650 to 675 million pounds.

In July the U.S. Department of Agriculture, Crop Reporting Board

predicted a 1,340.8 million pound crop. August 1, a 1,345 million

pound crop. The September report, 1,305 million pound crop, and

in October a 1,308 million pound. crop. I understand the November

report to be about the same as the October report. The first 5 weeks

on the South Carolina and border belt markets, the Stabilization take

was as follows: August 3, 24.9 percent, August 9, 13 percent; August

16, 21.6 percent; August 23, 17.5 percent; and August 30, 17.2 percent.

For the 5 weeks a 17.5 percent. 'During the first 5 weeks on the South

Carolina and border belts, the market was dull and disappointing to

both the growers and the warehouses. As the drought became real

in the old belt, the Stabilization take dropped as follows: September 7,

8 percent; September 14, 8 percent; September 21, 9 percent; September 28, 9 percent; October 3, 7.5 percent. Starting about September

5, the buying companies became active in the South Carolina and

border belt and continued through the east and middle and old belts

until the second week of sales in the old belt. The crop in the old

belt was marked as a dry-weather, sun-baked crop in spite of irrigation

and approved practices that was followed by most growers. After

our second week of sales the Stabilization take increased weekly as

follows: September 30, 11.86 percent; October 7, 11.18 percent; October 14, 21.64 percent; October 21, 27.48 percent; October 28, 34.40

percent; and November 4, 50.99 percent. Some of this is understandable, as part of the crop is dry weather. However, a great deal of

tobacco is going into the Stabilization which is tobacco of good quality, ripe, open grain, and of standard varieties, as good, if not better,

than tobaccos that have been moved into the channels of trade in the

past years.

Volume of producers sales for 1962 was 1,400.3 million. Deliveries

to the Stabilization Corporation in 1962 was 237.2 million, letting
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 17

1,203.1 million produced, an estimate of 245 million delivered to the

Stabilization Corporation, leaving only 1,058 million pounds going

into the channel of trade. In view of the above-mentioned observations, first, there is apparently too much tobacco; second, as the

drought continued, tobacco on the southern markets looked better

each day to the buying companies; third, the channel of trade is not

purchasing as much this year as they have in the past.

Mr. ABBITT. Thank you.

Mr. MCMILLAN. You do not want to leave the impression that we

grew more tobacco this year than the previous year, when in fact, we

suffered almost a 20-percent loss in poundage this year.

Mr. MYERS. No, sir. I was just comparing the trends of the

markets. I just used South Carolina and the border as an example.

Mr. MCMILLAN. You mentioned the South Carolina market.

Mr. MYERS. I just picked that out because that is the way the

figures justified it that way.

Mr. ABBITT. You show a summary between last year and this year

of the purchases and percentages of the various companies and the

Stabilization. How do you account for that?

Mr. MYERS. The only way that I can figure that is that there is

too much tobacco. I gave each of you a copy of the summary of the

Danville warehouse for the first 33 days of 1962 and 1963, showing the

purchases and percentages of the various companies and the Stabilization. If you will notice, I do not like to call names, but these are

public records, in fact, American, in the first 33 days purchased

8.10 percent in 1962, and this year they purchased 4.59 percent.

Mr. Dibrell, an independent exporter, purchased 6.55 percent last

year, and they increased to 7.20 percent this year. Export, 19.61 in

1962 and 14.7 percent in 1963; Imperial, 10.17 percent in 1962 and

8.9 percent in 1963; Liggett, 2.43 percent in 1962 and 1.12 percent

in 1963; P. Lorillard, 2.15 percent in 1962 and 2.79 percent in 1963;

R. J. Reynolds, 7.87 percent in 1962 and 9.65 percent in 1963; Virginia

Tobacco Co., a branch of Universal Leaf, 18.70 percent in 1962 and

20.93 percent in 1963; and F.C. B, 19.63 in 1962 and 24 percent in

1963; the other grades, 4.80 percent in 1962, and 6.29 percent in 1963.

To show you a comparison, I will use Stabilization on this, just to

show their take throughout the season in the same warehouse. On

September 24, Stabilization's take on B tobacco was 7.96; it increased

to 15.81 percent on October 15, and on November 5 to 45.39 percent.

Just after the first 2 weeks their take started to increase and that

has gone on up until now, and we do not know where the stopping

point is.

Mr. ABBITT. How do you account for the decrease in the buying

by the companies?

Mr. MYERS. I do not understand it. It just looks like after about

2 weeks somebody pulled the light switch.

Mr. ABBITT. How does that compare in the way of quality?

Mr. MYERS. Some of the same tobacco that is on our floors everyday. Every—of course, usually, your first 2 weeks you sell a larger

percent of smoking tobacco. Now we are selling a larger percent of

B tobacco or leaf tobacco. However, we are still selling a small

percent of smoking tobacco and that is going into the Stabilization,

just like the B tobacco.
18 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Mr. ABBITT. On occasion, I understand, that some of the buyers

just walk down the aisles and do not buy. Have you observed that?

Mr. MYERS. I have observed some of the domestic companies,

that many times you will see them walk down 10 or 15 or 20 feet

beyond your sales, in other words, they will walk down, and if they

see a pile that they might be interested in, they will stop there and

wait for the sale to catch up with them, and then go on down, but

that is all that they do.

Mr. ABBITT. Would you advocate turning all of this Stabilization

subsidy back?

Mr. MYERS. I think that if it is sold to the foreign trade and we

can compete with Rhodesia and these other markets, I think that

would help, but I do not believe in letting our domestic companies

have it at a reduced rate.

Mr. MCMILLAN. You actually believe that method would assist

in correcting this problem.

Mr. MYERS. Yes, I do. I certainly do.

Mr. ABBITT. Are there any other questions?

Mr. TUCK. Do all of these companies appear to buy on the same

day of the week—do they start buying at the same time or do they

stop buying at the same time?

Mr. MYERS. It looked that way to me. It looked like one day

that you cut the light switch and almost all of them stopped.

Mr. TUCK. Do you have any comments as to a solution of the problem that you mentioned in your statement?

Mr. MYERS. I have my own thinking, if you will indulge me. In

my estimation the first thing that should be done is to curtail our

supplies of tobacco down to the amounts that are used each year. I

do not believe that this can be done by an acreage cut. I will try to

give you and example.

There has been talk among different organizations and in the newspapers that we will, probably, come up with a temporary—a 10 percent

in acreage. If this is true, we will raise about 686,684 acres of tobacco

in 1964. In the event that we should produce the same poundage per

acre as we did in 1962, which I consider now as a normal crop, we will

produce 1,325.3 million pounds, or 13 million pounds more than this

year. I definitely think we should cut the crop, at least, 20 to 25

percent.

In talking with hundreds of farmers throughout the old belt of

Virginia and North Carolina, we questioned the wisdom of cutting the

price of the 1962 crop held by Stabilization. Tobacco is only supported at 90 percent of parity. We believe that it should and will sell

for parity if supply is gotten down to demand. Also, I believe that

the meetings held by the Department of Agriculture last season did a

wonderful job to educate the producers to raise quality instead of

quantity.

I think that the old belt, especially, needs quality to compete with

the markets. I think that the exporters of U.S. tobacco should inform the producers of their needs—of the needs of their customers—

the type and kind of tobacco suitable to their customers. I think

that the Department of Agriculture of Virginia and North Carolina,

the county agents, the tobacco specialists and the buying company

representatives, all form organizations, the Bright Belt Warehouse

Association, the Virginia-Carolina Old Belt Association, all market
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 19

associations should work together at meetings, starting at once, to

keep the farmers informed of the latest trends and the type of tobacco

they should produce to meet the demands of the trade.

In my estimation the exporters and dealers have gone with the

trend of handling foreign tobacco, instead of selling American tobacco.

That is my feeling.

Mr. COOLEY. Do you advocate a 20- to 25-percent reduction?

Mr. MYERS. Twenty to twenty-five percent-whatever the law

will allow.

Mr. COOLEY. Do you think that we ought to take that much reduction in 1964?

Mr. MYERS. Yes, sir. I think that if we do that that the difference in the price will offset much more the difference than if we take the

10-percent cut.

Mr. COOLEY. Thank you.

(The tables referred to follow:)

Summary of a Danville warehouse for the 1st 33 days of 1962 and 1963 showing

the purchases and percentages of the various companies and the Stabilization

1962 1963

Pounds Percent Pounds Percent

American Dibrell.. Export Imperial Liggett P. LOrillard, R. J. Reynolds Virginia F.C. B F.0 

Total 

590,216 477,238 1, 428, 800 740,822 177,070 156,922 573,200 1, 362, 504 1, 430, 468 349, 916

8.10 6.55 19. 61 10. 17 2.43 2:15 7.87 18.70 19.63. 4.80

7, 287, 156

269,778 422,662 849,474 527,310 65,042 163,702 566,434 229,920 1,409,336 369,496

4.59 7.20 14.47 8.98 1.12 2.79 9.65 20. 93 24. 00 629

5, 872, 164

Copy of a summary, sheet of a Danville warehouse Sept. 24, Oct. 15, and Nov. 5'

giving pounds and percentage of buying companies and Stabilization Corporation

Purchaser Sept. 24 Oct. 15 Nov. 5

Pounds Percent Pounds Percent Pounds Percent

American Dibrell Export Imperial Liggett Lorillard Reynolds Virginia F.0 • F.C. B 

Total 

2,698 1,064 2,960 744 1,436 832 9,762 9,912 1,934 2,7147.92

, 3, 12 8.68 2. 27 4.21 2. 44 28. 64 29.08 5.67 7.96

6,650 15, 612 27,366 16,932 92 6, 516 14,500 59,926 10,172 29,636

3. 55 8.33 14.60 9.04 .49 3. 48 7. 73 31.98 5.43 15.817,048 19, 146 28,108 20,162 2, 122 2,670 4,978 18,932 21,434 103,546' 3.09 8.39 12.32 8.84

. 93 1. 17 2. 18 8.30 9.39 45.3

34,086 187,402 228,146 

Mr. LENNON. You mentioned sales in the old belt with respect

to the percentage that went into Stabilization in the first 5 weeks. I

should take issue with you in that respect, because I am familiar with

some of these markets. We had a new type of grading this year, particularly, the so-called slick variety designation. Let me say this to

you, because I think it poses a problem. I was swamped, deluged
20 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

with telegrams in the first 2 weeks from my people saying they were

dissatisfied with the slick designation variety. Immediately thereupon I asked those in Washington in the Tobacco Division to send

into the market their top grading officials to confer with the graders

on the local markets in an attempt to encourage them to resolve the

doubts in favor of the growers. That was done.

I spent a week in my eight markets, beginning on September 3.

I talked to every grader in every one of my markets.

We were faced with the situation of the agonizing experience of

this new type of grading service. Do you know what the 20 percent is?

Mr. MYERS. Yes.

Mr. LENNON. Since this was a new designation, I found that every

grader felt that we ought to start, at least, with 40 percent and then

reduce it as we educated our growers how to grade. Unfortunately,

that was not done, but the day after the officials from the grading

service went on the markets, I talked with the supervisors of every

one of my eight markets by long distance and the situation began to

improve.

Then when I was on the market on Tuesday through Friday, I

talked with every grader in those markets, and encouraged them to

see that it was absolutely necessary that they resolve this problem.

You folks did not have that experience to the extent that we did.

You did not have it in the eastern belt. They did not have it in the

middle belt.

Mr. MYERS. That is true.

Mr. LENNON. Our belt took the brunt of that. I talked to a number

of the supervisors of the buying service in my markets. They were

not buying any tobacco that had this designation. And it was only

after the grading services had been talked to, that they began to buy,

Reynolds, Liggett & Myers, and some of the others. I do not believe

that you can say that it is totally accurate that it was due to the

drought situation in the old belt. You must keep in mind that our

total take in all of our markets left only 12 percent to the Stabilization.

Apparently, the old belt has had a considerably higher percentage

going to Stabilization. Last year you had 28.4 percent that went to

Stabilization from the old belt, and this year you already have 33.9

percent through last Friday, November 8.

Mr. MYERS. That is correct.

Mr. LENNON. It is the old belt and the middle belt that historically

has had more going to Stabilization. Of course, the eastern belt this

year, so far through November 8, last Friday, only had 15.5 percent,

as compared to 14.1 percent for this year going to Stabilization from

the eastern belt, which is a big belt.

That is not true and never has been true of the middle belt and the

old belt.

These figures that I have do not show that.

Mr. MYERS. If you look at the figures of the tobacco that Stabilization has held from the old belt, it has always done pretty well for

Stabilization.

Mr. LENNON. Yes, sir. The middle belt and the old belt have been

right heavy contributors to Stabilization.

Mr. MYERS. And also to the profit.

Mr. LENNON. TO the what?

Mr. MYERS. To the profits of Stabilization.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 21

Mr. LENNON. Yes, I agree with you. My recollection of the 1955

and 1956 costs was that about 600 million pounds in round numbers,

and much to my surprise at the last hearing in this room, the gentlemen

from Stabilization indicated that they had disposed of almost 462

million pounds of the 1955-56 crop through the regular procedures at

the regularly established prices, 105 percent of parity, plus 5 percent

for costs. And they only sold, as I recall, 78 million pounds at other

prices, and the thing that I bitterly resented was that they did no

put a floor under that price. They sold it at what anybody would

want to pay for it. And there were buyers who would have been

glad to pay more for it. I think that Lorillard took 22.6 million of

that. That was the largest single domestic company purchase. That

was a mistake. If we had sold the 76 million pounds at a price

where there was a floor, we would have done better. They just came

in and gave what they wanted for it, however. I knew of several

companies that wanted to buy tobacco that could not get it at that

price. I think that there is about 26 million pounds of it left today,

as I recall.

Mr. MYERS. I still think this is having some effect on the market.

Mr. LENNON. I think it has an effect, too. You will recall the

rumors that got out here early this spring before any of the markets

opened that it was not because of the 1955-56 crop, but because of

the 1962 crop.

Mr. MYERS. I mentioned that here. I think that has actually

done more harm.

Mr. LENNON. You say that you are advocating a 20- to 25-percent

decrease. What is the average acreage allotment of the growers in

the old belt?

Mr. MYERS. I could not tell you offhand.

Mr. LENNON. Does it run 2.7 or 2.9 or 4.2 or what?

Mr. MYERS. I would say that it is something like 3.7. That would

be just guessing.

Mr. LENNON. In my judgment it is not that much. I have 1

county where there are 1,172 growers who have less than an acre

each.

Mr. MYERS. I think that they run about the same in South

Carolina and other places.

Mr. LENNON. What would happen if you had a serious flooding

or drought condition to the people with a 20-percent acreage cut?

Mr. MYERS. Then we would really be in shape next year to raise

a fine high-grade crop of tobacco.

Mr. LENNON. But you know that we live from year to year—our

financinc,is from year to year of the crop.

Mr. MYERS. That is true.

Mr. LENNON. And other than the big growers—they are the only

ones that have the capital resources to stand a flooding or a drought

season. The others would be out of luck.

Mr. MYERS. That is true.

Mr. LENNON. I think that it would be a terrible mistake to advocate

as much as 20-percent cut.

,Mr. MYERS. I think that if we do not 

-Mr. LENNON. In my belt it is 10 percent.

Mr. MYERS. I think that if you do not do it 

26-833-64-4
22 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Mr. LE N NON. That is the sentiment in my district.

Mr. MYERS. You will have some of the same thing we have had.

Mr. LENNON. The growers in your belt recognize that you can

no longer control it with acreage and marketing quotas. What was

the average yield in North Carolina last year?

Mr. MYERS. It was about 2,000 pounds in your belt. Your belt

was the highest.

Mr. LENNON. Yes, sir. We were the high yielders, because it has

the best climate and the best plants. [Laughter.]

Mr. MYERS. And using more fertilizer.

Mr. LENNON. I agree with you, that you can no longer control it

by acreage quotas and acreage allotments and the like. That is

not realistic. It was mentioned earlier I can remember when the

yield in North Carolina was 762 pounds an acre and now, as was

indicated, it is 1,856 pounds, as it was in 1962.

Mr. MYERS. That was in 1903 as compared to 1962, I believe,

that you are giving.

Mr. LENNON. I have advocated for a long time, and went to the

Secretary last year and asked him to assign me most knowledgeable

men in his Department as a group to study the possibilities of X number of plants per acre, but I have not heard anything from him.

Mr. MYERS. I think that you have done a fine job. I have followed

you on that.

Mr. LENNON. It is human nature to get as much as man can out of

his line. Why should not a grower get as much as he can out of the

land? Every businessman wants to get all that he can out of his

business. But we will have to come to this. I am concerned about

it, as is the distinguished chairman of this committee. We will have

to head in..another direction. I agree with Mr. Cooley, we cannot

bring it on the floor now. We should get by with as little decrease in

acreage as possible in the hope that our farm organizations will reach

some degree of unity with respect to a realistic approach to controls.

Thank you.

Mr. MCMILLAN. I certainly want to associate myself with the

remarks you have made concerning the grading methods and service.

It seems as though no one knows how to handle this new grading

system. The farmers in my district could have suffered a loss of $2

million on account of this new system of grading. They lost at least

one-half of their buying power. They would not make a bid on the

new grade S.

Mr. ABBITT. Are there any further questions? Mr. Kornegay?

Mr. KORNEGAY. Thank you, Mr. Chairman. The figures you

presented to the subcommittee on the amount of purchases by the

various companies are very interesting. I observed that several of

the companies listed there bought less tobacco in 1963 than in 1962,

is that correct?

Mr. MYERS. Yes. This is just particularly in one warehouse.

MT. KORNEGAY. Just in one warehouse?

Mr. MYERS. Yes.

Mr. KORNEGAY. Do you have any information with respect to the

others?

Mr. MYERS. Not definitely, but that seems to be the trend in the

old belt.

Mr. KORNEGAY. Have these buyers given you any reason for buying

less tobacco this year than they did last year?
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 23

Mr. MYERS. You will hear that there is too much nicotine in the

tobacco and that it is sun baked, it' is slick, or it is this or it is that.

As we have discussed before, it is a too crop.

Mr. KORNEGAY. As MT. Cooley said?

Mr. MYERS. That is correct.

Mr. KORNEGAY. Mr. Chairman, let me interject this: There is not

much disagreement here on what happened. The companies did not

buy the tobacco. I was wondering if any of the company or buyer

representatives are here today so that we can hear any explanation

they may have for buying less tobacco this year than last year.

Mr. ABBITT. So far as I know none of the companies are represented

here today. They were asked to attend and to participate in the

hearing, because I know that there are some here who might want to

ask them questions. Is there any representative of the buying companies here?

(No response.)

Mr. ABBITT. I did not think that there were.

Mr. KORNEGAY. It appears to me, in order to get the full picture

of this situation we should have testimony from the buyers which

would, certainly, by interesting and would enhance the value of the

record.

Mr. ABBITT. Are there any other questions? If not, we have two

more witnesses that were introduced by Congressman Tuck. Will

you please come around?

STATEMENT OF MAJ. PAUL C. EDMUNDS III, HALIFAX, VA.,

PAST PRESIDENT, BRIGHT BELT WAREHOUSE ASSOCIATION,

PRESIDENT, SOUTH BOSTON WAREHOUSE ASSOCIATION

Major EDMUNDS. Mr. Chairman and members

'

I have some figures

which will only substantiate Mr. Terry's and Mr. Myer's figures.

Some were taken from sales in my warehouse in South Boston, Va., on

September 30, October 14, and November 11. And I can go to any

individual grade and compare them and the take of Stabilization

goes way up. On those particular dates, the whole of the Stabilization's take on September 30 was 10 percent, on October 14 it was 25.16

percent, and on November 11, it was 61 percent.

Now my only idea in being here today is to see that the old belt

gets a fair shake with the other belts.

I operate warehouses in the Georgia belt—and have been down there

16 years. I have operated them in South Carolina and have dealt

with Conway. I know about these other belts.

Maybe our only cure is to go to Georgia, Florida, and South Carolina

which open up November 25 and let the old belt open up first, then I

think that we would, certainly, get a fair shake. Of course, that is

impossible.

Mr. MATTHEWS. I am glad for that information so that I can take

it back to my growers. [Laughter.]

Major EDMUNDS. If we open—if we did open early it might help

Mr. MCMILLAN. You say that you operated a warehouse in Conway,

S.C.

Major EDMUNDS. In Conway through 1962.
24 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

• It was .not in 1963. Before World War II I was in Timmonsville,

S.C. for 5 years. But since World War II I have been down in

Blackshear, Ga.

The one reason the old belt take goes up so high is because they do

fulfill their orders down there.

In 1962 we had a fine crop of tobacco in the old belt, yet 32 percent

went into Stabilization.

Mr. ABI3ITT. In what year was that?

Major EDMUNDS. In 1962.

Mr.. ABBITT. What was the percentage?

Major EDMUNDS. 32 percent. We had a real good crop of tobacco.

The idea is that I want to see the old belt get a good fair shake with

the rest of the belts and some pressure put on the companies, for them

to anticipate their needs and to give us an even treatment with the

rest of them.

Mr. ABBITT. That is what you advocate be done?

Major EDMUNDS. Yes.

ABBITT. What else do you advocate?

Major EDMUNDS. I do not, except, certainly, the crop is like Mr.

Myers and Mr. Terry said that crop control of it is not all of the

answer. Someone advocated control of poundage and to grow that

which we need, plus the surplus which we need. We would have to

get new legislation for this. You said it was impossible. So I

think, probably, the only answer now is a cut. I think that 20 percent is too drastic.

Mr. ABBITT. Then you do feel and advocate that?

Major EDMUNDS. Yes.

Mr. ABBITT. We will hear from you now.

STATEMENT OF PAGE LOFTIS, SECRETARY, SOUTH BOSTON

TOBACCO BOARD OF TRADE, FORMER MEMBER, HALIFAX

COUNTY BOARD OF SUPERVISORS

Mr. LOFTIS. Mr. Chairman and members, my job is that of secretary in charge of the South Boston Board of Trade which means that

I ,c o to all sales, and I talk to the different growers on those different

sales. They are very much confused in the old belt, and bewildered

and also apprehensive about what is going to happen, and they want

to know what is the matter, what can they do. The farmers are

all willing to do anything that they can to alleviate the situation.

I am sure that they have voted for controls throughout the years.

We hope that through the wisdom of this committee you can come up

with something that will mean that the old belt will have a fair chance

in the future.

Thank you.

Mr. ABBITT. Thank you so much. Now, Mr. Goode, we will

hear from you.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 25

STATEMENT OF M. A. GOODE, TOBACCO WAREHOUSEMAN AND

TOBACCO GROWER, MAYOR, TOWN OF VIRGILINA, VA.

Mr. GOODE. Thank you, Mr. Chairman, I would like to go you one

better, Paul, instead of the old belt, let us protect all of the belts.

I was in one in South Carolina, approximately, 20 years ago. And

my friend, Dr. Ballou, who was the head of Imperial Tobacco Co.,

said that he had never seen a finer grade of tobacco than was in this

warehouse. I think you know both of them. They were just walking

down the aisles and passing by the most beautiful tobacco I have ever

seen. I knew the colonel very well. He was a very fine friend of

mine, a personal friend.

I said, "Colonel, why in the heck are you not buying this tobacco?"

He had a cigar in his mouth, "That is a good question," he said.

"But" he said, 'if I buy" he said, "we can get all of our needs here on

this border belt and the eastern belt. What will we do when we get

up in the middle and the old belt?" He said, "We are trying to distribute this tobacco for each section, that is, each belt, so that we can

give them all a fair shake."

Now, gentlemen, I think there is your answer, that these several

companies know what their needs will be, what your percentage of the

production is averaging in certain belts, and that they go back there

and buy your percentage of the total there and come back here, Paul,

and give it to us here. That may be humanly impossible, but it

would be one answer.

There is another thing, gentlemen, this may be a bombshell, but we

are using too much chemical. We have got to maintain quality.

And the minute that you get into foreign trade you are gone. The

tobacco companies do not want it.

I would like to see the Department of Agriculture outlaw it. I

think that is the only thing to do. I do not use it.

I have just jotted down some figures here. Your cigarette consumption, Mr. Chairman, has increased by leaps and bounds. Now

at this time there is the cancer scare, but your consumption goes up and

your disappearance is going down. There is a reason.

Let us save this program.

Mr. MCMILLAN. Do you not think that with the use of the filters

that tobacco companies are using a lot more burley tobacco than they

didpreviously?

Mr. GOODE. I think that that has had an effect, but if I may inject

right here this, gentlemen, there is a reason for all this. None of the

companies are represented here today, although I wish they were.

But 15 or 20 years ago in South Boston, Danville, Durham, WinstonSalem, Greenville, you could get all of the tobacco stems you wanted.

They would give them to you. You cannot find any there today. We

are smoking them.

I will say, Mr. Chairman, if you will take three leaves that are your

top leaves—that will give you an average, and just use those, and the

three leaves that are next, and the three leaves of your "B" that are

next on the other side, and take those respective types of tobacco to

some drugstore, where he can give you a fine grain measurement and

weigh the gross, and remove the stems, and then reweigh the stems,

and get the percentage of that gross weight, it will leave you the net
26 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

tobacco weight for use, and you will find, gentlemen, that your stems

will weigh, at least, 25 percent of that gross weight.

If you had that out your trouble would be over, a lot of it. It will

take legislation for it.

You take this pack of cigarettes right here [indicating]—let them

label that by law like you have to label other goods, that this contains

reconstituted tobacco consisting of stems and so forth and so on—put

that in big letters on the pack and follow that up with penalizing

them with a 2-cent-a-pack tax extra for that reconstituted tobacco,

that would help. Your cigarette sales are at an alltime high and they

are smoking stems. I think there is one of your greatest answers.

So far as cutting your crop is concerned, I am thinking of the

little farmer who has an acre or 2 acres of tobacco, Mr. Chairman,

and if you cut him very much, he is going to have to go to the factory

to get a job.

Mr. MCMILLAN. And if you did not use those stems, they would

be using more leaf tobacco.

Mr. GOODE. They are using less tobacco now. The king size and

filters have revolutionized the use of tobacco. They use a much

stronger tobacco than if it were not filtered, so I am told. •

And they tell you that they have got nicotine in the tobacco, that.

is, too much in the crop. Well, they have got a heck of a lot of it.

And they say that they have not got enough nicotine some of the

time. Do you not think those tobacco boys can mix it? They can

mix some of that which is too strong with that which is too little and

you have got just what you wanted.

Take the ordinary cigar, it used to have a long filler. Today it is

granulated, all mixed up—it is reconstituted tobacco. If you will

take this ashtray right here, and put in some water and then cut a

cigar in half, and come back 2 hours later, you will find that you have

no tobacco.

And then you have foreign competition. I do not know what to do

about it. We are priced out of several of :the markets.

I grow tobacco. It is my living. I do not know what the import

duties are into this country, how they import the tobacco, but I would

restrict the quotas on importing tobacco that is competing with our

tobacco. I do not mean Turkish tobacco—we have to have that—

but I would suggest that we watch that.

We had an acreage this year of 9 percent. You fellows have down

South. I have talked to some people there. I did not go into

Georgia. I did not get the news from there, but in Fairmont, the

whole market there is only selling about 10 percent less tobacco than

last year.

Mr. MCMILLAN. We sold 19 million pounds less in South Carolina

this year than last year.

Mr. GOODE. My warehousemen in Oxford said that they would run

about 10 percent less at Fairmont.

Major EDMUNDS. In 1962 in one county you had an average of

2,750 pounds per acre, did you not?

Mr. MCMILLAN. That is the finest tobacco county in the United

States.

Major EDMUNDS. And raised over 50 million pounds—and 2,750

pounds per acre which is phenomenal. I do not think you have any

such this year.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 27

Mr. ABBITT. We certainly appreciate your coming here and giving

us the benefit of your views.

Is there anybody else here who cannot come back this afternoon?

Mr. BRANDON. I am S. J. Brandon and I am a tobacco grower from

Brunswick County, Va.

Mr. ABBITT. We appreciate having you come here. We will be

glad to hear from you now.

STATEMENT OF S. J. BRANDON, BRUNSWICK COUNTY, VA., A

TOBACCO GROWER

Mr. BRANDON. Gentlemen, I will try to be brief. I do not think

that anyone can appreciate the tobacco program any more than I

can, being a tobacco farmer. And before we become hysterical and

say, "Let it be beat to death by Mr. Roosevelt," or some of those

gentlemen, I think that we could do well to do some house cleaning

and do a little tidying up on our own.

If my memory serves me correctly,. the tobacco companies were

investigated in the 1.94'0's if there were any practices that would lead

to restraint in trade. And so far as F know now, that investigation

is still open. I would like to know why it has not been closed or why

it has not been pursued further.

I think the grading service has done a good job. However, I would

like to wonder why it has to be public notice whatever grade is put

on the pile of tobacco. Why must the grading service be a bird dog

for the tobacco companies? ,

I asked a tobacco buyer to tell me. He said, "I cannot buy this

because it had something in it." It was a match to another pile.

He said if you get the tag off of it I can buy it.

Who is the grading service—what is it for? Is it for the tobacco

companies? I do not know.

I think we can go a long ways toward improving our program if we

would be realistic enough to say that when we have too much we have

got to have a cut. The old saying is that, you know, if you cut a

dog's tail a little bit at a time it will not hurt. It will be like a.small

cut, a little bit at a time, which will never be. effective.

I can appreciate some of the feelings of the gentlemen from North

Carolina who have wonderful yields and who make the type of tobacco, apparently, that the trade wants, but since we all sell our

crop after the other belts are just about through, we have always got

a shortage, but when there is a shortage of tobacco, our crops will sell.

If there is a surplus, then we have a too crop. So I would like to see

some improvements made within the program we already have, and -

let us face up to our responsibilities, so that we can cut it as much as

20 percent. What is wrong with having a little surgery, and some

cutting, instead of having a whole lot of worries and have it become

very ineffective?

We had an increase for a year or two. I do not know that any farm

group asked for it. It increased our burdensome supplies. It did

not help anybody but the company.

.Mr. MCMILLAN. Don't you think that the farmers ,lta% te

would vote out a program that would reduce their ac, 

t

22 percent?

Mr. BRANDON. I do not think it would be vot • iut. They w4

do a lot of grumbling, but they are realistic. I not kpow% of a'

19'0'

4/

HAriNtt.
28 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

group that is more realistic than a farmer who has to fight the elements,

disease and pests and everything else, and still has enough faith to

get up a plant bed and to plant tobacco. He is used to hard knocks.

I know you gentlemen are politicians and are certainly representing

your people from back home. If you did not, you would not be here,

but we ought to be realistic, too. If there are no more questions,

that is all.

Mr. ABBITT. Thank you.

Mr. LENNON. How many acres do you have?

Mr. BRANDON. In excess of 60.

Mr. LENNON. In excess of 60?

Mr. BRANDON. Yes.

Mr. LENNON. We do not have more than a half dozen in my

district that has that much. Thank you.

Mr. ABBITT. We certainly appreciate your coming up here.

Mr. BRANDON. Thank you very much.

Mr. ABBITT. Our next witness is Mr. A. J. Hall, president of the

Virginia Farmers Union and, also, representing the National Farmers

Union. We appreciate your being here.

We will first have a statement from our colleague, Mr. Fountain.

Mr. FOUNTAIN. I desire to express my appreciation for the invitation to appear at this hearing. I come from an area which I expect

is one of the largest flue-cured tobacco growing areas in the world.

I think that we all have some of the same problems from what has

been said. I certainly agree that we should do everything that we

can to try to meet these problems. I will not be able to come back

this afternoon.

Mr. ABBITT. It is always helpful to have you here on any problem

that we have before us. Thank you very much.

We will now hear from Mr. Hall.

STATEMENT OF A. JACK HALL, PRESIDENT, VIRGINIA FARMERS

UNION, AND REPRESENTING NATIONAL FARMERS 'UNION

Mr. HALL. Mr. Chairman and members, my statement will be brief.

My name is A. Jack Hall and I live in Windsor, Va. I am presklent

of Virginia Farmers Union and I am a farmer, as all voting members

of Farmers Union must be.

I wish to compliment the honorable chairman of this committee,

Mr. Abbitt, who ably represents the Fourth Congressional District in

Virginia, for calling this meeting of your committee, to explore the

marketing conditions facing our tobacco growers in Virginia and North

Carolina.

Mr. Patton, president of National Farmers Union, requested that I

also represent National Farmers Union here today. I take great

pleasure in appearing before you to express our views and opinions.

It is time for the tobacco farmer and his elected leaders to sit down

and take the toughest, most hard-boiled look at their situation.

Remembering that political administrations come and political administrations go; that farm organizations come and farm organizations

go, we must put aside sentiment and emotion and get down to some

hard considerations for the future.

The price support program was established to improve farm producers' income; to stabilize markets and to provide an adequate supply

at a reasonable price to consumers.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 29

The farmers agreed to reduce the acreage of the supported crop

by their proportionate share of whatever national cut was indicated

by applicable Federal law. In other words, they give up the chance

to produce every possible bushel or pound in return for a supposedly

fair price on a reasonable amount of production.

If the delicate balance of needs and supply are properly managed,

stocks will not accumulate, to be purchased under ban by Commodity Credit Corporation and other agencies of Government.

Large accumulations of farm commodities by CCC and other agencies

have the effect of depressing prices and create a damaging image of

the farm program to the taxpaying public.

The raw truth is that American farmers must turn some fire back

against the fire which has been scorching us. We must get our

hands on the tough kind of bargaining power we meet coming the

other way every time we go to the market. We must increase our

take-home pay just as others have increased theirs, including the

corporate officers who get it in the form of salaries and the corporate

investors who get it in dividends.

American farmers must take over the management of their abundance, must take more control of their product. This may mean

taking a page out of the book of the auto industry, the steel industry,

and the big food processors where the rule of economics is to restrict

production and administer prices.

I am sorry to say that it is our belief that our difficulty in selling

Flue-cured tobacco to the trade in the old belt can be traced to either

a deliberate overestimate of the quantity of tobacco needed, or a lack

of knowledge of the amount we need to grow. The consequence of

this overestimate is that those who profit from processing, manufacturing, and distributing our raw materials have an economic advantage

at the expense of the producers.

It is with great reluctance and trepidation that I launch into a

tirade on conditions as I see them. I don't intend to accuse or blame

anyone, but even I can see a few things and try and place a value and

meaning in them.

The delicate balance achieved by adjusting supply to what can be

used, can easily be disturbed, creating either a shortage in the marketplace which will result in scarcity and high consumer prices, or if

stocks accumulate in the hands of CCC or other agencies, the results

would be an economic disadvantage to growers.

Our present difficulty in the marketing of Flue-cured tobacco and

some other commodities, in my opinion, can be traced to oversupply,

enabling the end users of tobacco to obtain a constant and abundant

supply of raw materials produced on our farms.

I hope that you, the members of this committee, will investigate

the practices of our governmental agencies who store and sell our

stocks of farm raw materials. Can it be possible that a program

designed to protect and improve farm income has become, instead, a

means whereby the processors, manufacturers, and distributors do

not need to carry, finance, and store inventories? That the cost of

buying, storage, and handling of our so-called surplus is being absorbed

by the taxpayers, instead of a legitimate charge being made to the

industry? Can not a profit be made, if you please, for these services?

I see nothing wrong with being businesslike in the handling of this

program.
30 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

I conclude, stating that in our opinion, the adverse effect of allowing

the law of supply and demand to be used against the farmer is a

national tragedy.

It has been permitted to operate more adversely than it need be

by mismanagement of the Government's inventory. That is, the

inventory has not been truly locked up, but has been allowed to hang

over the market on a rubberband.

Let us use the tools we have, or tools we know about. Our farm

policies have actually subsidized the food and fiber bills of the

American public and the mounting profits of processors, manufacturers, and other middlemen, while farmers' income has been declining

year after year.

• The subsidy should go where it belongs, and I might add, appreciated.

I thank the committee for its attention.

Mr. ABBITT. Thank you very much for that statement. I share

your view in much of what you have said. It is difficult for me

to understand why all of the companies would not buy the tobacco.

They come in one day and maybe buy this grade of tobacco, and

maybe the next day they will not buy it. They may buy it a few

days later. So it is difficult for me to understand just what is going on.

I realize that something will have to be done. Of course, the buyers

do not have to buy it, if they do not want it. On the other hand, they

may be getting together. That should be gone into very carefully.

Do you gentlemen have any questions?

Mr. MATTHEWS. Thank you, Mr. Chairman. I am glad to have

you gentlemen here before us. It is a pleasure.

Mr. HALL. Thank you.

Mr. ABBITT. We will next hear from Mr. Moore, chairman of the

Virginia Farm Bureau Federation Flue-Cured Tobacco Committee,

who is accompanied by Mr. Love and Mr. Dunn.

STATEMENT OF S. T. MOORE, CHAIRMAN, VIRGINIA FARM

BUREAU FEDERATION FLUE-CURED TOBACCO COMMITTEE

Mr. MOORE. Mr. Chairman and members, we appreciate your

thoughtfulness, and it is indeed a privilege and a pleasure to be

here today.

I am S. T. Moore, Jr., of South Hill, Va., chairman of the Fluecured tobacco committee and member of the board of directors of

the Virginia Farm Bureau Federation.

At the public hearing held by the U.S. Department of Agriculture

last December tobacco companies, both domestic and export, stated

they were disturbed about the declining quality of Flue-cured tobacco

being offered by sale by the U.S. Flue-cured tobacco producers.

Following are some of the suggestions that were offered to improve

quality:

1. Allow tobacco to become thoroughly ripe before harvesting.

2. Avoid use of maleic hydrazide.

3. Moderate use of fertilizer and adequate spacing of plants.

4. Use a variety that tends to produce a high quality tobacco.

Using the recommendations of the tobacco companies and the U.S.

Department of Agriculture Tobacco Advisory Committee, the tobaccogrowers of Virginia set out to produce the crop they felt would be
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 31

acceptable to the buying trade. Efforts made by Virginia growers

surpassed any efforts made in prior years. We feel the evidence of

these efforts is supported by two surveys made by the Virginia Department of Agriculture.

The first (see appendage No. 1) shows the varieties of tobacco

which Virginia growers indicated they intended to grow in 1963

compared to varieties planted in 1962. In 1962, 44 percent of the

crop was Hicks and White Gold, two varieties normally considered

most acceptable. In 1963, growers reported they intended to plant

57 percent of their crops in these varieties.

The second (see appendage No. 2) showed that three-fourths of the

reported acreage was being grown with fertilizer, spacing, and sucker

control practices suggested by the buying companies which are

normally expected to produce acceptable tobacco.

In addition to the general acceptance of desirable varieties and

cultural practices which these surveys indicate, the Virginia Farm

Bureau Federation, through its Approved Practices Club, provided

a means by which growers could identify their tobacco as having

been produced under recommended conditions. Before being eligible

to display his tobacco under the approved practices label, the grower

first signified his willingness to follow the practices outlined on the

attached agreement (see appendage No. 3). Each cooperator's farm

was checked by a fellow cooperator to verify compliance with the

terms of the agreement. Even though weather conditions in some

areas of Virginia were more unfavorable for the production of tobacco

than is normally expected in the old belt, we feel that many producers,

through their intensive efforts, were still able in those areas which

received near normal rainfall or could use irrigation to produce

tobacco with the higher level of desirability. It is most discouraging

to producers who have grown what is generally agreed to be a desirable

crop to have his crop apparently blackballed because some parts of

the area had unfavorable weather conditions.

An examination of the average prices received by growers on a

grade basis shows that prices dropped markedly from the second to the

seventh week of sales in the old belt. For example: The generally

accepted grades of standard tobacco B-4F, B-5F, B-4FR, H-4F,

H-5F, C-5F, X-4L, X-4F, P-4F, and P-5F dropped from $2 to

$6 per hundred pounds in this period. It is difficult to understand

why the demand would fall so drastically on these grades when,

because of the drought, the production of these tobaccos has been

materially reduced. Though we do not have statistics to substantiate

our observation, we feel that the percentage of these grades going under

load is significantly increased during this period. An examination of

the records of the Flue-Cured Tobacco Stabilization Corporation

would be necessary to determine if this observation is correct.

The Virginia Farm Bureau Federation has long been on record as

favoring such modifications in the tobacco program that would enable

U.S. flue-cured tobacco growers to compete effectively for the world

market. We feel that the future economic well-being of the Viriginia

flue-cured tobacco producers will depend on our ability to sell more

rather than to produce less. All in all, only by knowing what

happened in 1963 can the Virginia growers make the changes necessary

to improve the marketability of their tobacco. While the drought

may account for a part of the problem the sharp decline in demand for
32 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

an acceptance of standard tobaccos during the current marketing

year remains unexplained.

(Appendages 1, 2, and 3 follow:)

APPENDAGE 1

FLUE-CURED TOBACCO ACREAGE BY VARIETIES, 1962 AND 1963

Hicks is the leading Flue-cured tobacco variety to be planted in Virginia this

year according to a survey made by the Virginia Crop Reporting Service in

cooperation with the Division of Markets of the Virginia Department of Agriculture. The acreage of Hicks to be planted is estimated at 24,850 acres, an increase of 22 percent over the acreage of this variety planted last year. Coker 319,

a new variety, is expected to rank second in 1963 with 21,630 acres and White

Gold third with 15,120 acres. The three leading varieties will account for 88

percent of the 1963 acreage.

In 1962 Coker 316 was the leading variety with 33,220 acres, or 45.2 percent

of the total Flue-cured acreage. Hicks ranked second with 20,290 acres and. White

Gold third with 11,980 acres. The three leading varieties comprised 89.1 percent

of Virginia's Flue-cured acreage.

Hicks and White Gold, similar varieties, will account for 57 percent of the total

Flue-cured acreage in 1963 compared with 44 percent in 1962.

Flue-cured tobacco acreage by varieties, 1962 and intended for 1963

Variety

1962 harvested 1963 intended

Acres Percent of

total

Acres Percent of

total

Coker 80-F 2, 570 3. 5 770 1. 1

Coker 316 33,220 45.2 

Coker 319 21,630 30. 9

Hicks 20,290 27.6 24,850 35. 5

Mathews 611 150 .2 1,260 1.8

McNair 12 1,320 1.8 910 1.3

McNair 20 420 .6

Reams 64 1,320 1.8 

White Gold 11,980 16.3 15,120 21.6

NOrth Carolina 95 960 1.3 1,260 1.8

Other 1,690 2.3 3,780 5.4

Total 73,500 100.0 70,000 100.0
FUNCTIONS OF THE TOBACCO AUCTION MARKETS

APPENDAGE 2

Virginia survey of Flue-cured tobacco productioa practices, June 1963

33

Percent of

Fertilizer: total acres

3-9-9 or equivalent, pounds per acre: reported

Less than 1,300 11. 6

1,300 to 1,500 37. 2

1,500 to 1,700 34. 1

1,700 to 2,000 14. 8

More than 2,000 2. 2

No report . 1

Total 100. 0

Side dressing:

8-0-24 or equivalent, nitrogen:

None 13. 2

1 to 100 39.2

101 to 199 20. 3

200 to 250 14. 7

Over 250 . 8

No report 11. 8

Total 100. 0

Plants per acre:

Less than 5,300 8. 2

5,301 to 5,600 14. 5

5,601 to 5,900 12. 0

5,901 to 6,200 27. 1

6,201 to 6,500 20. 4

6,501 to 6,800 7. 5

6,801 to 7,400 4. 7

More than 7,400 3. 2

No report 2. 4

Total 100. 0

Sucker control method planned:

Hand 18.3

Oil or oil emulsion and combination oil or oil emulsion and hand 60. 8

MH-30 and all combinations which include use of MH-30 17. 1

No report 3. 8

Total 100. 0

APPENDAGE 3

VIRGINIA FARM BUREAU FEDERATION, FLU-CURED TOBACCO APPROVED

PRACTICES CLUB

AGREEMENT

of , Virginia a producer

of Flue-cured tobacco wish to associate myself with other cooperating producers

in the Virginia Farm Bureau Approved Practices Club of Flue-cured tobacco

producers and agree to the following:

1. That all Flue-cured tobacco produced by me or under my control will be

included in this voluntary program.

2. I will limit plant population to not more than 6,500 plants per acre (20 inches

by 4 feet equals 6,534).

3. I will use, for sucker control, methods and/or materials other than maleie

hydrazide.
34 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

4. To the best of my ability I will use cultural, harvesting, curing, and marketing

practices conducive to the production of tobacco which will be accepted in normal

channels of trade as follows:

(a) Moderate fertilization based on soil test results, experiment station

data, Extension Service recommendations and my own knowledge and

experience.

(b) Irrigation, when used, will be used with moderation.

(c) Harvesting will be done when leaf is mature and ripe for pulling.

(d) Grading will be uniform and care will be taken to display a product

free from foreign matter, burnt or green leaves, and in a form generally

considered acceptable.

5. I will welcome inspection by a committee, duly appointed, of my fellow

cooperators which may report improper practices to those administering this

program.

6. Sampling of my product, by representatives of the buying companies and

others associated with the club, for laboratory analysis, will be welcome.

7. I understand that the identifying trademark, under which I may display my

approved tobacco, is registered and protected under Federal law, and that improper use and/or authorization for use would be in violation of these statutes.

8. I agree that I hereby absolve the Virginia Farm Bureau Federation and its

affiliated organizations of liability under this agreement.

9. I understand that final approval of this application for this privilege of

<certifying and displaying my tobacco under this program will be made by a committee of my fellow cooperators and will depend, in large measure, on my own

good faith in carrying out the intent of this program.

10. It is understood that, should it become necessary, I may withdraw from

this agreement without penalty.

My allotment for 1963 is acres. Farm Serial No. 

Signed Post office County 

Application approved Date ,1963

Mr. ABBITT. Thank you.

Mr. MOORE. In summary, as Farm Bureau member representing

the Virgnia tobacco growers, all of our members are concerned and

would like to have some of these answers determined, so that we can

make our plans for another year.

Mr. ABBITT. We certainly appreciate that statement. I agree with

you that those I talked to posed no objection. They were told what

was needed, and they attempted to produce that. They proceeded

in that manner. I do not understand the part of the buyers or the

companies. Once they get the producers to do this, they come up and

do not buy it. It is not understandable.

Mr. MCMILLAN. That is exactly what the farmers in South Carolina did. They reduced the use of fertilizer and MII-30 to the extent

that they made 19 million pounds less tobacco this year, and then received a lower price.

Mr. MATTHEWS. I would like to congratulate Mr. Moore and the

tobacco farmers that he represents for giving us this splendid report.

As the chairman and Mr. McMillan will recall, we all participated in

a conference months ago with the Secretary of Agriculture and as a

result of that conference it was recommended that the tobacco farmers

follow the practices then evolved. I think it is a splendid example of

farmers accepting discipline. I think that point should be emphasized.

I just want to congratulate again, you and the farmers you represent

for carrying out these splendid practices.

Mr. ABBITT. I might add that they did follow them. And they are

desiring only to make a reasonable return on their investment.

Mr. MATTHEWS. As I recall, last year one criticism was that we did

not produce tobacco that had enough nicotine, and this year we get

criticised because it has too much nicotine in it.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 35

Mr. TUCK. I share in the general comments, and the views that

have been expressed.

Mr. ABBITT. We will be glad to hear from you now, Mr. Love.

STATEMENT OF J. COBEL LOVE, REPRESENTING KENBRIDGE

WAREHOUSE ASSOCIATION

Mr. LOVE. Thank you, sir. It certainly is a pleasure to be here.

My name is J. Cobel Love, and I am a tobacco warehouseman farmer

at Kenbridge, Va.

I am here on behalf of the Kenbridge Warehouse Association.

Lunenburg County is a Flue-cured tobacco growing area, with a

population of 13,000. The major portion of this population is

dependent directly, or indirectly, on Flue-cured tobacco for a living.

We are familiar with the problem that our farmers are having with

the marketing of their crop of tobacco. We are seeking information

relative to the present situation. These observations have been

made and we respectfully hope that proper solutions will be found.

1. It was obvious that the buying companies decided to buy the

usable tobacco in the old belt, as indicated by their actions during the

first 2 or 3 weeks of the present season; even to the extent of paying

higher prices for the smoking grades of tobacco than they were paying

on the southern markets. Then something happened: Suddenly these

grades had no demand or at greatly reduced prices.

2. Farmers had been led to believe that if they produced quality

tobacco that they could expect a fair price for the product. Can we

find the answers?

What has happened?

Who is responsible?

What are the factors involved?

Can anything be done to alleviate the situation?

Are farmers responsible? If so, what can they do to alleviate the

situation?

Do the tobacco companies have any responsibility to the farmers

who are making an effort to supply them with a product that is

usable?

Has the Stabilization Corporation exerted its best effort?

Is there too much tobacco?

Is there too much of the wrong kinds of tobacco?

3. We believe that farmers are entitled to the answers to these

questions.

4. We know that our farmers in Lunenburg County and southside

Virginia want to maintain a good market for their product and that

if a solution can be found to the marketing problems, that our producers will fall in line and support a program that will produce quality

Flue-cured tobacco in return for a price that will mean a fair standard

of living for them.

We appreciate the opportunity of presenting our observations and

questions. Thank you.

Mr. ABBITT. I appreciate your statement very much, and, also,

saying to you that you have verified what practically all of the other

•witnesses have said, that we did have a good crop of tobacco in the

.old belt, that the growers did cooperate to the best of their ability to

produce it. I am sorry that the companies did not buy the tobacco.
36 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

You had a reasonably good crop. I feel that this committee will do

everything it can to look into the matter to see what can be done.

Mr. LOVE. May I add one other observation?

Mr. ABBITT. Certainly.

Mr. LOVE. Again, this past year, according to the survey that we

made in Lunenburg County, almost 50 percent of the tobacco in

Lunenburg County was irrigated, and we know from past experience

that these tobaccos are tobaccos that the companies have said in the

past they wanted. We asked the question, "Why do you not buy it?"

We have not gotten any orders for them.

Mr. ABBITT. That was what they desired.

Mr. LOVE. Whether they buy it other places, we do not know.

Mr. ABBITT. Now, Mr. Dunn, we will be glad to hear from you.

Mr. Dunn is a representative of the Virginia Flue-Cured Tobacco

Growers Association.

STATEMENT OF CHARLES R. DUNN, III, REPRESENTING THE

VIRGINIA FLUE-CURED TOBACCO GROWERS ASSOCIATION

Mr. DUNN. Mr. Chairman and members, I apologize for not having

a prepared statement. I represent an organization which is small and

new. It is mostly young men.

In the situation it has worried us a great deal, because there are a

very small number of young men staying on the farm today. We do

not know where our future is.

I have made a few notes. It is kind of funny. I made them on the

back of a blank note that I picked up at the bank yesterday which is

almost a month overdue.

This is why we are here, and our concern is that we are having a

hard time making a living. You know, sometimes, maybe you ought

to stop and see this first. We have a number of young men in our

organization who are not having any trouble this year. You know

what their winning combination is? It was what my grandfather

said. "Plant exactly what the tobacco companies say do not plant—

do exactly what they tell you not to do—sow your tobacco down

South before they get up—and you will, generally, come out all

right." [Laughter.]

It has worked good. I am not joking.

Mr. ABBITT. If I may interject this off the record.

(Discussion off the record.)

Mr. DUNN. Well, sir, we are very much concerned that the companies are not buying our tobaccos. I have noticed this, that the

small farmer, the man who really tends to his crop, even in Virginia,

is not having much trouble selling it this year. I am thinking of

myself, because I have tried to be a big farmer and it is as sorry as it

can be. I sell tobacco in Rocky Mount, N.C. This year I took a

big load to Conway, and I added 25 cents to the price.

I have 8 or 10 young farmers right near with small acreages who

work unusually hard. And those rascals have been getting 70 cents

right down the line from Imp(rial and export for every pound they

make. I wonder what is wror g? Is it us in Virginia?

I sympathize with the Cor gressmen from Georgia and South

Carolina. I know how I would feel if I was in their position placing

us in Virginia in our pos tion. And I worry what will happen to us

in Virginia.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 37

Of course, the system of keeping on cutting acres will not work.

We will not solve the problem in that manner. I, simply. wish that

we could hit in the right direction toward solving the prollem.

One is not to listen too much to the tobacco compani( s. I favor

stabilization. Stabilization saved us this year, but I I- ope that we

can take a lesson from it. I hope that we can improve the something

that we have done.

I just wish that I were capable to solve the problem. I know I

am not.

The Farm Bureau people came up with a wonderful club this year.

I fought it hard. At least, I thought I knew what the tobacco companies were going to do. We saw what happened in South Carolina

last year. But the only thing that we can recommend, Mr. Abbitt,

is that you keep the tobacco companies from colluding, and even if

you cannot do it, if we can keep them from colluding against us—

against the farmers—if they will buy what they said they would buy—

I see that I am contradicting myself—it would help. The first 2

weeks this year they bought our tobacco just like hotcakes. There

was no question about it—they bought it. And all of a sudden they

stopped.

Mr. ABBITT. HOW was the tobacco?

Mr. DUNN. They were good crops.

I am a big farmer, and I raise a sorry crop, and practically everyone

around me raises a sorry crop.

The Congressman from North Carolina said that the average acre

in his county was 1.1.

Mr. DUNN. Of course, the average acreage in Virginia is very small,

too. It is not much over 2 acres.

Mr. LOVE. It is 3% acres.

Mr. DUNN. Maybe we are the ones that are doing something

wrong. If we are, we would like to know about it. Of course, we

can keep on and on raising tobacco and putting it on the market and

putting it into stabilization, but we will ruin our whole program. We

would like to know what it is that we are doing wrong. Maybe somebody will tell us that we are raising sorry tobacco and that we have

to change—maybe we could change—maybe we could stop raising

that kind of tobacco. This year we did. We made every possible

effort to raise good tobacco. There is no question about it. Even

the big ones did make every possible effort.

Mr. ABBITT. Are there any other questions? If not, thank you so

much. We appreciate your being here.

Now we have Mr. Harold Thomerson here with two witnesses.

Would you come around and give us your statements?

STATEMENT OF HAROLD THOMERSON

Mr. THOMERSON. Mr. Chairman and members, I would like to

introduce Mr. Joe Pell and Mr. Red Harper, who is a sales supervisor for the Winston market. They would like to have about 5

minutes.

Mr. ABBITT. You are in good company. We are glad to have

your here.

Mr. TUCK. I have known him for many years.

Mr. ABBITT. He has a good background?
38 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Mr. TUCK. Yes. [Laughter.]

Mr. MATTHEWS. I have known Mr. Harper for a long time. He

has been very helpful with the tobacco program. I want also to

welcome you, Mr. Harper.

STATEMENT OF RED HARPER

Mr. HARPER. Mr. Chairman and members of the committee, we

have, in our area of northwest North Carolina, made a tremendous

effort in the past year to produce a quality tobacco. We got the

cue from the Virginia Farm Bureau. We thought it was a good idea.

We asked the Northwest North Carolina Development Association,

which is made up of businessmen, bankers, lawyers, doctors, farmers

in those 11 counties, in that area, to sponsor a quality program in

that area. They took to it like ducks to water.

We began our first meeting with an attendance of about 2,500

farmers in the Memorial Coliseum in Winston-Salem. We had

representatives from eight companies to talk to them. Each one of

those buying representatives made splendid talks and encouraged

our tobacco growers to follow the accepted practices program as has

been outlined here today. And we, as a result, held from 5 to 10

meetings in each one of those individual counties. And as a result

of it we had better than 2,000 farmers who signed up for the accepted

practices program in growing this crop of tobacco in 1963. We had

other thousands of farmers that did not sign up who also followed the

accepted practices program.

Our program consisted of something over 8,000 acres of tobacco

that was signed up in the program. We had a little yellow sticker

with the seal of northwest North Carolina on it to give to each farmer

for each pound of his tobacco, each pile of his tobacco. That idea was

for that seal to go on the end of the tag or the card, and go into the

factory with the tobacco and to let the buying company make any

kind of chemical test they wished. And I am confident that our

farmers religiously followed that promise. We did not issue the

seals until they swore at the end of the growing season that they had

followed those practices of using an accepted variety, not overfertilizing,

not overirrigating, using sucker control that was not objectionable,

proper grading and preparing the tobacco for market.

As a result of that program, our farmers were tickled to death.

And on the opening sales and for the first week or 10 days after the

opening of the sales, I had hundreds of farmers come to me and to

tell me that they lost untold money by hauling their tobacco to

South Carolina and the border. We lost approximately 15 million

pounds of our crop to the border and South Carolina, and some to the

middle and eastern belts before we opened.

Now the story is another way. Figures have been given the other

day. The same trend is true on the Winston-Salem market. We

started off the first week with Stabilization getting practically nothing.

The week that just ended they got slightly better than 50 percent of

our sales.

Now those tags are on that tobacco and they are not bidding on

it—not a single bid.

One of our warehousemen raised some tobacco that belonged to a

lady—she had to raise it—they raised it $3 a hundred, and the
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 39

Stabilization got it at $51 or $52 a hundred. They sold it later in the

week. They lost $450 on those three piles of tobacco. When it

found a stopping place with a buying company it was $21 a hundred.

In our opinion our farmers do not think that an acreage cut is the

answer to this program that it is an answer to our difficulties.

I have heard these 

program,

figures taken from Government reports,

the 1947 figures for the counties in the Winston-Salem area. That is,

19 of those counties in the Winston-Salem area that it is the marketing

area for. In 1947, they had 154,749.4 acres in those 19 counties

and they produced 164 million pounds. In 1963, those same 19

counties had 84,120.18 acres or 70,629 acres less, and a yield in 1962

of 1,810 pounds per acre which were produced in that area. And the

70,000 acres less produced 11% million pounds less tobacco.

We do not think that an acreage cut will do any good. It just

encourages farmers to plant tobacco closer together in the rows

closer together and to overfertilize, to irrigate all they can and make

more pounds.

I have here a copy of a speech of Dr. Edwards, who is president of

Clemson College, who was in Raleigh last week, and he says:

It is common knowledge at home and overseas and with those who live with Flue-cured tobacco every day that a single factor that has contributed more than

any other to the decline of the quality of Flue-cured tobacco has been acreage restriction.

He also says that we will be conscious of the fact that within the

next 10 days, where many of you will be attending a meeting in

Raleigh, the subject of acreage for 1964 will be the item of

business.

Our farmers have almost 100 percent been in the belief that a

planned poundage basis is the only way out.

Mr. ABBITT. I appreciate that statement from you.

Do you have any questions?

Mr. MATTHEWS. No. Thank you very much, sir.

Mr. MCMILLAN. I agree with the gentleman's statement that

acreage reduction is not the answer at all and must place more

emphasis on marketing.

All of the South Carolina tobacco is sold in my congressional

district. We produced 19 million pounds less this year than in 1962.

Mr. HARPER. I daresay that some of the 165 who went from

North Carolina and South Carolina to Europe to find out what they

could over there to get more tobacco sold over there and met with

the tobacco people in every country they visited, England, France,.

Belgium, Holland, Denmark, and Germany, learned much. Dr.

Edwards came back convinced that the only solution to our problem

is quality tobacco. I do not know how we are going to get our

farmers to make that effort again. It has been terribly disappointing.

They are disgusted with the situation.

Mr. ABBITT. We certainly appreciate your statement. Do yott

have something that you would like to say in addition?

STATEMENT OF JOE PELL, WINSTON-SALEM, N.

Mr. PELL. Mr. Chairman and gentlemen, I would

concur with most of the things that have been said here

in the meeting.
40 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

We have talked about too much nicotine, too much, too much of

that. There is but one answer to it. I have been in the tobacco

business since I was 12 years old. I was born and reared in a tobacco

warehouse and on a farm. There is just one "too," there is too much

tobacco.

I can sell the first six rows of tobacco on my sales in Winston-Salem,

but as soon as I sell a pile, the man takes out his little book and takes

down the number of pounds I get on the first six rows, because they

will have their allotments bought at the end of those first six rows.

There is just one answer. We have had too much tobacco. We

have to find a market for more tobacco. That is the answer to all of it.

I do not know whether we can do either one.

So far as the old belt is concerned, to operate in Fairmont, N.C.,

which is in the border, I do not have any trouble selling tobacco in

Fairmont, ordinarily, in the early market. I have had some trouble

in the old belt, because geographically it is located so that I imagine

I will always have trouble selling tobacco there until the supply is

pulled down to meet the demand. You cannot get around the supply

and demand situation. It will always control your market pricewise.

So I think the answer is to go on a poundage basis. We do not

have a control now, because the figures as presented here this morning

have proved to us that we do not have a control. What you do is

give the farmer an incentive to grow more pounds to the acre, to

catch up for the acreage he has lost. He has proven that to you by

the figures that have been presented here.

Mr. MCMILLAN. We produced less pounds in South Carolina and

still received less price.

Mr. PELL. That is ordinarily not the true picture in your district.

I have some very good friends, your constituents, there in your district

and ordinarily that is not the fact. We have enjoyed a very good

market in South Carolina and in the border belt.

Mr. MCMILLAN. The official figures that I have from the State

agriculture commission show that tobacco sold for less this year

and the farmers are not happy.

Mr. PELL. That is true this year, because this year was an unusual

year, but that is not true across the years. I am talking about every

year in the old belt, because, as I say, of the geographical location

we have taken a licking up there. I do not know what can be done

about it, if anything. But the only answer would be to go on a

poundage-control basis so that we would have actually a control

and know how much tobacco we could anticipate that the companies

would use, plus a normal surplus. At the present time we have 2.9

years' surplus, and 2.5 is considered normal that we should carry.

I appreciate the time you have extended me.

Mr. MCMILLAN. I would like to have permission to insert a statement from the State agricultural commission and some other material

into the record at this point.

Mr. ABBITT. Without objection, that permission will be granted.

(The statement follows:)
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 41

Hon. JOHN L. MCMILLAN,

U.S. Congressman, Washington, D.C.

DEAR CONGRESSMAN MCMILLAN: There is a bill now before the National

Congress wherein, from the information I have received, the grade placed upon

tobacco by the Government grader cannot be made known to the buyer. Many

farmers and warehousemen have asked that I request your support of this bill.

The buyer, in most instances, pays $1 more than the support price as shown by

the grade, thus destroying the principle of a true auction market. We feel that

the buyer is using the knowledge of the grader rather than his own knowledge of

tobacco. Then too, in this particular year, we feel that in many instances the

grader has been wrong. At the recent hearing in Columbia, several examples

were shown wherein the same tobacco was sold $20 to $30 higher per hundred

pounds when tobacco was graded by a different grader.

All of us feel that if this information is withheld from the buyer, the market

would improve in price. Your support of this legislation is earnestly and sincerely

solicited.

With kindest personal regards and best wishes, I am,

Respectfully yours,

Hon. JOHN L. MCMILLAN,

U.S. Congressman, Washington, D.C.

DEAR CONGRESSMAN MCMILLAN: I realize that you have taken an active

interest in the problem of the tobacco grading system, and we certainly appreciate

your help in this respect. However, new problems keep arising from the Government graders which are not conducive to friendly relations nor for creating a stable

auction market.

Recently, Mr. James Ellis, brother of former Representative Ralph Ellis, sold

tobacco on the Conway market. After the sale was concluded and the buyers

had traveled over an additional row, the buyer who had originally purchased the

tobacco called the grader and had him change the grade. This resulted in quite a

loss to Mr. Ellis. It appears that the buyer is able to have a grader change a

grade at any time while the farmer or the warehouseman have been specifically

instructed not to try contacting the grader. In this grading system, there appears

to be no hesitancy on the part of the grader in changing a grade where it is requested by the buyer. In the instant case, there appeared to be a completed

sale and within a few moments the tobacco would have been moved from the floor.

Another problem which is quite disturbing is the attitude of the head grader

here in the town of Loris. He has had several of the prominent businessmen and

tobacco men talk to him about his attitude and they advised him that he was

hurting the market. His reply was that he didn't give a damn about the market

as he worked under civil service. This man has constantly gone ahead of his

graders and changed the grades after they were placed on the tobacco by his

subordinates. If there is anything which you could do to alleviate these problems, we would greatly appreciate it. We also want you to know we appreciate

all that you have done relative to these problems.

With kindest personal regards, I am,

Respectfully yours,

THE SENATE,

STATE OF SOUTH CAROLINA,

Columbia, August 9, 1968.

JAMES P. STEVENS.

THE SENATE, STATE OF SOUTH CAROLINA,

Columbia, September 4, 1963.

JAMES P. STEVENS.
Con

D arli

Dillo

Hemi

King

Lake

Lam

Loris

M ulli

Pam

Timt

STATE OF SOUTH CAROLINA, DEPARTMENT OF AGRICULTURE

Report of tobacco sales for season 1963

Markets

Number of

warehouses

Sold for producers Sold for dealers Resold by warehousemen Total sales

Pounds Amount Pounds Amount Pounds Amount Pounds Amount

ay 

agton 

3

4

10,350,

7, 188,

166

458

$6,

4,

381,

147,

978. 40

847.59

192,874

219, 004

$101,

101,

062.

555.

97

52

555,056

641, 388

$328,

367.

274.

406.

24

91

11, 098,

8, 048,

096

850

$6,

4,

811,

616,

315. 61

810. 02

4 

ngway 

tree 

2

33

7,

7,

8,

019,

568,

128,

987

360

160

3,

4,

4,

992,

596,

908,

740. 70

377. 85

850. 16

107,919

56, 716

128, 530

49,

26,

63,

912.

246.

892.

31

95

73

579,518

672, 831

730, 236

306,389,

430,

933.

092.

392.

98

31

34

7, 707,

8,297,

8, 986,

424

910

926

4,

5,

5,

349,

011,

403,

616. 99

717. 11

135. 23

City_ 

r 

8

3

31,976,

2, 829,

260

972

19,

1,

924,

566,

098. 71

386. 45

1, 113, 396

37,056

564,

17,

034.

417.

10

94

1,891, 012

155, 298

1,058,

73,

153.48

860. 70

34, 980,

3,022,

668

326

21,

1,

546,

657,

286. 29

665. 09

us 

3

6

8,

41,

102,

000,

168

356

4,

25,

996,

142,

260. 90

359. 14

417, 482

529, 146

205,

237,

361.

845.

13

82 4,

303, 258

782, 274

174,

2, 924,

719.

306.

88

67

8,822,

46, 311,

908

776

5,

28,

376,304,

341. 91

511. 63

Leo 

ionsville 

33

7,

16,

125,

283,

522

058

4,

9,

375,

497,

215. 30

913. 09

167, 931

574, 671

84,

276,

791.

865.

89

23 1,

480,602

698. 016

253,

985,

218.

531.

81

12

7, 774,

18, 555,

058

748

4,

10,

713,

760.

226. 00

309. 44

Total sales, season 1963 147,572,467 89,530,028. 29 3.544, 731 1,729,016.59 12,489, 492 7, 291,890.44 163, 606,690 98,550,935. 32

Total sales, season 1962 166,753,895 102,356,319.40 4, 189, 414 2,214,844.16 14,697, 990 8, 782,844.89 185, 641,299 113,354,008.45

Decrease, season 1963 19,181,428 12,826,291.11 644,683 485,827.57 2,208, 498 1, 490,954.45 22, 034,606 14,803,073. 13

Average rate, sold for producers only, by markets, season, 1963, per hundredweight:

1963 1962 1962 1962

Conway.. $61.6606 $62. 5071 Lamar $55. 3499 $59.2072 Darlington 57.7015 59. 4211 Loris 61. 6657 61.7807

Dillon 56.8768 59. 9734 Mullins 61. 3223 61.1189

Hemingway 60.7315 63. 0633 Pa,mplico 61. 4020 62.5967

Kingstree 60.3931 61. 6196 Timmonsville 58. 3300 60,0670

Lake City_ 62.3090 62. 1768

Average rate, sold for producers only, all markets, season 1963: $60.6685. All markets, season 1962: $61.3817. Decrease rate in 1963: $0.7132.

FUNCTIONS OF THE TOBACCO AUCTION MARKETS 
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 43

Hon. JOHN L. MCMILLAN,

Washington, D.C.

DEAR JOHNNY: I did not intend writing you until I read an article in the Sunday News and Courier, about what one of the Government tobacco graders had

to say about them downgrading tobacco. He flatly denied it. I have had tobacco

on warehouse floor and turn the tag and move it over two or three rows, and

have it raised as much as 20 cents per pound. And I have had it reversed the

other way around. Now mind you I did not tell them that tabacco had been

through sale and I rejected what I was offered the first time. And the same

grader graded both times. I tell you something else the buyers don't seldom

go above 1 cent per pound above support price this year, and I have had in prior

years where they would pay from 6 to 39 cents above support price. It looks to

me like our Mr. Weeks has sold out to the tobacco companies, for what I do not

know. I was told that Stabilization sold 5 million pounds of tobacco about

2 or 3 weeks before our tobacco markets opened for 49 cents per pound and

that tobacco cost the Government 90 cents per pound. That don't make sense

to my way of thinking.

We are on the verge of losing our control program on tobacco. I have talked

with a number of large and small tobacco growers, and they are thinking just like

I am, that the law in regards to the grading system should be changed whereby

the grade should be placed where the buyers could not see it or else graded after

it has been sold. The company buyers are buying on the judgment of the Government grade on tobacco and not on their judgment. I am going to give you

one more clue as to downgrading the farmers' tobacco and then I am going to

let you be the judge as to what should be done. I sold a lot of tobacco one day

that was graded 67 cents. I sold the balance of the same lot next day and it was

graded 42 cents. Now mind you, that tobacco was a split barn and was identical.

We need some relief and we need it now, or we will all be bankrupt for no fault of

ours. Hoping to get your views as to what you think can and should be done.

Yours truly,

D. B. STANTON.

MULLINS, S.C., August 28, 1963.

• GEORGETOWN, S.C., August 7, 1963.

Hon JOHN L. MCMILLAN,

House Office Building, Washington, D.C.:

• The system of grading tobacco on our local market by the Government has

greatly reduced the price. Please urge an investigation of this system to the

end that it might be ratified. If not our local economy will be drastically affected.

MEYER ROSEN, State Representative.

Congressman JOHN L. MCMILLAN.

House Office Building, Washington, D.C.:

It is the considered opinion of the tobacco farmers and warehousemen in

South Carolina that unless the present prices paid for tobacco on the auction

markets are substantially increased at once, the tobacco producers will

suffer an economic catastrophe from which they will not be able to recover.

Tobacco farmers have gone all out in their endeavors to produce a quality crop.

All recommended cultural practices have been followed.

Notwithstanding every effort to produce the desired quality of tobacco, the

prices paid to farmers are the lowest that they have been in years, and present

chaotic conditions prevail on South Carolina markets.

It is felt that as a result of overemphasis upon quality tobacco, the grading

service has consciously or unconsciously lowered grades which resulted in a lower

support price. The end result of such action being that tobacco companies are

not paying a fair market price for tobacco.

Company buying patterns indicate they rely entirely upon the Grading Service

to establish the grade, such a policy results in the Grading Service completely

regulating the market price.

If present prices paid for tobacco are not increased the tobacco farmers cannot

survive. It is urged that an immediate investigation be made into the policy

and practices of the Grading Service as well as the buying policies of the tobacco

companies.

WILLIAM L. HARRELSON,

Commissioner of Agriculture for South Carolina.

COLUMBIA S.C.,August 4, 1963.
44 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

Mr. MCMILLAN. Mr. Chairman, I cannot permit this meeting to

adjourn without expressing my own personal feelings concerning any

tobacco acreage reduction for South Carolina next year. The tobacco

farmer has had his tobacco acreage reduced to such an extent that

hundreds of farmers have been forced to leave their farms and seek

other means of livelihood.

I have stated numerous times during this meeting that we people

in South Carolina have already suffered an approximate 19-percent

reduction since the official tobacco sales figures show South Carolina

produced 19 percent less tobacco than during 1962. I certainly agree

with some of the witnesses who have testified from Virginia and the

North Carolina border belt that acreage reduction is certainly not

the answer to our tobacco problem.

We people in South Carolina listened to tobacco experts who

traveled all over our State calling on the farmers to produce high

quality tobacco. The tobacco farmer used fertilizer and MH-30 to

a much lesser extent that ever before and thereby produced much

less poundage in order to grow the highest quality tobacco possible.

The tobacco farmers did not receive the price they should have after

they had complied with the requests of the tobacco company officials

since the price of tobacco this year is not as high as it was in 1962.

My colleague, Congressman Lennon, from North Carolina has

properly expressed the serious situation we found ourselves in on the

South Carolina tobacco markets when the Department of Agriculture's

Marketing and Grading Service presented the grade S tag on the

markets at the beginning of the selling season in South Carolina and

the border belt. I think every grader and every person connected

with the Grading and Marketing Service must admit that the tolerance of slick tobacco should have been 40 percent rather than 20 percent until the farmers had become educated to this type of grading

system. Personally, I think the grader's tags should have been obstructed from the view of the company buyers so they would not have

been tempted or swayed by the Government grade price.

I am sincere in my opinion that the Stabilization Bureau has purchased millions of pounds of tobacco under the grade S and KL grade

that should have been purchased. by the private tobacco companies.

This meeting should prove helpful; however, I do not subscribe to

the usual procedure of reducing tobaccp acreage every time something

happens to the tobacco grading market.

Mr. ABBITT. I have two letters, one dated November 11, 1963,

from the Maury Leaf Tobacco Co., addressed to myself, and another

letter, dated November 12, 1963, from Mr. J. S. Gee, also addressed

to myself, and I ask unanimous consent that they be placed in the

record at this point.

(The letters dated November 11 and November 12 follow:)

MAURY LEAF TOBACCO CO., INC.,

Richmond, Va., November II, 1968.

HMI. WATKINS M. ABBITT,

Chairman, House Tobacco Subcommittee,

House Office Building, Washington, D.C.

DEAR CONGRESSMAN: Much has been published in the press since the first

of August concerning dissatisfaction over the auction market prices, doing injustice both to the buyers and the Government tobacco graders.

I would like to express my own personal opinion and bring out facts that should

be known.
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 45

Weakness of prices on the South Carolina and border markets early in the

season caused Senator Bethea and Representative McMillan of South Carolina

to call for an investigation. The explanation for these apparent low prices is

quite simple. It was due to lack of usual dealer support in the market and

this lack of support can easily be explained.

The dumping by the pool of 58,811 hogsheads of 1955-56 crops of strictly

domestic grades (C and X grades), at half prices, loaded the domestic manufacturers with stocks that normally would have been drawn from dealers' inventories.

On July 19 there was still in the Stabilization inventory 8,857 hogsheads of this

domestic-type tobacco, an additional threat to the dealers.

Most dealers are still overstocked with 1962 crop tobacco that would have

been absorbed by the domestic or oversea trade had the 1955-56 crops of both

types not been dumped on the market at half price, not to mention the cut in

Stabilization 1961 crop prices below the dealer's cost.

In numerous cases the dealers' inventories of old crops has tied up their entire

line of bank credits and while all of them wanted to purchase some of the 1963

crop at current prices, many had no way to finance the new crop purchase for

inventory.

In view of the cancer scare, the manufacturers have had to be careful not to

overstock, and the dealers' inventories were relied upon if there was an increase

instead of decrease in sales. Obligations to the stockholders required the purchase of the cheap 1955-56 Stabilization stocks by the manufacturers and this

was disastrous to the dealers with heavy inventories that the manufacturers

would normally have needed.

One of my oversea agents writes that some of his clients have adopted a "wait

and see" attitude before buying my 1963 crop offerings, feeling that if the Stabilization cuts the price on the 1957-58 crop, as they did with the 1955-56 crop, they

could buy cheaper.

It was a mistake to sell untied tobacco in the 1963 crop when the trade was

already overstocked with loose leaves from 1962. The USDA should not repeat

this error in the 1964 crop by selling untied leaves in North and South Carolina.

The buyers judge tobacco on its merits and pay no attention to the marks

put on tickets by the Government graders. Both have been unfairly abused by

the warehousemen, farmers, and a few others who opposed marking the "S"

grade on slick tobacco.

For my further views on the subject, I invite you to read the enclosed reprint

from an article published in Tobacco on June 7, 1963.

Should you feel that my remarks have sufficient merit, I trust you will pass

them on to other members of your committee.

With cordial regards.

Yours sincerely,

GREENHOW MAURY, Jr.

KENBRIDGE, Va., November 12, 1963.

Hon. WATKINS M. ABBITT,

House of Representatives,

Washington, D.C.

DEAR CONGRESSMAN ABBITT: I sincerely appreciate the invitation to attend the

Tobacco Subcommittee hearing on Wednesday, November 13, at 10:30 a.m. I

am sorry that I will not be able to attend due to previous engagements.

I have advised you previously of some of my opinions on the Flue-cured tobacco

situation; however, I would like to state some of my views so you may use them in

the hearing if you so desire.

I am a Flue-cured tobacco farmer and dairyman; I am also chairman of the

Lunenburg Agricultural & Conservation County Committee and a director of the

South Hill Production Credit Association and the South Hill branch of the National Farm Loan Association.

I can state personally and from many contacts with many farmers and other

individuals interested in Flue-cured tobacco that something is drastically wrong

with the marketing process on the old belt this year. For the first 2 to 3 weeks

of the season, the buying companies were buying most of the tobacco offered.

Since that time, Flue-Cured Stabilization Co-op receipts have grown daily until

at present they are receiving in excess of 50 percent of the entire offerings.

We had a very severe drought in this section this summer, which has reduced

our crop both in quality and quantity but the same or better tobacco is being

offered now than was the first few weeks of the selling season when companies
46 FUNCTIONS OF THE TOBACCO AUCTION MARKETS

were buying. Last year, we were told that we had too much rain and a washed-out

crop that the buying industry did not want; this year we are told that we were too

dry and the nicotine content is too high, so unless we can reach a happy medium

in weather, it seems we cannot produce a salable crop.

The harvest here was late. Some farmers have only finished curing in the last

2 weeks. Yet many of the buyers will be leaving our markets this coming weekend

for the burley markets. Past experience has taught us that if we do not have

buyers we cannot expect to sell to them.

It appears to me that we are in a squeeze and being taken advantage of. The

selling season does not open soon enough for the buyers to consider our tobacco in

their requirements and buyers are taken away before we can complete our sales.

I suggest, for your committee's consideration, a staggered marketing season in

which the old belt would be allotted a certain number of buyers to open sales on a

limited basis earlier than they presently open. Perhaps these buyers could rotate

from one market to another so the companies would be able to consider our tobacco along with the tobacco from other belts.

Last winter and early spring, the companies buying for the export trade were

particularly critical of our growing methods and indicated that if we would plant

old line varieties of tobacco, use less fertilizer and chemicals and space our tobacco

further apart, that we would grow a product in which they were interested. I

feel that the majority of our farmers in the old belt and particularly in Lunenbuig

County tried to follow these recommendations. But this tobacco is finding its

home in Stabilization Co-op stocks instead of the trade where we expected it to v.

Many people have suggested lowering the support rates on export-type grades in

order to compete with foreign countries. Since, when the Stabilization Co-op

receives our tobacco it is bringing only 90 percent of its theoretical value, I think we

should take a hard look before we decrease any support prices. Many of the major

companies have equipped themselves to handle looseleaf tobacco; perhaps consideration should be given to supporting only looseleaf from the bottom part of

the plant. This would mean a saving to the farmer in labor and a reduction in

support price and permit us to market our tobacco earlier.

I have talked with people in the trade and believe that many of the small

independent companies are afraid to buy tobacco because of the sale that was made

at a discount last spring from Stabilization Co-op stocks. I believe that prior

to any other sales at reduced price, the Stabilization Co-op should be required to

consider the possible adverse effects on future marketings of farmers.

The cancer news in the press, I feel, has caused a depressing effect on some of the

companies as they are watching and waiting for the Surgeon General's report to be

released to see what effect this will have on the market, knowing full well that they

can purchase their requirements from the Stabilization Co-op.

I feel that it might be advisable to add the difference between 90 and 100 percent of parity to the Stabilization stocks when they are offered for sale so the

buying companies, both domestic and export, would not use the stocks for an

inventory.

Unless something is accomplished to relieve the present situation in the old belt,

many of our family size farms will cease to exist as they are almost entirely dependent on the income from Flue-cured tobacco. I hope I have not merely added

confusion to the issue.

We are looking forward to seeing you in Lunenburg at our meeting on Friday,

November 15.

Sincerely yours,

J. S. GEE.

Mr. ABBITT. Now we have some others present. I would like

for them to stand up and give us their names and addresses so that

we can have them for the record.

(The following names were submitted: R. B. Settle and S. Reed

Settle.)

Mr. ABBITT. It there anyone else that wants to be recognized?

Is there anybody else here who wants to testify? I appreciate

every one of the witnesses being here today. I know that you are

deeply concerned with this problem. We appreciate your giving

us your views. I do not know what we can do, but I assure you that

we will do what we can—I do not know what this committee can do,

if anything, but I feel that we are going to look into it and do the
FUNCTIONS OF THE TOBACCO AUCTION MARKETS 47

very best that we can. I realize that there are problems. It appears

to me that the farmers, particularly in this belt, have listened with

care and attention to the recommendations of the Department and to those of the companies. They have followed these recommenda- tions. They have followed the practices that were presented to them. The overwhelming evidence is that it was a good crop. It

was placed on the market. And for some reason it has not been purchased. Just why, I am not able to say, but there is a strong feeling that, perhaps, the companies think they will be able to get the tobacco later on—that that is their view—and that then they will

get it at reduced prices. It has been said that tobacco improves with

age, within reason. They tell me that. And that some, certainly, would prefer to have it a little older. Perhaps that is what they want.

I assure you that we will go into this matter as best we can. If there is any representative here from the Virginia Department of Agriculture, I will be glad to hear from him. We will appreciate

your giving the reporter your name.

STATEMENT OF S. HOLLIS SHOMO, DIRECTOR, DIVISION OF

MARKETS, VIRGINIA DEPARTMENT OF AGRICULTURE, RICHMOND, VA.

Mr. SHomo. My name is S. Hollis Shomo

'

and I am director of the Division of Markets of the Virginia Department of Agriculture, and with me is Mr. C. T. Barnes, who is supervisor of the Marketing Expansion Section of the Division of Markets, Virginia Department

of Agriculture.

We are doing a good job of listening today, to see if we can learn something that will give us some of the answers to this problem.

MT. ABBITT. Thank you.

The meeting is adjourned.

(Whereupon, at 12:45 p.m., the subcommittee adjourned.)

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