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--kr-cy HEARING

KANSAS ST14Tig. - 1.1 IN IV E.FISITy BEFORE THE KSU LIBRARIES 

SUBCOMMITTEE 0) TOBACCO

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

NINETY-THIRD CONGRESS

SECOND SESSION

JANUARY 22, 1974

Serial No. 93-RR

Printed for the use of the Committee on Agriculture

U.S. GOVERNMENT PRINTING OFFICE

29-662 WASHINGTON : 1974

4
Mo.

COMMITTEE ON AGRICULTURE

W. R. POAGE, Texas, Chairman

FRANK A. STUBBLEFIELD, Kentucky,

Vice Chairman

THOMAS S. FOLEY, Washington

E DE LA GARZA, Texas

JOSEPH P. VIGORITO, Pennsylvania

WALTER B. JONES, North Carolina

B. F. SISK, California

BILL ALEXANDER, Arkansas

JOHN R. RARICK, Louisiana

ED JONES, Tennessee

JOHN MELCHER, Montana

DAWSON MATHIS, Georgia

BOB BERGLAND, Minnesota

FRANK E. DENHOLM, South Dakota

SPARK M. MATSUNAGA, Hawaii

GEORGE E. BROWN, JR., California

DAVID R. BOWEN, Mississippi

CHARLES ROSE, North Carolina

JERRY LITTON, Missouri

BILL GUNTER, Florida

CHARLES M. TEAGUE, California,

Ranking Minority Member

WILLIAM C. WAMPLER, Virginia

GEORGE A. GOODLING, Pennsylvania

ROBERT B. MATHIAS, California

WILEY MAYNE, Iowa

JOHN M. ZWACH, Minnesota

ROBERT D. PRICE, Texas

KEITH G. SEBELIUS, Kansas

WILMER D. MIZELL, North Carolina

PAUL FINDLEY, Illinois

LAMAR BAKER, Tennessee

CHARLES THONE, Nebraska

STEVEN D. SYMMS, Idaho

EDWARD YOUNG, South Carolina

JAMES P. JOHNSON, Colorado

EDWARD R. MADIGAN, Illinois

FOWLER C. WEST, Staff Director

JOHN F. O'NEAL, General Counsel

HYDE H. MURRAY, Associate Counsel

JOHN RAINBOLT, Associate Counsel

L. T. EASLEY, Staff Consultant

SUBCOMMITTEE ON TOBACCO

FRANK A. STUBBLEFIELD, Kentucky, Chairman

WALTER B. JONES, North Carolina

DAWSON MATHIS, Georgia

CHARLES ROSE, North Carolina

JERRY LITTON, Missouri

WILMER D. MIZELL, North Carol;na

WILLIAM C. WAMPLER, Virginia

EDWARD R. MADIGAN, Illinois

EDWARD YOUNG, South Carolina
CONTENTS

Statement of:

Daniel, Hon. Dan, a Representative in Congress from the State of Page

Virginia 27

Frick, Kenneth E., Administrator, A.S.C.S., U.S. Department of

Agriculture 3

Mizell, Hon. Wilmer D., a Representative in Congress from the

State of North Carolina 2

Additional material submitted to the subcommittee:

Article from Federal Register, December 26, 1973 7

Tobacco Exports Under the Barter Program 11

(n)

INCREASE IN TOBACCO MARKETING QUOTAS

TUESDAY, JANUARY 22, 1974

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TOBACCO OF THE

COMMITTEE ON AGRICULTURE,

Washington, D.C.

The subcommittee met, pursuant to call, at 10:05 a.m., in room 1301,

Longworth House Office Building, Hon. Walter B. Jones, of North

Carolina, presiding.

Present: Representatives Jones, Mathis, Rose, Litton, Wampler,

Mizell, and Young.

Also present: Representatives W. C. Daniel, David N. Henderson,

Ike F. Andrews, and Richardson Preyer.

Hyde Murray, associate counsel; Perry Shaw, staff assistant; Steve

Allen and Steve Pringle, staff consultants.

Mr. JONES. The subcommittee will be in order, please. Before we

get into the business at hand, I would like to take this opportunity to

welcome to this committee Christine Gallagher, from my district in

North Carolina, who served this committee so well for so many years.

Christine, we are delighted to have you. [Applause.]

Mr. JONES. I believe we have with us this morning Mr. Kenneth

Frick of the USDA and Mr. Joe Todd.

At this time, Mr. Frick, I would like to have the committee pave

the way for you, if such be needed, and direct to you some questions

that many of us have been called upon to answer. Perhaps then you

can answer those as best you can in your testimony.

I think one thing that concerned the farmers of my district as much

as anything else was the threat to completely terminate the control of

the quota system and we would like to know if indeed these annual

increases might be leading ultimately to the elimination of the quota

system.

Second, did the Department take into consideration the threatened

acute shortage of fertilizer for next fall?

Also, a question was raised by many, what, if anything, is the Department going to do to insure orderly marketing conditions next

fall in order that we do not have to suffer through the same confusion

and chaos that existed last year.

There were others, but they escape my mind at this time. We just

thought if you would answer those questions, to give our members some

assurance of the justification of this increase, if at all possible, it might

be helpful to all of us here on the committee.

I am going to recognize at this time the ranking minority member of

this subcommittee, Mr. Mizell, for a statement.

(1)
2

STATEMENT OF HON. WILMER D. MIZELL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NORTH CAROLINA

Mr. MIZELL. I thank you, Mr. Chairman.

Certainly, I want to commend our chairman here, who is a colleague

from North Carolina, for conducting this hearing this morning. I

think it is important for our friends from the Department to know

that it was at my urging that these hearings were called here today.

They were initiated immediately after I received word of the Department's decision on the 10-percent increase in quotas and

allotments.

As one who represents perhaps the most well-known tobacco

district of the country, the Fifth District of North Carolina, which

encompasses the city of Winston-Salem and hundreds of tobacco

farms, in fact thousands of tobacco farms, it was, of course, a natural

reaction for me to seek clarification and justification of this committee

as soon as possible since it threatens in quite a drastic way the economic

stability of my State and my region of the country. As the ranking

minority member of this subcommittee, it was my duty as well to

see that the tobacco program which has been so successful in the

past is not put in the danger of going down the drain by taking as

arbitrary and as willful an action as any I have seen and I have

seen quite a few in my 5 years on the Hill.

Back when I was playing baseball, with some pitchers, there was

always the danger of getting their signals crossed with the catchers.

I did not have that problem, since about all I had was a fast ball

anyway and there is just one signal for a fastball. Of course, many

pitchers had the problem of getting theirs confused.

I think in this matter we are dealing with today, the possibility

exists that not only did the Department and the subcommittee get

their signals crossed, but someone may have tried to put a fast one

past someone else while the "someone else" was in recess.

Last fall, a special congressional investigating committee, comprised of many members of this subcommittee, held field hearings in

Lumberton, N.C. and Florence, S. C., those initiated by our friend

Charlie Rose and Ed Young from South Carolina—the chairman was

present and also a colleague from Virginia, Bill Wampler—to seek to

determine the extent of the marketing problems in the tobacco industry. The most important problems we identified during those

hearings were overproduction and lack of space on auction floors for

sufficient numbers of tobacco growers and their products.

Following those hearings, we made a recommendation to the

Secretary of Agriculture that he not increase allotments at this time

and let us work out the marketing problems we already had. Instead,

the Department proposed on December 26 to do away with the

allocation and the quota system altogether, which would have established a dominion of chaos in tobacco markets throughout the South.

Then last week, the Secretary announced instead that quotas for

flue-cured tobacco would be increased by 10 percent. We are left to

assume that this announcement was to have been welcomed with

enthusiasm by tobacco growers who had feared for the worst for 1

month, worrying that they might not have an allocation program at

all.
3

In my State of North Carolina, at least, I detect no great sigh of

relief at this announcement. Instead, I found and, heard from a great

many disgruntled and worried growers, and I have received more than

3,000 letters from my tobacco farmers, who are greatly and rightly

concerned about their economic future and their family's welfare.

I have gone over the figures for allotments and quotas and percentages and all the rest. Those figures just do not add up to me the way

they apparently did for the Department of Agriculture.

So the purpose for these hearings is really fourfold in my opinion:

First to determine how the Department arrived at its determination

that a 10-percent increase in quotas is required;

Second, to impress upon the powers that be in the Department of

Agriculture the strong and well-founded dissatisfaction with its announcement among tobacco growers;

Third, to find out why the Department not only ignored a recommendation by the special ad hoc investigating committee in raising

the allotment, but did so while the Congress was in recess and had no

opportunity for consultation on this matter;

And fourth, to see if we can find some way to assure an adequate

supply of tobacco for both export and domestic purposes and at the

same time, assure the flue-cured tobacco grower that he is not going

to go broke in the process.

Now, in my district, we have had, in Forsyth County, over 200

tobacco farmers at a meeting; in Surry County, over 250 reported at a

meeting. Of course, much of their concern was aroused because of the

proposal that would completely suspend the allotment program.

While at the same time raising all of the concerns and anxieties of my

tobacco farmers, I read in the newspaper that the Department was

assuring certain Senators all along that there was not going to be any

elimination of the allotment program.

Well, now, maybe down at the Department this might be a little

amusing, but I would like you to know that from my standpoint, and

also if I read the mood of this committee correctly, we do not think it

is very funny to play games with the welfare of some 200,000 tobacco

farming families in this country. I did not find it very amusing to propose to eliminate the allocation program with the idea of backing off

from that proposal and then just advancing the one for a 10-percent

increase. So I think it was very poorly handled. I, for one, did not find

this a very good strategy.

I thank you, Mr. Chairman, for permitting me to have this time to

express my views.

Mr. JONES. Mr. Frick, with that background, the chairman recognizes you to answer as best you see fit.

STATEMENT OF KENNETH E. PRICK, ADMINISTRATOR, ASCS; ACCOMPANIED BY JOSEPH J. TODD, DEPUTY DIRECTOR, TOBACCO

DIVISION, ASCS, U.S. DEPARTMENT OF AGRICULTURE

Mr. Chairman and members of the committee, my name is Kenneth

E. Frick, Administrator, Agricultural Stabilization and Conservation

Service, U.S. Department of Agriculture. I have with me Mr. Joseph J.

Todd, Deputy Director, Tobacco Division.
4

We are pleased to discuss the recent action of the Department in

increasing the national marketing quota and acreage allotment for

the 1974 crop of flue-cured tobacco.

Legislation requires that the amount of the national marketing quota

and acreage allotment for flue-cured tobacco be determined and

announced during the period July 1—December 1, inclusive. The

legislation requires further that the latest available statistics of the

Federal Government be used in making these determinations.

The 1973 crop quota and allotment were not announced until

November 29, 1972—to enable us to have the latest data possible

with respect to production, carryover, domestic use, and exports.

Beginning in late 1972, we began to receive requests from grower

groups that the 1974 crop quota and allotment be announced early

to permit holding the referendum prior to the opening of the auction

markets. Legislation requires that growers be notified of their farm

quotas and allotments (insofar as practicable) for the first year of the

3-year period prior to a referendum. The 1974 crop quota was announced

July 3, 1973, and the referendum was held July 17, 1973. The markets

opened July 24, 1973. The 1967 and 1970 referendums were likewise

held before the markets opened.

We used the latest statistics which were available at the time the

1974 crop quota was determined. The marketing quota legislation

authorizes an increase in quotas and allotments under either of the

following conditions:

1. The amount of tobacco free of marketing restrictions is less than

the normal supply, or

2. A national emergency exists, or

3. There is a material increase in export demand.

Exports of flue-cured tobacco during May and June of 1973 were

20 percent above the same months a year earlier. These data became

available after the 1974 crop quota was determined. Exports have

continued at an unusually high level. During the first 5 months of the

current marketing year (July through November) exports totaled 268

million pounds, farm weight, an increase of 18.4 percent over the

corresponding months of last year. In addition to this significant

increase in shipments, we have been advised by industry groups that

they have received additional orders from foreign customers that they

are unable to fill because of reduced supplies.

Reports from trade sources indicate that cigarette production in

foreign countries is increasing by about 4 percent annually. The

improved economic conditions and population increases in foreign

countries are expected to further stimulate increased cigarette usage

and the demand for quality leaf. Although prices of U.S. tobacco are

higher than tobacco produced elsewhere, the devaluation of the dollar

has made our tobacco more competitive.

Reports from our agricultural attaches in a number of major foreign

tobacco producing countries indicate that the 1973 crop production

was reduced by adverse weather conditions. In view of increased

cigarette consumption and reduced tobacco production in some

countries, the available world supply of high quality flue-cured

tobacco is relatively tight. This affords the United States an excellent

opportunity to expand its export market if we have adequate supplies

available to meet the increased demand. In the absence of adequate
5

supplies in the United States, foreign manufacturers have no alternative except to seek other sources of supply. -This could result in the

permanent loss of export markets.

When we met with the subcommittee on December 6, it was suggested that no consideration should be given to increasing the 1974

crop quota unless a commitment was obtained from the buying

companies that they would increase the capacity of their processing

facilities, since growers felt that they had not increased the facilities

to handle the 10 percent increase in quotas and allotments for 1973.

A meeting with the leading manufacturers and dealers was held on

December 14. Following a full discussion, we were assured that they

will have available by the time the markets open for the sale of the

1974 crop the necessary facilities for processing 85 million pounds of

flue-cured tobacco per week. At this meeting some buyers stated that

their facilities were not operated at capacity last year because of

insufficient tobacco, inadequate transportation, labor, and other

problems. During the past 2 years, sales of flue-cured tobacco have

averaged between 75 and 76 million pounds per week. A capacity of 85

million pounds in 1974 represents an increase of about 12 percent over

the weekly sales last year and would permit the sale of a crop of 1,275

million pounds in 15 weeks.

We continue to receive information from industry sources and from

our attaches and others who have traveled abroad or had knowledge

of tobacco trade pointing up the increased demand for U.S. tobacco

in foreign countries. Monthly reports of exports received from the

Department of Commerce continued to show increased shipments of

U.S. tobacco. Sales of tobacco held under Government loan continue

to mount. As a result, flue-cured loan holdings on December 31, 1973,

were less than 58 percent of the holdings of a year earlier. A review of

our loan inventory indicates that most of the holdings are not in the

grades which are in the greatest demand by our foreign customers.

As a result of all these things, we had no choice but to face up to our

responsibility of determining whether it was necessary to increase or

terminate the 1974 crop quota to meet the increase in export demand.

In compliance with the Administrative Procedure Act, a notice was

published in the Federal Register of December 26, 1973, to provide

interested persons an opportunity to submit data, views, and recommendations. Copies of the notice were sent to farm organizations,

commissioners of agriculture, land grant universities, warehouse

associations, dealers, and manufacturers. I would like this Federal

Register notice put into the record, please, and I would like to read

from one paragraph:

Section 371 of the act provides in part as follows: If the Secretary has reason

to believe that because of a national emergency or because of a material increase

in export demand, any national marketing quota or acreage allotment for cotton,.

rice, peanuts, or tobacco should be increased or terminated, he shall cause an

immediate investigation to be made to determine whether the increase or termination is necessary to meet such emergency or increase in export demand.

[The above referred to document appears at the end of Mr. Frick's

statement.]

Although the response to the notice has been of record proportions,

only a relatively few actually relate to the issue—"Should the 1974

crop quota be increased or terminated to meet the export demand?" A

29-6U-74-2
6

large number fear that increased production will reduce prices. Some

pomted out that any increase in the quota and allotment would reduce

the amount they receive for leasing their quotas to other farms. Many

pointed out that with the scarcity of labor, fertilizer, fuel oil, and

other supplies or equipment, they cannot produce additional tobacco.

This suggests the possibility of reduced production on many farms

and, therefore, the need for more production on the farms which will

be able to produce it. After carefully reviewing the responses, it became

obvious that we could do no less than increase quotas and allotments

by 10 percent to meet our responsibility.

We were informed that our decision should be made known at an

early date so that growers could continue the preparation of plant beds,

purchase fertilizer and other supplies, negotiate leases, and move

ahead in planning their farming operations. Thus, we announced on

January 14 that marketing quotas and price supports will continue

in effect on the 1974 crop of flue-cured tobacco and that the national

marketing quota and acreage allotment will be increased by 10 percent

to meet increased export demand.

On the subject of terminating quotas or whether continuing to

increase is aiming for the termination of quotas: not at all. I think

the point of suggesting in the Federal Register that we consider

termination of quotas was to have some discussion on why you should

terminate quotas. I would only relate to two or three points.

If you did terminate quotas, you can support all tobacco growers

at their 1973 allotment. You can include support to those who increase

by 10 or 20 percent if you desire and consider them complying with

the desires of the increased amount of tobacco.

I think it was worth also considering that in light of the increased

cost of raising tobacco, probably this would affect the leasing of

tobacco allotments, and we realized that almost a third of our tobacco

allotments are leased, and this does increase the cost to those who do

lease by an average of almost 20 cents a pound. I think it was worth

discussing.

Now, obviously, the discussion really did not get started, because

there was concern that we were trying to abolish the quotas. Not at

all. It was a way of handling it so we could get the desired increase

and not put the pressure on those who did not have the fertilizer or

those who did not have the labor. It could have been supported at

1973 levels.

I think it was a matter of discussion, so with the incoming letters, it

became obvious that no one was ready for that discussion.

On fertilizer, we know that the cost of fertilizer is high. We know

that there is tightness in supplies. Yet with tobacco, we do feel that

they will attract the needed supplies of fertilizer.

Orderly marketing—this is why we did meet with the people that

are charged with the responsibility of moving the tobacco, and we do

have commitments for various firms in the amount of the.increase

that they will have in facilities to move this crop, as we said in the

statement.

I think there is a problem here that is always in front of us: How

do you arrive at a conclusion of what is adequate supply to have

sufficient tobacco, to have a good offtake of tobacco? How do you

continue to, hopefully, increase the offtake of tobacco in both the
7

domestic and foreign markets and still satisy the need for high enough

prices for farmers during a period when costs are rising at unprecedented rates? I think this is something that we' need to discuss very

substantially, a very difficult thing to come to grips with.

We also know that the support level will go up to about, I think,

something over 83 cents this year. So this is also a.very high increase

in the rate of support, I think from something around 76 cents plus

to something over 83 cents for the 1974 crop.

We took this into consideration also, that if we had overemphasized

the supply, why, it would not bring disastrous prices to growers in

the flue-cured area.

Mr. Chairman, this concludes my statement. I will be glad to

respond to any questions you or members of the committee may have

concerning the statement.

[The Federal Register notice referred to by Mr. Frick follows :1

[From Federal Register, Vol. 38, No. 246, Dec. 26, 1973]

DEPARTMENT OF AGRICULTURE

AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE

[7 CFR 7251

FLUE-CURED TOBACCO

DETERMINATIONS ON MARKETING QUOTAS AND ACREAGE ALLOTMENTS FOR

1974-75 MARKETING YEAR

Pursuant to the Agricultural Adjustment Act of 1938, as amended (7 U.S.C.

1281 et seq., herein referred to as the Act) consideration is being given to increasing

or terminating the national marketing quota and acreage allotment for flue-cured

tobacco for the 1974-75 marketing year.

Marketing quotas on an acreage-poundage basis for flue-cured tobacco for

the 1974-75, 1975-76 and 1976-77 marketing years were duly proclaimed, and

the national marketing quota for flue-cured tobacco on an acreage-poundage

basis for the marketing year beginning July 1, 1974 was determined and announced

as 1,179 million pounds. The quota was based upon an estimated utilization in the

United States in such marketing year of 690 million pounds and exports in such

marketing year of 455 million pounds, with an upward adjustment of 34 million

pounds determined to be desirable for the purpose of maintaining an adequate

supply (38 FR 18233).

Notice was given of a referendum to be held on July 17, 1973 to determine

whether the farmers voting favored or opposed the establishment of marketing

quotas for the three marketing years beginning July 1, 1974, July 1, 1975, and

July 1, 1976 (38 FR 18254). In the referendum, 98.5 percent of the farmers

voting favored quotas for a period of three years beginning July 1, 1974 (38

FR 23935).

Section 371 of the Act providss, in part, as follows: "(b) If the Secretary has

reason to believe that, because of a national emergency or because of a material

increase in export demand, any national marketing quota or acreage allotment for

cotton, rice, peanuts or tobacco should be increased or terminated, he shall cause

an immediate investigation to be made to determine whether the increase or

termination is necessary to meet such emergency or increase in export demand.

If, on the basis of such investigation, the Secretary finds that such increase or

termination is necessary, he shall immediately proclaim such finding (and if he

finds an increase is necessary, the amount of the increase found by him to be

necessary) and thereupon such quota or allotment shall be increased, or shall

terminate as the case may be, (7 U.S.C. 1371(b).)"

When the quota for the 1974-75 marketing year was determined, exports during

the 1972-73 marketing year were estimated at 490 million pounds, farmweight,

based on the latest statistics then available. However, exports during May and
8

June, 1973 were 75.6 minion pounds, 20 percent above the same months a year

earlier. As a result, exports during the marketing year ending June 30 reached 519

million pounds, 6 percent above the estimate used at the time the 1974 crop quota

was determined.

Exports have continued strong during the first 4 months of the current marketing

year (July-October), and totaled 188 million pounds, 10 percent above the corresponding months of last year. Reports from trade sources indicate that cigarette

production in foreign countries is increasing by about 4 percent annually. The

available world supply of high quality flue-cured tobacco has become relatively

tight.

Consideration will be given to data, views and recommendations as to whether

the national marketing quota and acreage allotment for flue-cured tobacco for

the 1974-75 marketing year should be increased or terminated and if increased,

the amount of such increase, and data and views submitted by purchasers of

amount of such increase, and data and views submitted by purchasers of tobacco

with respect to the capacity of processing facilities to handle the increased weekly

marketings which would be expected if the marketing quota and acreage allotment

were increased. Submissions should be transmitted in writing to the Director,

Tobacco and Peanut Division, Agricultural Stabilization and Conservation Service,

United States Department of Agriculture, Washington, D.C. 20250. All submissions made pursuant to the notice will be made available for public inspection

from 8:15 a.m. to 4:45 p.m., Monday through Friday in room 6741, South Building,

14th and Independence Avenue, SW., Washington, D.C. All submissions must, in

order to be sure of consideration, be postmarked not later than January 10, 1974.

Signed at Washington, D.C. on: December 18, 1973.

KENNETH E. FRICK,

Administrator, Agricultural Statibilization and Conservation Service.

[Fit Doc. 73-27079 Field 12-20-73;10:52 a.m.]

Mr. JONES. Thank you, Mr. Frick.

At this time, the Chairman will recognize Mr. Mathis for any

questions he might have.

Mr. MATHIS. Thank you, Mr. Chairman, I came in after some of

the other members, so if I might ask to pass, I would like to be recognized afterwards.

Mr. JONES. Mr. Mizell, any questions?

Mr. MIZELL. Yes, Mr. Chairman. If it is all right with the Chair,

because I have any number of questions, I might ask that we operate

under the 5-minute rule so I do not abuse this privilege today.

Mr. JONES. Without objection, the committee will operate under

the 5-minute rule.

Mr. MIZELL. Thank you, Mr. Chairman.

Under the proposed rule changes published in the Federal Register

of December 26, 1973, you stated that you would give consideration to

views, data, and recommendations of interested persons concerning

the national marketing quota. Now, my question is if you have received these letters of response, and particularly, have you studied

the data and the views contained in the recommendations?

Mr. FRICK. Yes, we have, Congressman Mizell, and realizing that

most of the views that do not touch the quotas, do not change the

acreage allotments, and still we felt that we had to look at the figures

as they come to us and to go up, I guess what you would call a kind of

minimum amount to assure the growers of these markets. But I

realize that the statements from the growers, and I think most of them

were from the growers, was to not go up.

Mr. MIZELL. Well, you answered my next question. That was what

were the responses and, of course, they were overwhelmingly opposed

to terminating the program or increasing the allotment. I think you

answered that question, Mr. Frick.
9

Now, really, when was the decision made? Was it not made in

December not to terminate the allotment program?

Mr. FRICK. No, sir. The decision was made—I do not know, just

a day or two before we put it out in January. We put it into the Federal

Register knowing that we would have to review our figures and to

listen to the comments made. The decision was not made until shortly

before it was put out.

Mr. MIZELL. Then I take it that the reports that I was reading in

the newspapers that the Department was assuring certain Senators

that there was not going to be any termination of the program, there

was no basis for those?

Mr. FRICK. Congressman Mizell, I did not read those reports, I do

not know what basis there was for those reports. From my standpoint,

no basis.

Mr. JONES. Would the gentleman yield just a minute?

Mr. MIZELL. Yes.

Mr. JONES. We will extend your time by that much.

Mr. MIZELL. Thank you, Mr. Chairman. I yield.

Mr. JONES. In that connection, during a telephone conversation

with Secretary Butz, I raised the same question to him that you are

raising to Mr. Frick. The answer was that the only statement that

the Secretary had made to any Senator was, "I will do nothing to

wreck the tobacco program."

I hope that clears it for you. The Secretary assured me I could use

the same statement whenever I saw fit. Of course, the interpretation

of the word "wreck" might differ with individuals.

Mr. MIZELL. This concerned me a great deal, because while our

farmers were really upset about the possibility of losing their program

after they had worked so hard and been so dedicated to controlling

production and controlling their program to keep it strong, and then

on the one hand to see they are proposing to terminate it and then on

the other to read in the newspapers that this was merely a ploy on the

Department's part to try to make the 10-percent increase which they

were going to propose more acceptable 

Mr. FRICK. Let me assure you, Congressman Mizell, there is no

ploy, no game. This is, as you pointed out, very clearly serious business

and it does affect more than 200,000 farmers. We understand that, and

we do not think we should play games with farmers or their livelihood.

Mr. MIZELL. When you published the proposal in the Federal

Register, you were proceeding under section 371(b) of the Agricultural

Act, were you not?

Mr. FRICK. Yes, sir.

Mr. MIZELL. You have already answered that, sir. But you were

not proceeding under the national emergency provision of that section,

were you?

Mr. FRICK. No sir, this is strictly to do with the exports.

Mr. MIZELL. Then you were proceeding under your authority in

which you believed there would be a material increase in export demand in 1974?

Mr. FRICK. Yes, and could I read some figures on that?

Mr. MIZELL. Yes, I am sure that any that you have will be appreciated.

Mr. FRICK. We can insert this in the record, but the data that was

used in determining the 1974 quota back in June of 1973 showed that
10

we had exports for 1972-73 of 490 million. When the final figure came

in, this went up to 519 million. We used the figure of 465 million for

1973-74. More up-to-date figures show that this went up to 510

million.

We used the figure of 455 million for 1974-75, and our estimates

committee at this point in time puts that at 500 million. This, in itself,

is 120 million more pounds than we used in establishing the 1974

quota back in June. So as additional information comes in—here is

120 million pounds in export only, not talking about domestic, that

was not counted on at the time we did make the original determination.

Mr. MIZELL. And the original determination was made with the

thought in mind that that is what the quota should be, and because

of the later figures which has resulted in the proposed increase?

Mr. FRICK. Yes, we had not projected this dramatic increase in

exports that has gone on much longer than we expected—at that

time. I mean we just did not project.

Mr. MIZELL. I appreciate your comments on that, because there

are many that thought you had these figures as early as May and June

and that you did not want to propose them until after the referendum

was held, and then only after that was the proposal made. You can

see why there would be some serious questions raised in the minds of

our farmers?

Mr. FRICK. Yes, sir.

Mr. MIZELL. Now, as we look at the proposed quota production in

July, the quota for 1973 was 1,179 million pounds of flue-cured tobacco. At the time, we also knew that there was an undermarketing of

about 50 million pounds. In addition, we knew the law permitted in

excess of 10 percent of the quota to be marketed without penalty,

thus adding another 118 million pounds, making the total marketing

quota of 1,347 million pounds available to 1974 producers. Now, you

did have those _figures at the time you set the quota, did you not?

Mr. FRICK. Yes sir.

Mr. MIZELL. Now, in addition to those, there are 323 million

pounds of flue-cured tobacco under loan. Is that correct? Is that the

figure that we had under loan at that time?

Mr. FRICK. That was the figure that we had available in June,

apparently.

Mr. MIZELL. Yes. So in summary, without there being any increase

in allotment, a total of 1,670 million pounds would be available for

marketing in 1974 and 1975 if all of it were produced?

Mr. FRICK. Yes, I guess this is right. I am not sure I have kept up

with all the figures. If everybody used the 10 percent, Mr. Todd said.

Mr. MIZELL. And of course, you have already answered this, but so

that we might be completely clear on it, what happened between July

and December that caused you to believe that we would need an

increase in allotments in order to meet the export demand?

Mr. FRICK. Well, again, in just updating figures we had, exports

went up 120 million—now, that is both finalizing a figure for the 1972-

73 year, estimating the year we are in, and then additional estimates

on the year we have not started. Then I see even domestic consumption

is up 25 million. Now, our people do estimate a 500 million offtake in

1974-75. They estimate 510 million in the year we are in. If you carry

forward the 18-percent increase in exports that we are now experiencing, the offtake is much more than what they indicate.
11

So all I would say is that the figures have chtinged dramatically

since then. Even that which is in C C is down considerably from the

time we made the first allotment notice.

Mr. MIZELL. But you do think the exports are going to exceed 500

million pounds in the 1974 crop?

Mr. FRICK. We show in our estimates committee 500 million. So I

would not venture beyond that; I do not know. That is our people's

best estimate at this time.

Mr. MIZELL. What was the export figure last year that you quoted

earlier,Mr. Frick?

Mr. FRICK. The export figure for 1972-73?

Mr. MIZELL. Yes.

Mr. FRICK. That was 519 million. The export figure projected for

this year is 510, then projected for 1974-75 is 500.

Mr. MIZELL. Now, of the export of last year's crop, how much of it

was exported under the old barter program? Do you have those

figures?

Mr. FRICK. This was during the period 

Mr. MIZELL. That the barter program was in effect.

Mr. FRICK. I do not think we have those figures with us at this time.

We will be happy to supply that. We are not doing any barter right

now.

Mr. MIZELL. I understand that the contracts that were let last

spring, of course, if they have not been used, they will still be in effect,

but chances are they have already been used under the barter program; is that right?

Mr. FRICK. Or under the export subsidy program.

Mr. MIZELL. No; we have completely eliminated the 5-percent

export subsidy. Then of course, the proposal to eliminate the barter

program, after we held hearings here last spring, my understanding is

that they would go ahead and let the contracts for 14 months, or contracts covering 14 months for the purpose of exporting tobacco.

Mr. FRICK. Can we supply you with those figures?

Mr. MIZELL. I wish you would, because if I remember correctly, we

are talking about something between 250 and 300 million pounds of

tobacco. As you have just stated, the barter program is not going to be

in effect this year.

My question was, and you might include this with your statement

for the record, how much effect do you think the elimination of the

barter program will have on the projected export of tobacco? If you

would include that with the figures, I would appreciate it, because it

could be very significant as we look to the export program.

Mr. FRICK. We will.

[The material referred to follows:]

TOBACCO EXPORTS UNDER THE BARTER PROGRAM

Eligible for export under the Barter Program beginning in 1958, tobacco

has been one of the program's leading commodity exports in recent years and has

represented a significant part of total U.S. tobacco exports.

Late in Fiscal Year 1973, a temporary suspension of barter contracting was

announced after a determination that the current unprecedented demand for

U.S. agricultural commodities negates the need for the program's export incentives.

The program was re-activated during June to permit barter exporters to obtain

contracts to cover export sales of cotton and tobacco they had already made.

Tobacco export firms received contracts valued at about $42 million as the result
12

of the program's re-activation. Since July 1, 1973, contracting has been suspended

and activity limited to exports to completing existing contracts. The final date

for shipments under these contracts is July 31, 1974.

Barter records do not identify the crop year of shipments, but the following

table shows the quantity and value of barter tobacco exports in recent years:

tin thousands]

Fiscal year Pounds Value

1972 176,798 $200,690 1973 170,048 205,044

1974 (1st half) 45, 551 55, 481

Mr. MIZELL. Mr. Chairman, I notice you keep looking at your

watch. You just call time on me any time you want to. I will be glad

to yield because I am sure that I have exceeded my 5 minutes. Then

when we are through, if we have additional time, I would appreciate

the opportunity to continue my questioning, Mr. Chairman.

Mr. JONES. Thank you, Mr. Mizell,

The Chair recognizes Mr. Rose.

Mr. ROSE. Thank you, Mr. Chairman.

Mr. FRICK, I cannot think of any better way to start off 1974 than

by having a discussion with you about tobacco. Do you or your

assistant there have any figures on how much tobacco we actually

used in 1973? By that I mean that went into export and was used by

domestic companies?

Is not the figure of 1,175 million pounds about what we used in

1973? Or do you have that?

Mr. FRICK. The 1972-73 figure 

Mr. ROSE. No sir, I am

Mr. FRICK. Well, the 1973-74 figure, that is the one we are in, we

have down here 1,190. The year before was 1,183.

Mr. ROSE. Well, we are pretty close. So we are talking about 1,190

was the tobacco that was used on the export markets and by domestic

companies during the last year.

Mr. FRICK. Yes, sir.

Mr. ROSE. Now, according to the questions you answered for

Congressman Mizell, looking at 1974-75, before you made any 10-

percent increase, there was available in the neighborhood of 1,600

million pounds, as Mr. Todd said, if everybody grew the additional

10 percent. Is that not approximately correct?

Mr. FRICK. Yes, I guess so. You lose me a little bit on those figures.

Mr. ROSE. Let us back up.

Mr. TODD. If everybody used the full 10 percent, which they never

have.

Mr. ROSE. What was the announced quota for 1974-75 before the

10-percent increase?

Mr. FRICK. 1,179.

Mr. ROSE. And you had about 50 million extra that came from

Georgia and South Carolina, is that not correct?

Mr. TODD. I do not quite read you, Congressman. The national

quota for the 1973 crop was 1,179 and the July announcement carried

the same national quota.

Mr. ROSE. For 1974-75.

Mr. TODD. Of 1,179.
13

Mr. ROSE. But there were some carryovers from the previous year.

Mr. TODD. Each year; yes.

Mr. ROSE. Yes, sir, of about 50 million pounds, is that not right?

Mr. TODD. In the 1973 crop. It was not that big in 1972.

Mr. ROSE. It was on the 1973 crop, so that would add another 50

million on the 1974, would it not?

Mr. TODD. Yes, sir. It is not all in Georgia, though. Nationwide

it is 50 million pounds.

Mr. ROSE. All right, sir.

Mr. Frick, is your Department aware or do you have figures now

of how much tobacco the companies have on hand—not stabilization,

but how many years' supply of tobacco do the companies have on

hand right now?

Mr. TODD. Anybody holding any tobacco except farmers—farmers

do not have to report—but everybody except farmers have to report

to the Department once each quarter exactly what their holdings

are. That has been the law since 1929 and we find those reports to be

very reliable. So we have accurate reports.

Mr. ROSE. So we are not like the petroleum industry, not knowing

what kind of supplies we have on hand, are we, Mr. Todd?

Mr. TODD. That is right. On tobacco, we get actual reports.

Mr. ROSE. How many years' supply do the tobacco companies have

on hand right now?

Mr. TODD. We do not have the January 1 figures added up yet, but

we use the figure of the beginning of the marketing year which is July

1. On July 1 this year, they reported 1,787 million pounds on a farmweight basis. That includes the Government loan holdings. That is

the total carryover.

Mr. ROSE. You can translate that into years' use, now, Mr. Todd.

You have a rule of thumb on how much the tobacco companies had

on hand that they could use for a year and it has varied between 2

and 3 years' supply up to 5, 6, and 7 years' supply.

Is it not true, Mr. Todd and Mr. Frick, that the tobacco companies

have on hand right now about 2.4 years' supply of tobacco. Is that

not correct, sir?

Mr. FRICK. Mr. Rose, yes; when you add up the producer marketings and what they owned and what CCC had, that adds up, I see a

figure of 2.9 billion, which is about exactly 2.4 years, I think.

Mr. ROSE. So what the effect of your 10-percent increase is going

to be, there Is going to be an increase in the years of tobacco that the

domestic companies have on hand. Is that not about right? Are we

not going to increase the years of supply as a result of your 10-percent

increase up to maybe 3 or 4 years' supply of tobacco on hand?

Mr. FRICK. If the present outlook for export and if the increase

continues, why, that would not happen at all. If the present export—

I mean if the exports go back down to what they have been doing,

then what you are saying, we could increase by maybe 100 million

pounds.

Mr. ROSE. In your testimony, Mr. Frick, you say "In view of

increased cigarette consumption and reduced tobacco production in

some countries, the available world supply of high quality fluecured tobacco is relatively tight." And that is about the size of your

estimation. You indicate agricultural attaches as the source of this

29-662-74----3
14

information. And you felt that this was sufficient indicia of world

demand to increase the allotments 10 percent. That had something

to do with your decision, did it not, Mr. Frick?

Mr. FRICK. That had something to do with it, but I think the figures

that were concrete had more to do with it. That was the actual

increase in marketings overseas during the periods we have cited,

and the change in figures as we were updated between July 1 and in

December.

Mr. ROSE. When was your announcement officially made that you

had decided to increase the allotments 10 percent? Was it January 14?

Mr. FRICK. Yes, sir.

Mr. ROSE. All right. January 14 was on a Monday, Mr. Frick.

You indicated that the decision had been made a day or so before that

announcement in response to Mr. MizelPs question, which would

have, unless you were working on the weekends, would have been

about the 11th, a Friday.

Now, the 10th was the last day that comments could be postmarked

in response to your December 26, 1973, Federal Register announcement. Mr. Frick, I went to your office on January 16. Mr. Todd very

graciously showed me the piles of paper that had been mailed in from

the various sources around the country, and he estimated then that

there were probably 6,000 or 7,000 letters that had come in and on

the 16th, only about half of those, or as he estimated it, roughly—

well, exactly-3,500, plus or minus, of those responses had been

tabulated. And your people in Mr. Todd's office, Mr. Lanier's office,

indicated to me that 86 percent of those that had, of those 3,500,

some 3,000 or more, had indicated please do not make any change

in the tobacco allotment system. Approximately 13 percent, or approximately 480-some had said, do not make any change in the

allotment system, but if you have to do anything, please increase

rather than do away with the quota system. And only one-half of

of 1 percent of the responses that your office had on December 16,

that they had tabulated—January 16—said do away with the

allotment system.

Now, I have calmed down considerably in my good discussion with

you here, but it really bothers me to think that the Department of

Agriculture would suggest to our tobacco farmers that you were

seriously considering doing away with the allotment system when

there was no emergency situation, as the law requires, to give you that

authority. I submit to you that it worked well, Mr. Frick, to suggest to

the American flue-cured tobacco farmers that they face either an

increase or a termination of their allotment system and they begged for

the lesser of the two evils. A 10-percent increase was not wanted in

1973. It was certainly not wanted in 1974 in the face of the fuel

crisis, in the face of a fertilizer crisis. But it was certainly the better

of two evils when stacked up against doing away with the quota system

altogether. That prospective bill made 10 percent seem like a godsend.

I submit to you, Mr. Frick, that an injunction would have laid

against the Secretary of Agriculture if you had done away with the

tobacco quota system, because I do not believe it would have been a

legal act. I hate to see the Department of Agriculture threaten the

American tobacco farmer.

What have you done with the tobacco companies that you met with

in December to assure a more orderly marketing of tobacco in 1974?
15

Mr. FRICK. Congressman Rose, they have given us figures as to the

increases in the facilities so that they can handle a certain amount

more of tobacco and we have those figures on hand.

Mr. ROSE. Do you have any way of enforcing their promise to have

redrying capacities of 10 percent more, 12 percent more?

Mr. FRICK. I do not think we have any way of enforcing that at

this time; no, sir.

Mr. ROSE. Thank you.

Mr. Chairman, I appreciate the indulgence of this committee. I

think this is a sad day for the tobacco business. I am sorry that this

has happened. I am afraid that our Department has looked after the

interests of the tobacco companies, who are making alltime record

profits in this country.

I do not believe you have done a very good job, Mr. Frick, in looking

after the interests of my small tobacco farmer. I hope I am here next

year sitting in this seat to look at the record of what has transpired.

But I fear for what our farmers are going to face in this season.

Thank you, Mr. Chairman.

Mr. JONES. Thank you, Mr. Rose.

The Chair recognizes Mr. Wampler.

Mr. WAMPLER. Thank you, Mr. Chairman.

Mr. Frick, I want to thank you for being here this morning and for

your frank response to questions that have been posed. I am beginning

my 10th year on this subcommittee and I suppose we are living in a

changing world, because this is really a turnabout. I can remember

many times in past years when we were pleading for an increase in

tobacco quotas and allotments and sometimes we were successful,

but most often we were not.

I want to commend the Department and this administration for its

aggressive action in developing export markets for agriculture. I

think they have achieved a considerable degree of success in expanding

our foreign markets for all of our agricultural commodities. I think

this is one area where the United States has somewhat of an advantage

and I think it has been clearly demonstrated that we can compete in

exporting our agricultural commodities.

As I recall the figures at the close of the last fiscal year, our exports

of agricultural commodities were in the range of $11 billion, of which

perhaps $1 billion was concessional, but over $10 billion represented

cash trades, or credits for us, and helped reverse what would otherwise

have been a dismal balance-of-payments deficit. We are moving in the

right direction.

I am concerned with the increase in tobacco marketing quotas as it,

relates to flue-cured tobacco. I hope that your estimates of our requirements for the export market are accurate. I have no reason to

suggest that they are not.

What concerns me here as it relates to the grower of tobacco is his

problems with labor, fertilizer, fuel, and certain marketing problems.

I want the Department to do everything they can to be sure that the

tobacco grower is given recognition of his problems and that we do

everything within reason to see to it that he has the fuel, fertilizer,

and other supplies to produce and market his crop.

Let me ask you this question: As you have projected the requirements for our export trade, what do you think would happen if trade

sanctions against Rhodesia were lifted or if they were relaxed?
16

Mr. FRICK. Well, I understand that Rhodesia probably would

increase their production by 100 million pounds or so and there would

be that much more tobacco on the market. At some point, this is

competition for us. I do not have a feel for which markets we would

be affected in.

Mr. WAMPLER. You said in your statement that as a result of the

meeting the subcommittee held with you and the Secretary—I believe

it was on December 6 

Mr. FRICK. Yes, sir.

Mr. WAMPLER. You indicated that you would subsequently meet

with representatives of the buying companies and you would urge

and stress the importance of increasing their capacity to process the

tobacco once it is sold and move it from the warehouse floor. At our

hearings in Lumberton and Florence last year, the testimony was

rather overwhelming that growers were having a great deal of difficulty in marketing tobacco in an orderly fashion. Many growers

were denied marketing space because it was not available. What

would be the Department's reaction to legislation requiring the buyers

of tobacco to remove it from the warehouse floor within a reasonable

length of time—say 72 hours—or in effect, have to pay a penalty or

have demurrage charges placed on that tobacco?

Mr. FRICK. I see nothing wrong in requiring movement of tobacco

through facilities if they are going to buy it and not hold up the next

sale day. I have no reaction except this, that again, I do not—I think

it is impossible to legislate every movement of tobacco and at what

point you have gone too far, I do not really know, sir. But I do know

there was some holdup, and I think once a man has purchased tobacco,

he should move it in his facilities and not stop the next day's sale.

Mr. WAMPLER. We were told by representatives of the warehousemen that labor was a factor and they did not have ample labor to

move the tobacco as fast as they would like to.

We also heard testimony that many of the buying companies had

closed some of their redrying facilities, and this necessitates moving

some of the tobacco long distances. I would hope that the buying

companies would consider reopening these redrying facilities which

are closer to the producer because I think this is one of the things

that can be done to speed up the marketing process. If we are going to

increase the market sales to the extent your testimony indicates, we

are going to have to do everything we can to sell this tobacco during

this critical marketing time.

There was testimony to indicate that there has been a great movement of flue-cured tobacco among the various belts. I would hope the

Department would look at this to see if there is not some way to

prevent flooding markets.

Mr. FRICK. We will look at both of those problems, Mr. Congressman.

Mr. WAMPLER. Thank you, Mr. Chairman.

I appreciate your comments, Mr. Frick.

Mr. JONES. The Chair recognizes Mr. Litton?

Mr. LITTON. Mr. Frick, in your opinion, was there a shortage of

redrying facilities last year?

Mr. FRICK. Apparently, there was some holdup. I am told it is not

only redrying, but other facilities for the movement of tobacco were

in short supply. So I gather in some places there was a shortage.
17

Mr. LITTON. So in your opinion, there was a shortage of redrying

facilities last year?

Mr. FRICK. Yes.

Mr. LITTON. And in spite of the shortage last year, you went

ahead and increased the quotas this year with no assurance that there

would be any more facilities other than the companies themselves

saying they would do something about it.

Mr. FRICK. Yes, we thought we got a good response from the

companies and the figures they told us. We figured these were responsible commitments to go from the 75 million per week ability up to the

85 million per week ability.

Mr. LITTON. If these companies do not continue their commitments, if they do not keep their word to increase their facilities, who

suffers?

Mr. FRICK. Sir?

Mr. LITTON. Who would suffer if commitments are not kept to

increase the facilities?

Mr. FRICK. Well, certainly it delays the marketing for the grower.

The delay—at what point this is suffering, I do not know, except we

had it happen in one locale this year where we did suggest that CCC

would take the tobacco under loan when the buyers were not on the

floor.

Mr. LITTON. Basically, if the tobacco companies do not maintain

their commitment to increase the facilities, those who suffer are the

growers in most cases, is that not right?

Mr. FRICK. Yes, I would think so.

Mr. LITTON. SO you are willing to gamble for the grower, I guess?

Mr. FRICK. I felt we got a good strong commitment from these

companies.

Now, you are suggesting to me that they will not follow through or

there is concern that they will not follow through.

Mr. LITTON. I am suggesting that possibility, yes.

Mr. FRICK. And certainly, if this is not followed through as committed, why, we would have to take a different look at it in the future.

We expect them to follow through.

Mr. LITTON. The fact that there was a shortage last year, were they

making any attempt to increase their facilities, not knowing the quota

would be increased?

Mr. FRICK. They told us they had been making these changes

already and it had nothing to do with quota increases at that time.

At least I remember the conversation indicating that.

Mr. LITTON. Was there much more tobacco produced in 1973 than

1972?

Mr. FRICK. The 1973 producer marketing was 1,144. The 1972

producer marketing was 1,022. Yes, there was, I think, around 11

percent more in 1973.

Mr. LITTON. And that is what caused the shortage of facilities, the

increased production?

Mr. FRICK. Well, I would think it certainly had something to do

with it, yes, sir. They used to have much greater facilities years ago,

and I understand there has been a big change in the handling processes and they have reduced the number of facilities in a more modern

way of handling things. That is what I am told.
18

Mr. LITTON. Mr. Frick, the point I am making is that the companies

did not appear to be making any substantial change to have more

redrying facilities to meet the increased production needs, and now

all of a sudden, you believe that they are going to do that. That is

what disturbed me. I wondered if their performance in the past would

indicate that their performance now is going to be better.

Mr. FRICK. Congressman Litton, I think the companies, as our own

people, had pretty well decided that we had reached a level and we

were going to stay there. We had been living off of CCC holdings, and I

think that they decided that our exports were going down and this

trend would continue and they were not expanding facilities. And

something has happened over the last 2 years. I think they are responding a bit late, but I really think that they have decided that we

had hit a level and now they understand that we must market more

tobacco. I think they are going to respond to this.

Mr. LITTON. I will not belabor the point. It just bothered me that

when we were increasing production they were not responding and

now on the promise of increasing the quotas, you feel sure they will

respond. I sure hope your perception is correct on behalf of those who

produce the tobacco.

Mr. JONES. Mr. Young?

Mr. YOUNG. I yield to Mr. Daniel and I will ask questions later.

Mr. JONES. I thought we would recognize the members of our committee first and then come to Mr. Daniel.

Mr. YOUNG. Thank you, Mr. Chairman.

Mr. Administrator, first of all, I would like to thank you for coming.

I appreciate the forthrightness of your statement.

In your opinion, do you think we should have allotments on tobacco?

Mr. FRICK. I have no other thoughts than allotments on tobacco.

Mr. YOUNG. Do you believe, then, that the quota on tobacco is a

good thing?

Mr. FRICK. Yes; Mr. Congressman, I do not know how to have other

than quotas on tobacco, other than we did suggest the no quota

because there was a way to support present tobacco allotment holders

and still allow for an increase.

Mr. YOUNG. I would like to follow Mr. Litton and Mr. Rose's

questions concerning the tobacco companies and I understand you

have a commitment from these companies. In the event that these

companies do not live up to their commitments to increase their intake per week of 10 million pounds, would you then be willing to open

stabilization again to receive this tobacco so the market would not be

congested?

Mr. FRICK. If we run into a situation again where farmers are caught

with no place to market their tobacco, we would be willing to open

CCC stabilization.

Mr. YOUNG. Now, the truckers tell me that they have a problem in

hauling this tobacco—we went into this on the warehouse floors—that

the truckers would not move this tobacco because when they brought

their rigs into the threshing and drying plants, they were held up, so

they refuse to haul this tobacco. -What if this situation duplicates itself in the market in 1974?

Mr. FRICK. Well, of course, this would delay marketing and farmers

would be delayed to the point where the market would have to stay
19

open longer. And if it does not stay open, if it is decided to close, then

we would have to do something about it in stabilization.

Mr. YOUNG. Can you tell me what stocks are in stabilization at the

present time?

Mr. FRICK. Well, as of the end of December—and this is flue, is it

not-268 million pounds, farm weight.

Mr. YOUNG. Now, I called these folks that hold this tobacco and I

asked them what is wrong with it. What is wrong with this tobacco?

Mr. FRICK. Joe tells me nothing.

Joe, do you want to respond to that?

Mr. TODD. There is absolutely nothing wrong with that tobacco. It

is in excellent shape. It is just not the grades that these foreign

manufacturers order. Now, they have been buying some of our long

stocks because that is all they can get. It is just like when you go to the

store, you want something but you will take something else if you can

be assured you cannot get the other. I can assure you there is nothing

wrong with it.

Mr. YOUNG. I asked you this question because they said, do you

have a bunch of dogs over there? I want to find out. We have 268

million pounds of tobacco. I want to find out why the foreign markets

will not buy this tobacco. A lot of tobacco I have seen going into

stabilization looks like pretty good tobacco to me, but a man told me

the other day the tobacco companies operate by the golden rule: they

have the gold, and they make the rules.

Mr. FRICK. Mr. Congressman, I do not think there is anything

wrong with our tobacco that is in stabilization, but I do think it is like

Mr. Todd mentioned, that it does not suit some very specific needs for

certain grades.

Mr. TODD. As further evidence of that, the 268 million pounds we

had last year, we had 382 million at the end of the previous year and

657 million the year before that and 826 million the year before that.

So they have been reducing substantially.

Mr. YOUNG. Then what you are saying

'

Joe Todd, is it is not as bad

as they make out it is, because they have been buying it in years gone

by and reducing those stocks?

Mr. TODD. Yes, sir.

Mr. YOUNG. Let me ask you a question, Mr. Administrator, concerning the price of tobacco. As you know, I opposed very strongly,

very vigorously, this 10-percent increase. I had hoped that the farmers

would be listened to and some compromise would be worked out. I

felt very keenly aware of the situation of many of our farmers and we

simply did not want it. But now we have it.

Now, the question I ask you is will the price be strong? They are

trying to make up their minds in my area whether or not to plant

this 10 percent. Mr. Administrator, you have been with the companies, they have asked for this increase. What is your opinion concerning the price of the 1974 crop?

Mr. FRICK. Mr. Congressman, I have no way to project the price.

That is why we did look at the loan level change that went from

around 76 up to 83 plus for the 1974 crop.

Mr. YOUNG. This is a 6 to 7 cent increase per pound for the 1974

crop?
20

Mr. FRICK. Yes sir, which I think does assure the farmer of no

dramatic break from this year. Now, it certainly depends on the

amount that is grown; in other words, is it a good crop year? In other

words, is it a good weather year? If it goes way beyond normal, I do

not know how much above the loan the price would be. If it is just an

ordinary year, you would expect bidding to go along very nicely.

Mr. YOUNG. Mr. Chairman, if you would yield for one more

question.

If you would, market designation, Mr. Frick, was attempted this

last year and legal suits were brought against it. This could have a

very direct effect on the market. What is your position concerning

market designation for the 1974 crop?

Mr. FRICK. This is what we did suggest last year and did not go

ahead with. I would think we should suggest it again this year.

Mr. YOUNG. And how would it work?

Mr. FRICK. I would like Mr. Todd to describe it.

Mr. TODD. Mr. Chairman, may I comment on that without charging

it to him and comment also on a question you raised as to what might

be done to improve our marketing system?

Mr. JONES. The gentleman is recognized for 2 minutes.

Mr. TODD. As you know, Secretary Butz has made a statement a

number of times that he thinks our marketing system for former

marketing of commodities—tobacco, et cetera—should be improved.

Our marketing system on tobacco has not changed much in the past

hundred years. I think a bigger problem last year than the facilities

were labor and transportation, moving tobacco off the warehouse

floors. As Congressman Young says, maybe it was plugged up at the

other end in some cases.

We tried market designation last year on the recommendation of

the study committee that the Secretary had appointed. We were

late in getting it out because we had not anticipated that we would

try it because of the time element last year. But we had a number of

requests that it be put into operation and we did. Then we got this

court suit and I think that was due to the short spell that we had

allowed farmers to make the designations. We have already received

a number of requests this year, and the Congressman talked the

other day about putting it in operation this year. We have had a

request, I think, from the industrywide marketing committee and they

are doing extensive work now in trying to improve the marketing

system for the next year.

We met recently with the tobacco warehousemen—the leaders of

the various warehouse associations. They are taking some steps to

try to improve the marketing system.

Now, when they had the holiday last year, I think in your area, it

was due to the fact that they could not get the tobacco off the warehouse floor.

Mr. JONES. Could not get it off. That was the problem.

Mr. TODD. That is what I meant; sorry.

As Congressman Wampler knows, in his area in the burley markets,

the warehousemen bunch it up, move it off the floor and set it over by

the doors. They are trying now to get a plan whereby they will help

the buying companies because they have a better chance to corral

local temporary help than the buying companies do. So the ware-
21

housemen are negotiating now with the buying companies to try to

overcome that bottleneck. On the basis of past.experience, I am confident they will come up with something.

As Congressman Young knows, we think the biggest problem we

have is cross-belt marketing-48 million pounds of tobacco produced

up country were marketed down in the South Carolina border belt

last year. That messed up things down there because the local farmers

could not get on the floor. The warehousemen were booked with all

this and they could not haul it up there because the warehouses up

there were booked. So we have been asked to issue separate marketing

cards to identify that out-of-belt tobacco. We have no legal authority

to control it.

They passed a law in Georgia, as Mr. Mathis knows, a few years ago

to identify it and the courts threw it out as being unconstitutional.

So there are some problems involved there, but a number of groups

are working on it.

North Carolina State University has made an extensive study and

has some good suggestions, I think, on improving the marketing

system. I believe Clemson has and some others too. So we are going to

try to improve this marketing system by the time the market opens

another year.

I think one effort by the warehousemen to move that tobacco off

the floor so they can have more floor space for tobacco to sell will

overcome that problem.

Mr. JONES. In other words, you are trying to assure the committee

that you are going to try to designate the marketing plan this year?

Mr. TODD. I do not know, we have been asked to.

Mr. JONES. I am going to use part of my 5 minutes at this point,

then, if I may.

Mr. YOUNG. I will be glad to yield my questions to you.

Mr. JONES. Will the designation cover individual warehouses or

the market itself, like Farmville, where we have four warehouses?

Mr. TODD. It was the thinking of the study committee that the

first year we had the thing in operation, Congressman, about as far

as we could go would be to let the farmer designate the market where

he would like to sell his tobacco. I would hope in another year or two,

you could go to warehouses. But it would 

Mr. JONES. But if you implement the program this year, then there

are no plans or no thinking to designate individual warehouses, but

only the market itself?

Mr. TODD. We think we should take it one step at a time, yes sir.

Mr. JONES. Who would administer this program?

Mr. TODD. The only authority we have now is what we planned to

do last year. We will let the farmer designate at the local county SCS's

office.

Mr. JONES. On a voluntary basis?

Mr. TODD. Yes, sir.

Mr. JONES. Then if the framer does not follow

intended market or his designated market and goes

what is the penalty?

Mr. TODD. There really is not any authority for

we did ask the farmer 

Mr. JONES. What is the purpose of the program?

through with his

to another town,

any penalty, but
22

Mr. TODD. We ask the farmer when he made that designation to

sign an agreement to comply with it.

Mr. JONES. What if he does not?

Mr. TODD. We cannot do anything about it. And we turn those

summaries over to the marketing committee and they plan to put

additional sales opportunity on the markets where the farmers designated. But that is where the court intervened and threw a monkey

wrench into the works on the marketing committee.

Mr. JONES. What makes it legal this year when it was illegal last

year?

Mr. TODD. Well, we have started earlier this year and have time

for appeal if we get an adverse court decision.

Mr. FRICK. Mr. Chairman, in marketing, I think that Mr. Todd

expresses our interest very well. There is some frustration in the

Department that the marketing system does need some improvement.

It is obvious that the marketing system has caused some delay for

the farmers; it is obvious that there are other problems. We would

like the guidance you can give us in solving these problems.

Mr. JONES. We will be glad to assist you, sir.

Mr. FRICK. We will go as far as we can and as far as you have expressed to us in improving the marketing system. We are only the

Department of Agriculture and it is up to the industry to get with

its own systems to be improved.

Mr. JONES. Your humility overwhelms me.

Mr. YOUNG. Mr. Chairman, if you will yield on that particular

point, would the Department of Agriculture administer the market

designation or would the 33-man committee?

Mr. FRICK. The Department of Agriculture through the ASCS

office.

Mr. MIZELL. Mr. Chairman, I really did not intend to pursue the

questions in this area, but my one comment is the only suggestion I

have heard is always placing the restrictions and imposing the burden

on the farmer in these areas. So regardless of what type of marketing

we have, I think the farmer should get his fair shake.

The Department just keeps imposing additional burdens on him.

There are reasons why he moves that tobacco in order to market it

early in the season. Mr. Todd, you are aware of those reasons more

than I am.

Mr. JONES. The Chair now recognizes Mr. Mathis from Georgia.

Mr. MATHIS. Thank you, Mr. Chairman.

Mr. Frick, a couple of quick questions.

The warehousemen were here on January 3, I believe, and met with

you, as Mr. Todd pointed out. What was their position on the 10-

percent increase?

Mr. FRICK. When did we meet with them?

Mr. MATHIS. It does not matter when you met with them, they

were here January 3. What was their position? That's what I am

trying to find out?

Mr. TODD. I do not think they took any position on that. They

opposed termination, but they were here basically for another problem,

Congressman, because they had asked to meet with the Secretary and

Mr. Frick and the rest of us to ask us to let them initiate action and

improve the marketing system from the warehousemen's viewpoint.
23

Mr. MATHIS. They did not take a position on the 10-percent increase, but they did take a position on the termination of quotas?

They were opposed to that?

Mr. TODD. That is the only one I recall, yes sir.

Mr. MATHIS. What position did the buying companies take on the

increase? You met with them as well?

Mr. FRICK. Yes, we met with them earlier. I missed the warehouse

meeting, but the buying companies, at least the exporting companies

in particular, were interested in an increase.

Mr. MATHIS. What about the domestic companies—R. J. Reynolds,

American, these people who produce for the domestic market?

Mr. TODD. They asked for an increase. I do not recall any specific

amount.

Mr. MATHIS. Now, the farmers have not asked for an increase. The

overwhelming response you have had is that the farmers are opposed

to it?

Mr. FRICK. Yes, sir.

Mr. MATHIS. So we can find out something very basic there: The

companies have asked for it, the farmers have not.

Let me ask, the national allotment, the quotas for 1973 were what?

What is the exact figure that could have been produced in 1973 under

the quotas?

Mr. TODD. The original quota that we announced for both 1973 and

1974 was 1,179 million pounds-1 billion 179 million pounds. Now,

that will be increased by about 50 million pounds in 1974, the shortfall or undermarketings of the 1973 farm quotas.

Mr. MATHIS. Then a 10-percent increase on top of that has now

been added for the 1974 crop year, is that correct?

Mr. TODD. Almost. The 10 percent does not apply to the 50 million pounds shortfall.

Mr. MATHIS. All right, so there will be another 117 million added

to the 1 billion 229 million pounds, is that correct?

Mr. TODD. Yes.

Mr. MATHIS. So that would be 1,346 million pounds that we

could produce in 1974?

Mr. FRICK. One billion 

Mr. MATHIS. 1,346 million pounds?

Mr. FRICK. Yes, sir.

Mr. MATHIS. In your statement, you tell us the tobacco companies

have agreed to move 1,275 million pounds. What are we going to do

with this additional 71 million pounds of tobacco? Are we supposed

to eat this?

Mr. FRICK. I would like Mr. Todd to explain the amount of marketings we count on.

Mr. TODD. In the acreage-poundage legislation, there is a provision

in the law that if a farmer does not market his quota 1 year, it is

added to his quota next year, regardless of what quota we announced

for that year. He can go over his quota as much as 10 percent by

borrowing from next year and any overmarketings are deducted from

his quota for the following year.

During the 8 years we have had this quota, the marketings have

averaged 96 percent of the effective quota. It was about 95, 96 percent last year, 1973.
24

Theoretically, every farmer could go 10 percent over his quota as

you figure there. But it has never been done.

Mr. MATHIS. This does not include, Mr. Todd, the 10 percent

overage figure. I did not put that in. This is simply your 10-percent

increase that I was inquiring about.

But you have answered that question. In other words, if we have

a good crop, a normal crop, 96 percent, and we still have somewhere

around 50 million pounds of tobacco that cannot be marketed orderly

according to the figures you have given us here today.

Mr. TODD. No; Mr. Frick's statement says we can market that

much in 15 weeks.

Mr. MATHIS. How long does the selling season last?

Mr. TODD. It has always lasted as long as the tobacco remains to

be sold.

Mr. MATHIS. That is not true in Georgia. We have to come back

with wrap-up sales, the farmer has to haul that tobacco 200 miles,

in some instances, to sell it. You know that is the case.

So we have not been provided adequately with any assurances

whatsoever of the tobacco companies that they will follow through

on this. I think I would feel a lot better if we had some concrete way

of enforcing what they have told you they were going to do. But I

am very much concerned that we are going to end up with marketing

problems, particularly in Georgia, where we have not in the past

experienced the kind of severe problems that they have had in North

Carolina and South Carolina. But I know in my State next year alone,

we have a 30 million pound carryover.

Now, if we figure on the basis of our 150 million pounds that we

normally have and add a 10-percent increase to that and add the

carryover in, we are up to close to 200 million pounds, and there are

not enough barns in Georgia to hold it and there is not enough space

on the floors to sell it. I would hope my farmers would give very serious consideration to not planting this 10-percent increase you have

asked for.

I know you hear this little speech from me every time you come down

here but it is getting more and more frustrating and more and more

aggravating to have the wishes of this committee ignored consistently

by the Department of Agriculture, and it has not failed to do so in

the last 2 years.

We did have a meeting with you on December 6. We expressed our

concerns about the way the Department is going. It seems to me there

is an attitude in the Department that USDA knows what is best.

You gentlemen are down there, not subject to political pressures and

we are. That is what we are here for. We are elected by the people

to represent them. But it seems to me you have decided that what

this committee wants is of no concern and if we decide that a 10-

percent increase is not good for the tobacco farmers, well, fellows,

that is just tough luck, because we know what is best for the companies

and the Department, when we get down to it.

I intend, if it is at all possible and this committee will consider it,

to introduce legislation fixing the tobacco poundage at the 1973 level.

I would seriously hope we can get early consideration of that legislation

and that we can pass it. I want the farmers to know clearly where the

responsibility lies for these arbitrary actions that have been taken.
25

Not with the Congress, where we have tried to defend the interests

of the farmers instead of sort of selling out, as it were, to the tobacco

companies.

Mr. YOUNG. I hope to join my colleague.

Mr. MATHIS. I have one other question that is not related.

Do we have anything on peanuts yet? Is the Department taking

a position on what the final program is going to be for 1974 on that

question?

Mr. FRICK. Mr. Lanier is not here this morning. My understanding

is that he is talking with peanut growers and their representatives

in Atlanta, Ga., this morning.

Mr. MATHIS. You will recall when we were together in your office,

in the Secretary's office, a few days ago, I had what I understood to

be a commitment from the Secretary and from you that we would

have a firm answer by this time, January 21. This is the twenty-second.

My farmers are still waiting to know where they are for 1974.

Mr. FRICK. I would hope that this would be concluded shortly.

Mr. MATHIS. You think it might be before we get the peanuts out

of the field? We do need to know before Christmas, Mr. Frick.

Mr. JONES. I might say to the gentleman from Georgia, I discussed

the same identical matter with the Secretary this morning and I got

the same assurance you got, that it will be forthcoming, and I am still

waiting.

The committee is happy to welcome other Members of the House

here this morning. In courtesy and deference to their interest and

their concern, at this time, I will recognize each of these gentlemen

for the allotted 5 minutes.

Mr. Daniel of Virginia?

Mr. DANIEL. Thank you very much, Mr. Chairman. I appreciate

the opportunity you have given me to sit in on your meeting this

morning. I have a very definite interest in the program. Tobacco is

the primary cash crop in the district which I have the honor to represent in Congress.

Mr. Chairman, as I look around at the members of this committee,

I do not see nearly as much gray hair as I see when I look in the

mirror. Therefore, I have had some experience with tobacco that

perhaps some of you have not. I grew tobacco when they had a designation on the sale's card, a "P,' which means passed. I guess that

is one of the reasons I am so anxious to see this tobacco program continue, because I do think that it is a real advantage not only to the

growers, but I think it serves a public interest.

There are one or two things, Mr. Chairman, that I would like to

comment on just briefly. No. 1 was the number that was used here a

few moments ago with respect to the messages that were received from

the growers. Someone used a figure of 3,500, but there were more than

10,000 which came in from my district. Obviously, all of those were

not letters. Some of them were petitions. But there were more than

10,000 expressions from the people of my district.

I told those growers in meetings of one type or another that their

views would be listened to in Washington, that we lived in an era of

power politics and that I hoped that as many of them would express

their view as favored the program.
26

Now, Mr. Frick, can you tell this committee definitely that the

views of the growers were taken into account before the decision

was made?

Mr. FRICK. Yes, they we,re.

Mr. Congressman, the allegation was made a bit ago that we pay

more attention to the buying companies than to the growers, and I

can state very straightforwardly with you that this is not so. We do

take the growers' comments into consideration, but we must also look

at the figures we have in front of us, which are not buying companies

figures; they are our figures. We must use those figures in this determination. So we lean toward the growers unless we feel we cannot

lean there any longer.

Mr. DANIEL. I represent both the growers and the exporters—

Dibrell Bros. in my district. They are big exporters, as you know. I

think since you have increased this quota, it is incumbent upon the

Department, it seems to me, then, to create a climate in world markets

in which the exports can be accommodated. I hope the Department

will take this into account.

Now, I have talked to a lot of the tobacco companies, and while

they may very well be willing to do what they told you they will do,

these people face exactly the same problems that the growers face—

that is, transportation, fuel, and labor. And I am not at all sure, and

neither are they, that they are going to be able to meet this commitment. If they do not, obviously, the burden falls on the grower.

He is the man who is going to be hurt by it. I do hope that some sort

of a program will be worked out in order that the burden will be as

light as possible upon them.

Additionally, it seems to me that the foreign markets might also

face the same problems as the domestic market because they obviously

face the same problems. Where are they going to get the fuel? Where

are they going to get the labor? It seems to me the entire world, particularly those areas where we ship tobacco, has now become rather

affluent. They are also buying automobiles and using energy that they

did not previously use. Now that they do not have it this year, I

expect their economy is going to be affected the same way ours is. I am

just very much concerned about whether or not we are going to be able

to market the tobacco which has been authorized.

In your statement, you say that "Although the response to the

notices has been of record proportions, only a relatively few actually

relate to the issue—`Should the 1974 crop quota be increased or terminated to meet the export demand?' "

Now, Mr. Frick, is that not really begging the issue? You do not

believe that you can consider export demands in isolation, do you?

Mr. FRICK. No, certainly they are not in isolation. It was the—we

thought that it was dramatic enough, the change in exports, that we

must look at it as an export picture and we must address that question.

We have to consider domestic and exports.

Mr. DANIEL. Now, last year, as I recall, the demand increased 4

percent domestically and 3% percent in the foreign markets. Is that

approximately correct?

Mr. TODD. What do you mean by demand, the actual usage?

Mr. DANIEL. The demand for flue-cured tobacco.
27

Mr. TODD. Well, I am not sure I can follow you there. The 1973

crop was about 10 percent more than the 1972 crop and CCC only took

a very small, less than 1.5 percent, out of that, so there must have been

demand. They bought it.

Mr. DANIEL. What I am saying, though, is that the demand was 4

percent more on the domestic market and 3.5 percent more on the

foreign market. Are those figures correct? I do not know.

Mr. FRICK. That looks to be about right; yes, sir, that looks to be

just about right.

Mr. DANIEL. Mr. Chairman, I want to express to you again my

appreciation for allowing me to attend the meeting this morning. I

found it to be both enlightening and depressing.

[Representative Daniel's prepared statement follows]

STATEMENT OF HON. DAN DANIEL, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF VIRGINIA

Mr. Chairman and members of the subcommittee: I am grateful for the opportunity of attending your meeting today and commend you for scheduling this

hearing so soon after the reconvening of Congress.

In all honesty, I feel that the problems we are discussing today could have been

minimized considerably had the Department consulted with this subcommittee

prior to making any announcement of proposed changes in the flue-cured allotment program. Indeed, the frustrations, concerns and extra work on the part of all

of us might have been eliminated through a better line of communication as to

what was needed and how was the best way to go about achieving it.

Hopefully, if this hearing serves no other purpose, a better line of communication

may be established for the future between the Department and Congress. This is

essential, in my opinion, because much of the controversy through which we have

just passed was related to the method employed rather than the objective which

was sought.

It had been known for several weeks before Christmas that the Department was

giving consideration to increasing the allotments for 1974 but the possibility that

allotments might be suspended was not indicated as any factor to be considered.

Yet, when we learned of this on the Friday prior to Christmas—and the Federal

Register article had already gone to the printer—it was next to impossible to find

anyone in authority in the Department with whom the matter could be discussed.

Thus, the timing of the announcement appeared to be designed to allow a minimum

period for adverse reaction to develop. If this was the purpose, it did not catch our

people sleeping. In my more than five years in Congress, I have never seen anything

arouse as much concern in my district as the announcement of December 26,

which held open the possibility that termination of allotments might be ordered.

Many people seriously raised the question—and with justification—why a

matter of this importance was brought to public attention only after Congress

was out of town, on the day after Christmas, with only 15 days in which comment

could be officially made. No convincing evidence has come to my attention which

would offer a reasonable explanation as to why the announcement could not have

been made just as well on December 15, or even prior to that. At least, under

those circumstances, a more orderly procedure could have been followed.

The massive outpouring of letters, petitions, telegrams, and other communications which came in response to the call for comment was encouraging. In

my district alone, more than 10,000 signatures on several hundred petitions were

obtained and these were delivered to the Department. We also had several hundred

letters and countless telephone calls, all of which stated strong support for the

tobacco program as presently constituted.

Use of the word "terminate" in the Department's announcement was obviously

resented by all segments of the tobacco industry. The industry supports the

acreage allotment system with virtual unanimity. Most officials of the Department

of Agriculture also agree that the tobacco program would be thrown in disarray

without it. Growers approved the program by a referendum vote of 98.5 percent.

It seems to me that there should be a prohibition against the Department's

suspending or terminating acreage allotments after growers have approved such

in a referendum, unless or until those who voted shall have an opportunity to

reverse that abtion in a similar referendum.
28

But now we have the 10-percent increase—which may or may not prove an

advantage to the tobacco industry. If our exports are increasing as we are led

to believe, then certainly all of us welcome this development. However, the

shortage of fuel in the very countries to which we are looking for these expanded

markets raises questions beyond our ability to answer. The commitments which

the Department contends have been made by the tobacco companies to facilitate

the movement of tobacco in a more orderly manner may run into real problems

in seeking fulfillment. The companies themselves may face some of the same

problems of labor, fuel, and transportation and the availability of equipment.

At any rate, all of us are concerned about the future of tobacco, because it

provides a livelihood for thousands of people who grow it, thousands more in the

processing and manufacturing industries and even more thousands in allied

activities. Tobacco is our earliest national export and the roots of the industry

grow deep.

We trust that this experience of the past few weeks may be a step toward more

recognition that no action of the Department of Agriculture or of Congress

for that matter—can be taken in a vacuum or considered in isolation.

Mr. JONES. The Chair recognizes Mr. Henderson, my colleague

from North Carolina.

Mr. HENDERSON. Thank you, Mr. Chairman.

Mr. Frick, as we returned yesterday, I think it was the consensus

among my colleagues from the House that as they had been out in

the country, people were concerned about the energy crisis, inflation,

and the broad issue of Watergate. Some of my colleagues including

some members of the Agriculture Committee were surprised when I

told them that in my district, all those things had been pushed aside

by the Secretary's proposal to suspend or increase the quotas on fluecured tobacco. I think we have seen here this morning that this was

probably true throughout the flue-cured tobacco producing area.

As I recall in 1973, the domestic companies said it would be necessary for them to import some tobacco unless there was an increase

in quotas, and I believe this was a factor which led to the Department's

action to increase the 1973 quotas by 10 percent. Am I correct in my

recollection on that?

Mr. FRICK. Yes; I remember the same thing.

Mr. HENDERSON. Now, that leads me to ask this: Did our domestic

companies buy and get the tobacco they needed from the 1973 crop?

Mr. FRICK. Just one comment on this. We show producer marketings of 1,155 and we show total disappearance of 1,190. Now, relative

to domestic companies buying—Joe, dso you have figures on that?

Mr. TODD. We do not have any figures on what the different

companies, domestic or exporters, buy. We do get figures from the

warehouses and we get a report at the end of the season from each

company on what they purchased.

Mr. HENDERSON. Let me ask you, Mr. Todd, did the domestic

companies suggest to you this year that if there was not another

increase, they would have to import tobacco?

Mr. TODD. They make that statement repeatedly, that we would

rather buy U.S.-grown tobacco. If we cannot get it here, we have an

obligation to our stockholders.

Mr. HENDERSON. Did they make that statement this year to the

Department or the Secretary?

Mr. TODD. I do not recall.

Mr. FRICK. I do not recall.

Mr. TODD. The statement was made at the burley meeting last year.
29

Mr. HENDERSON. I can testify that they did state to me, and I am

sure to members of the committee, in 1973, but I have inquired and

have been assured by the members that they did not make that

suggestion this year. I wanted to be sure what their position was this

year. I understood you to say that the export companies, Mr. Frick,

in particular were the ones that were suggesting that we needed the

increase this year.

Mr. FRICK. Yes; and as Mr. Todd reported, the domestics had some

increase but not as strong as the exporting companies.

Mr. HENDERSON. So it seems to me last yeat we took care of the

domestic companies and this year the exporting companies. What can

we expect for 1975? Who else can ask for an increase?

Mr. FRICK. Mr. Congressman, I think the figures will indicate that

there is an increased demand for tobacco and we have at this point 

Mr. HENDERSON. And your action will take care of that increased

demand domestically and for the export trade by the action that you

have taken in these 2 years?

Mr. FRICK. We hope so.

Mr. HENDERSON. You indicated in your statement that some

countries had reduced their tobacco production. Could you identify

those countries specifically for us?

Mr. TODD. In flue-cured tobacco—China—well, the People's

Republic of China went up. India dropped considerably, from 307

million pounds to 245. Korea, the Republic of Korea, dropped. Brazil

dropped. Rhodesia dropped substantially in 1973 in flue-cured

tobacco. Thailand dropped. The Philippines dropped, and China

(Taiwan), from what information we can get from China, dropped

some, not much. And there was also a drop in Pakistan, we are told.

Mr. HENDERSON. Thank you.

Mr. Chairman, in conclusion, I would certainly like the record to

show my appreciation for the prompt action of the Tobacco Subcommittee here. I will conclude by saying that as I talked to the tobacco

farmers in my district during the period of time that the Department

had under consideration the action we are talking about this morning,

I asked them what they would do if there were a 10-percent increase or

if the program were suspended. They said, with regard to the 10-

percent increase relating to the fuel, they would steal the fuel to cure

the tobacco if they had to, but they did not know what they would do

if the Secretary stole the program.

I was intrigued by this and asked them, "How are you going to

steal the fuel to cure tobacco? You will probably have even less than

you had last year." They replied they would take it from their home

heating supplies, because if they did not make it with their tobacco

crop, they would not be able to buy any fuel next year, anyway, for

heating their homes.

I was impressed with that. I think it was that serious with them.

Finally, Mr. Chairman, if I could trespass 1 more minute, even before this matter was finalized in the Federal Register, a lifelong friend

of mine, a good tobacco farmer, reminded me that he had been growing tobacco all our lives. I knew that he had adequate land and the

know-how. But he started out with the question of whether he was

going to be able to get the seed, get the fertilizer, whether he was going to be able to get the plantbed gas, whether the plantbed covers
30

would be available, whether he could get gas for the tractor, whether he

could get the labor, the fuel—a shortage in everything, problems in

everything that the tobacco farmer expects to grow. You know, he

ended up by saying he just did not know what he was going to do this

year.

I said, the thing that impresses me about your statement is that I

have always heard that in farming you can control almost everything

but the weather and you have not mentioned the fact that you must

worry about that.

He said, "I will tell you one thing. I have more faith in the Lord than

I have in our Government to take care of all these problems." And it

certainly was proved by the time we got home and I went to see our

farmer friends.

Thank you, Mr. Chairman.

Mr. JONES. Thank you, Mr. Henderson.

The Chair recognizes Mr. Andrews of the great State of North

Carolina.

Mr. ANDREWS. Thank you, Mr. Chairman.

Mr. Administrator, may I ask a few questions with respect to your

meeting with the companies and with respect to the assurances they

gave you that they would be able to provide adequate handling and

storage facilities for the increased tobacco. This is a matter that

farmers in my district have asked me about and I do not know the

answer. May I ask you, sir, for purposes of information, when was your

meeting with the representatives of the tobacco companies, at which

time they assured you, I believe, to quote you, that the companies

would be able to provide adequate handling, redrying, and so on,

facilities?

Mr. FRICK. I would say it was sometime in December; December

14.

Mr. ANDREWS. Were there minutes kept of that meeting?

Mr. FRICK. Yes, we did keep some minutes and we have some

figures that they have told us about.

Mr. ANDREWS. Now, in what way did they give you the assurance to

which you have referred and to which I have just alluded?

Mr. FRICK. Well, different companies did indicate the number of,

what changes they were making in their facilities and how much more

tobacco they thought they could handle in the 1974 crop than they did

handle in the 1973. Also, I think one of them had purchased some

facilities that were unused in the 1973 crop and they would put that

into use in 1974. I thought the commitments made by those companies

were rather specific and to the point.

Mr. ANDREWS. Were they or any of them in writing or were these

just oral statements?

Mr. FRICK. These are oral statements and we have since been in

contact with them, putting them down again to be sure of these

figures.

Mr. ANDREWS. I wonder if we might have a copy of who said what in

terms of how many pounds, et cetera?

Mr. FRICK. Yes, we would submit this to the chairman.

Mr. ANDREWS. Very good.

Thank you, Mr. Chairman.

Mr. JONES. Thank you, Mr. Andrews.
31

I recognize Mr. Preyer from the great State of North Carolina.

Mr. PREYER. Thank you, Mr. Chairman. On behalf of the tobacco

farmers in my district, I want to thank you andthe subcommittee for

holding these hearings.

My farmers are the last ones to sell on the market and therefore,

they are particularly interested in whether there is a real need for this

10 percent increase. If there is not the additional demand there, they

fear—rightly, I am afraid—that by the time they sell on the market,

there will not be much demand for their tobacco. I apologize for being

late at the hearing. My other committee was trying to get out one bill

I thought would be quick—the safe drinking water bill. But we found

that even safe drinking water is controversial.

I Will not rehash all of the ground that you have gone over, but I do

want to thank you for having the hearing. I will read the record with

interest—so will my farmers—to make sure that there is a demand

justifying this additional 10 percent increase.

Thank you.

Mr. JONES. Thank you.

Mr. Mizell desires to be heard further.

Mr. MIZELL. Thank you, Mr. Chairman.

Mr. Frick, I found the figures that were related to the barter program

from our hearings last spring.

There were 176,789,000 pounds of tobacco exported under the

barter program valued at over $200 million. Of course this program

is out the window now. And, of course it concerns me when I see the

amount of tobacco exported under this program at a very, very minimum, almost a pittance, cost to administer this program. And now,

of the some 500 million pounds—you see, this is almost a third of the

tobacco exported last year was under the barter program itself. So

you can see why we are having some real concern about the exporting

of tobacco, because this is what you have based your need for the

increase on.

In relation to that, if we should run into some real difficulty with

the export markets, do you think there might be any reconsideration

of the barter program?

Mr. FRICK. Well, certainly, Mr. Congressman. We have to relook

at these items that have been terminated if we run into problems. We

know that it is running well without those programs today, but we

have every reason to want to increase the exports of tobacco. It is a

good dollar earner and it does mean income at home.

Mr. MIZELL. I appreciate that. This might be of some help down

the road.

But one other thing directly related to exports of tobacco. You

know at Geneva where the trade negotiations are going on related to

agricultural commodities, how much of a commitment do we have from

the Department to make sure that tobacco is also included in those

negotiations?

Mr. FRICK. My understanding is it is included just as high as any

other item is.

Mr. MIZELL. Well, considering some of the problems that we might

be confronted with exports, and certainly, we hope that they do not

exist, I am glad to hear that. I will certainly urge the Secretary and

the Department to continue to push for including of this.
32

Now, we just barely touched on this a few moments ago, but our

greatest export market, of course, has been in Europe, specifically England and West Germany. And, of course, in Asia we have Japan.

Yet we are talking about three of our greatest export markets and they

are having the greatest difficulty now in light of the energy shortage.

How much did you take this into consideration in projecting these

export figures?

Mr. FRICK. I am sure that we have not evaluated accurately at this point the effects of the increased oil cost to these countries. It is a

dramatic increase and what effect it has on their whole economy, I

am sure that in the determination of the tobacco allotment increase, all of this we did not know at that time. I am sure we do not yet fully understand it.

So I must say to you, Congressman Mizell, that we did not take this really into that much consideration at that time.

Mr. MIZELL. All right. In light of this projected need to meet this

export market, how much of an increase did we actually have in production in 1973, with the increase in the allotment and production?

Mr. FRICK. Well, in 1973, producer marketings went up from 1972

by about 133 million pounds. Is that the increase you are talking about?

Mr. MIZELL. Yes. In fact, that is a little in excess of—no, really,

the figures that I saw were that we actually exceeded the 10 percent,

not only in 

Mr. FRICK. Yes, 11 percent; yes, sir.

Mr. MIZELL. Right. So we actually exceeded the 10 percent just last year in production.

My next question is this: Without an increase this year, how much did we produce potentially under the allocation program in 1973? Potentially, how much could we have produced under the 1973

market? We did not produce all we could have.

Mr. TODD. We had a quota of 1,179. Well, there was a shortfall

from the previous year. We had quotas in effect in 1973 of 1,208, with

about a 30-million-pound shortfall, so the farm quotas in effect for

1973 totaled 1,208 million pounds. They could have added on 10

percent more to that if everybody had used his full 10 percent.

Mr. MIZELL. I am basically interested in those allotments and the

potential that could have been produced without overmarketing and

that is in excess of 1,200 million pounds.

Mr. TODD. Well, the quotas were 1,208. They could have gone over

by 10 percent. By borrowing from next year, it would have made

1,320 odd.

Mr. MIZELL. So when we look at the potential for production and

what was produced, would not it be a possibility of getting this

tobacco, most of this tobacco, produced without having another

increase this year?

Mr. FRICK. Mr. Congressman, a possibility. But, if we had stayed

the same and we do look at the producer marketings in 1973-74 of

1,155, an offtake of 1,190, we are going backward. We have apparently

reached, if we watch the markets, about—well, the 2.4 years' reserve

was brought up by Mr. Rose—about as far as you can go in what is

an adequate carryover without shorting the market. So I think we

would have been taking a chance with the farmers having the market

shorted and losing it to someone else.
33

Mr. MIZELL. So the 10-percent increase proposed last year, we

actually exceeded that in production, did we not? We exceeded 10

percent?

Mr. .FRICK. Yes sir.

Mr. MIZELL. My next question, then, is: With this 10-percent proposed increase, do you again anticipate exceeding by another 10

percent? Or just what is your anticipated production?

Mr. TODD. Congressman, with all the stories we hear about the

shortages of labor, material, fertilizer, oil and things, I would not

anticipate that it would go up that much. And I believe one or two of

you gentlemen have indicated that farmers have said they would not

be able to grow it. So I do not think we will get the additional 10

percent grown.

Mr. MIZELL. Frankly, I do not think that is a healthy situation, to

have the distrust between the farmer and the Department and the

markets. This is not the way to get things done. So on that, I think

we have to get that done.

My other question, Mr. Frick, you referred to the increase in support price from some 76 cents to about 83 cents for next year.

Mr. FRICK. Yes, sir.

Mr. MIZELL. I recall here a while back, there were some rumors

going around about the possibility of wanting to freeze that support

price so you might have a chance to export some more tobacco. Is

that rumor out the window now? Can you give this committee some

assurance that we are going to get that normal increase in support

price for the 1974 tobacco?

Mr. FRICK. Yes, sir; for 1974, I see no change at all. The 83 plus

would be the support level.

Mr. MIZELL. I think this should be some comfort to the farmer.

One other thing, up in the old belt—of course, there is this thing,

in the tobacco farmer's mind about the tobacco and export corapanies and that they have bought what they need by the time they

get to the old belt. I am not sure whether it is a reality or not. In fact,

this past year, I thought we probably had as good support from Commodity Credit as we have had at any time. But there is always the

built-in thought that once the other companies have taken out of

the market what they want, then Commodity Credit gets a large percent of that tobacco and they have a tendency to grade the tobacco

down and lower the price. This is always a concern of these farmers

and when we talk about an increase, this is the thing that comes to

their attention right away. I hope we can have the same type of support from Commodity Credit this year, and while they bought 31

million pounds of tobacco this year with production, if we get the

production you are asking for and we have a breakdown in the exports, I hope we can have the assurance that Commodity Credit is

not going to get weak kneed by the time they get up to the old belt

and they will continue to give our farmers the same grade and support

as they have in the other market.

Mr. FracK.You can have that assurance.

Mr. JONES. MT. Wampler?

Mr. WAMPLER. Mr. Frick, has the Department reached any decision on the national marketing quota for the 1974 crop of burley

tobacco?
34

Mr. FRICK. No, but we must do that before the end of the month.

Mr. WAMPLER. In the trade and among others, I have heard rumors

and horseback judgments of increases ranging from 3 percent to 20

percent. Would you care to comment on that?

Mr. FRICK. Just this: The information has been given to me that

the minimum we can establish, I believe, is 95 percent—is that right,

Mr. Todd?

Mr. TODD. Yes, of estimated use and exports for 1974.

Mr. FRICK. And I understand that there is a—and I do not remember the figures—a great deal of undermarketings being moved forward.

At this time, preliminary information that has come to me would indicate that we would probably go with the minimum.

The undermarketings are large enough to be a terrific amount upon

next year's actual marketings. So at this point I do not know any

reason or validity for these particular figures you are citing.

Mr. WAMPLER. When do you propose to make this announcement

public?

Mr. FRICK. Within 1 week.

Mr. JONES. Mr. Young.

Mr. YOUNG. Mr. Secretary, would it have been possible to put in

the Federal Register in November what you did in December concerning flue-cured tobacco?

Mr. FRICK. We would not have had all the information we had in

December.

Mr. YOUNG. A quick question. Concerning that, there was great

concern in the market this year which was a common belief that

there was very little competition among the tobacco buyers. We

asked the Antitrust Division to look into this. Would you cooperate,

as the Department of Agriculture, with the Antitrust Division if in

fact there was collusion on the market?

Mr. FRICK. Yes sir, in any way we can be helpful.

Mr. YOUNG. One final question. You asked that the tobacco quota

be increased because of the balance of payments. Is this right? Does

the export of tobacco help in the balance of payments for this country?

Mr. FRICK. Very D111Ch SO.

Mr. YOUNG. Then we in effect are asking the farmers to take upon

themselves this burden of producing tobacco so we will help the

balance of payments?

Mr. FRICK. Yes, I think the farmers throughout the Nation have

helped the balance of payments more than any other sector.

Mr. YOUNG. Now, are the farmers being asked to help the balance

of payments more than the industry in this country?

Mr. FRICK. I do not think so. I think all people are asked to export

what they can.

Mr. YOUNG. Thank you, Mr. Chairman.

Mr. JONES. Thank you, Mr. Young.

The Chair recognizes in the audience a former colleague of mine

in the North Carolina General Assembly and more recently the

district attorney, I believe, and currently with an organization known

as—Mr. Frick, perhaps you do not know about this organization—

the Organization for the Preservation of the Tobacco program. It

was founded down in Mr. Preyer's district, I believe, and at the moment consists of some, 4,000 members as of the December 26 announce-
35

ment. They have employed my friend, Bill Osteen, from Greensboro,

as their attorney.

Mr. YOUNG. I have two gentlemen I wouli like to introduce. One

is Jens Feck—would you stand up, please.

Jens is a German immigrant in this country. He will be working

on my staff. Along with him is James Luckey, from Lee County, who

will be serving on our staff also.

Mr. MIZELL. Mr. Chairman, I would merely ask that the record

be kept open for a couple of days for any interested party that might

like to include a statement pertaining to this subject.

Mr. JONES. Without objection, so ordered.

Mr. FRICK. Mr. Chairman, may I make just one additional remark,

please? It has to do, I guess, with two points.

One is I sense, of course, the concerns that farmers have in producing for this year, and I realize that there are tight supplies of fuel

and various items. But I think that we should be reminded that the

fuel allocation is 100 percent of need in agriculture. I think also that

we should be reminded that actions were taken to make sure that

there would be sufficient fertilizers available. I realize they are at

higher prices.

I also think that there is little reason to be negative about agricultural production in 1974. As you look forward at whatever market

projections there are, there is reason to be positive. I think that

farmers are responding. We have an intentions report out this afternoon which I think will be revealing to all of us as to what farmers'

intentions are for 1974.

One other item. I would pass on to you a concern that Secretary

Butz does have and one that one or two of you have alluded to. He is

concerned about tobacco during the next decade: Where will tobacco

be in 1980? We know that things are happening in the tobacco world.

We know that machinery is becoming available. We know that there

is interest in reducing the number of man-hours down to many less

than they are today by people working at the universities in the various

States. The figures we see indicate that dramatic changes are going

to happen in the flue-cured area in the near future. All I would hope,

Mr. Chairman, is that we could keep up communication with the

Department keeping up to date with those changes that appear to be

happening, both in the raising of tobacco, and hopefully in the

marketing—which we all know has some deficiencies and needs to be

improved—and third, in our ability to compete in a growing export

market. I think there is every good reason for us to look ahead into

1980 in tobacco.

Thank you.

Mr. JONES. Thank you, Mr. Frick and Mr. Todd, for being here this

morning. I would like to express the sentiments of this subcommittee

as well as the entire Committee on Agriculture. As Mr. Mathis said,

you hear it every time you come, but I rather sense there is between

the Department and the Congress a lack of communication. Perhaps

this meeting should have been held in December before the fact rather

than after the fact. I think much more could have been accomplished.

Mr. FRICK. We will try to do our job to communicate better.

Mr. JONES. I appreciate your promise.

With that, the committee stands adjourned.

[Whereupon, at 12:05 p.m., the subcommittee was adjourned.]

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