5 THURSDAY, NOVEMBER 9, 2000, 9:00 A.M.


























1 C O N T E N T S



4 Larry Wooten, President,

5 North Carolina Farm Bureau Services



8 Jim Graham, Commissioner of Agriculture

9 State of North Carolina



12 Larry Wooten, President

13 North Carolina Farm Bureau Services



16 Adam Goldstein, M.D.

17 University of North Carolina



20 President, Burley Tobacco

21 Growers Cooperative of Kentucky










1 C O N T E N T S



4 President, National Center for

5 Tobacco-free Kids



8 Executive Director

9 Presidential Commission on Tobacco



12 North Carolina State Grange



15 Executive Director

16 Rural Advancement Foundation International



19 Executive Vice President

20 Leaf Tobacco Growers Association



23 Board of Directors

24 American Lung Association







1 C O N T E N T S (Continued)



4 President, Board of Directors

5 Flue-Cured Tobacco Farmers



8 Advisor, Southern Maryland Tobacco Producers


10 S. L. ALLEN 63

11 Farmer, Pinetops, North Carolina



14 North Carolina Prevention Partners



17 President, North Carolina Farm Bureau Services



20 Executive Director

21 Office of Agricultural Policy, State of Kentucky



24 Chairman, Flue-cured Tobacco Committee

25 Virginia Farm Bureau






1 C O N T E N T S (Continued)



4 Martin, North Carolina



7 Chairman, Tobacco Committee

8 North Carolina Farm Bureau


10 J. T. DAVIS 94

11 Concerned Friends of Tobacco



14 Farmer and County Commissioner



17 Tobacco Farmer, Benson, North Carolina



20 Tobacco and Health Consultant



23 Spouse of Tobacco Farmer








1 C O N T E N T S (Continued)



4 Professor, North Carolina State University



7 Tobacco Farmer, Wilson, North Carolina



10 Virginia Tobacco Growers Association



13 President, CropTech



16 Executive Director, Mid-East Commission



19 Blacksburg, Virginia



22 Research Director

23 North Carolina Economic Development Center








1 C O N T E N T S (Continued)



4 Tobacco Farmer, Pitt County, Georgia


6 O. C. KEARNEY, JR. 164

7 Member, Board of Agriculture

8 State of North Carolina



11 Tobacco Farmer, Georgia



14 Tobacco Farmer, Pink Hill, North Carolina



17 Tobacco Farmer, Harmony, North Carolina



20 American Lung Association



23 Tobacco Farmer, Spring Hope, North Carolina








1 C O N T E N T S (Continued)



4 County Commissioner,

5 Pollocksville, North Carolina



8 Tobacco Farmer, Georgia


10 TOM DREW 191

11 Farmer and Educator

12 Goldsboro, North Carolina



15 Chairman, Burley Tobacco Advisory Committee

16 South Carolina Farm Bureau


18 JOE REAMS, Tobacco Farmer 199



21 North Carolina Association of

22 State and County Office Employees









1 C O N T E N T S (Continued)



4 Director of Tobacco Initiatives

5 American Cancer Society



8 Program Director

9 World Advancement Foundation International







16 Chief Executive Officer, American Cancer Society















1 P R O C E E D I N G S

2 Mr. Larry Wooten: My name is Larry

3 Wooten; I am President of North Carolina Farm Bureau

4 Services, and one of the co-hosts of this hearing of

5 the Presidential Commission. Our first order of

6 business this morning will be for me to introduce the

7 distinguished Commissioner of Agriculture for North

8 Carolina, Commissioner Jim Graham. Commissioner

9 Graham.




13 Mr. Jim Graham: Thank you very much,

14 Mr. Wooten. I want to welcome all of you here this

15 day. What you'll hear today is a continuation of the

16 importance of tobacco in North Carolina, the

17 Southeast, and the world. It's really gratifying to

18 see this crowd here, for this, I think, could be very

19 meaningful to the tobacco industry in North Carolina.

20 With that told, my job is to introduce the co-hosts

21 which you wanted to serve with, and welcome our

22 visitors from out of state, and hope you have a good

23 meeting here today.

24 I can't tell you how glad we are to have

25 you here in North Carolina, and also the North






1 Carolina State Fairgrounds in the Kerr Scott

2 Building. This building was designed for this type

3 meeting, and we are pleased to be able to use it. I

4 want you to know that we consider this to be a very

5 important meeting, and each of you, I appreciate the

6 giving of your time, to contribute to this gathering.

7 Again, I repeat, anything to perpetuate the continued

8 growth of tobacco, while some may disagree, I think

9 it is important in North Carolina.

10 We have a full agenda today; I will be

11 brief, not mess around and get on with this meeting.

12 Before I do, I'd like to introduce the new

13 Commissioner of Agriculture Elect of North Carolina,

14 Meg Scott Phipps. Stand up, Meg. She's telling me

15 she's going to be a strong supporter of tobacco, and

16 I believe her. Let me follow by saying how important

17 tobacco is to North Carolina. Tobacco will continue

18 to be important in our state, it continues to be

19 important to all the tobacco growers, and I certainly

20 appreciate that. Having said that, we'll move right

21 along.

22 Personally, I feel that we have to tell

23 you the price support program, either dealing with

24 contracts or the warehouse system, the whole program

25 must be tried to be saved because I think it's






1 working. There's much to be said for it adds

2 tremendous stability, and it's served farmers and

3 tobacco growers and companies as well. They must

4 stay together in order to continue the price support

5 program; it is imperative tobacco farmers should

6 continue to push for the continuation of the program.

7 We've got to have it. I've been here thirty-six

8 years, and tobacco, my friends, is the biggest crop

9 in North Carolina agriculture, and I don't want to

10 see a change. There are many lives depending on the

11 Golden Leaf in our state.

12 Having said that, I would like again to

13 say how proud we are to have you. This is a very

14 important committee. I don't believe in too many

15 commissions or too many study groups, but anyway,

16 here is an opportunity to be heard, and I hope you

17 will do that today.

18 I would like to introduce my co-host,

19 Larry Wooten, who will be presenting later on. I

20 want you to know we have a very fine panel, and I'd

21 like to introduce them at this time. I'd like to

22 first introduce Dr. Adam Goldstein, who is the

23 Assistant Administrator of Family Medicine at UNC

24 Chapel Hill. He's from Atlanta, Georgia. I won't

25 hold that against him. Dr. Goldstein is a very






1 prominent member of the University of North Carolina

2 faculty, and he serves on the Economic Association of

3 Health. Dr. Goldstein, would you please stand?

4 We'll hear from him later.

5 My second co-host is a long-time family

6 friend. I know her; her name is Sally Malek. I know

7 her as Sally Herndon. Her father and I were

8 classmates. Sally, where are you? She's pretty too.

9 Sally received her Masters in Public Health from the

10 University of North Carolina in 1991, and also she

11 finally wised up and got her Doctorate from NC State

12 University. We're glad to have you, Sally. I

13 appreciate your participation this morning.

14 Our third co-host is a personal friend,

15 and a former member of the Board of Agriculture of

16 the State. He's now President of the North Carolina

17 Farm Bureau, a farm organization. He's a native of

18 Duplin County, and he's very in the forefront, a

19 leader who knows the trials and tribulations that

20 face the tobacco growers of North Carolina each day.

21 I'm looking forward again to hearing from Larry. I'm

22 proud of our association with him.

23 I'm certainly pleased to be a part of the

24 program this morning. I have enjoyed serving you as

25 Commissioner of Agriculture these past thirty-six






1 years. I want to thank you again for coming. To

2 move right along, I thank all of you profusely for

3 coming. You folks back there, there are some front

4 row seats up here. I'm not going to introduce John

5 Barry; he'll mess things up. John, I'm glad to see

6 you.

7 It gives me a pleasure and honor to

8 present to you, my friend and your friend in tobacco,

9 Mr. Larry Wooten.



12 Mr. Larry Wooten: Thank you, Commissioner

13 Graham. Thank you for being one of the co-hosts

14 today, and for your long tenure of service to tobacco

15 farmers all across the country, and particularly here

16 in North Carolina. Before I introduce the

17 distinguished members of this Presidential

18 Commission, I would like to introduce a federal

19 official who is here with us today. He is certainly

20 no stranger to the tobacco community, Mr. Charlie

21 Hatcher. Charlie, if you'd stand. Charlie has been

22 designated as the Federal official in charge of this

23 hearing today, and all of you know Charlie from the

24 Department of Agriculture, the Tobacco and Peanut

25 Division.






1 At this time, I would like to introduce to

2 you, the members of the Presidential Commission. The

3 Co-chairs for this commission, to my right is Mr. Rod

4 Kuegel. Rod is a tobacco producer, a burley tobacco

5 producer from Kentucky. Rod is also the President of

6 the Burley Tobacco Growers Association. Rod, we're

7 glad to have you with us.

8 The other co-chair who has been appointed

9 to this Commission is Mr. Matt Myers. Matt is

10 President of the Campaign for Tobacco Free Kids.

11 Matt, welcome to North Carolina.

12 The members of the Commission are Ms. Lynn

13 Carol Birgman. Lynn Carol is Executive Director of

14 Kentucky Action. We're glad to have you with us

15 here. Another member of the Commission is Mr. Art

16 Campbell. Art is Assistant Secretary of the Economic

17 Development Administration of the United States

18 Department of Commerce. Another member of the

19 Commission is Mr. James D., Jimmy, Hill. Jimmy is a

20 flue-cured tobacco producer from Lenoir County, North

21 Carolina. Another tobacco producer from the State of

22 Virginia, Lunenburg County, Virginia, a member of

23 this Commission is Mr. Andy Shepherd. Another

24 tobacco producer in this Commission is a burley

25 tobacco grower from Ohio, Mr. Ron Scroufe. Another






1 distinguished member of this Commission is Chief

2 Executive Officer of the American Cancer Society,

3 Mr. John R. Seffrin. Another member of the

4 Commission is the Chief Executive Officer of the

5 American Heart Association, Mr. Cass Wheeler.

6 The final member of the Commission is

7 certainly no stranger to economic development in

8 rural North Carolina and the rural South, is the

9 federal co-chair of the Appalachian Regional

10 Commission, Mr. Jesse White. Jesse, we're glad to

11 have you with us today. Thank you very much.



14 Dr. Adam Goldstein: Good morning,

15 everyone. My name is Adam Goldstein, and I'm a

16 physician over at UNC, and it's my pleasure to be

17 able to be a co-host along with Sally Malek, and

18 welcome you on behalf of public health groups here.

19 We certainly in public health here in North Carolina

20 have a very proud history. The last number of years,

21 we've been working together with the farming

22 community in many areas. As a matter of fact,

23 despite the fact I'm from UNC and some of the others

24 are from Duke, we in the public health arena, I

25 think, unlike the Democrats and Republicans, have






1 found ways to work together; and I think in some

2 respects, that's a lot of why I'm here on behalf of

3 some of the public health groups here.

4 We have a number of guests here that I

5 want to welcome, from the public health field in

6 health and human services. Ripley Forbes, if you'll

7 stand up for a second. Ripley is the Senior Advisor

8 and Legislative Director for the Assistant Secretary

9 for Health, and the Surgeon General, Dr. David

10 Satcher, and former member of the legislative staff

11 for the House Commerce Committee, serving the House

12 on the environment. I was pleased to meet him

13 because my son has one of the posters that he helped

14 develop on behalf of the U.S. soccer team, posters

15 that have been all over the United States promoting

16 soccer, but also promoting smoke-free kids. My son

17 who has the poster on the wall, and asked me after

18 having had it there for a year, "Dad, did you give me

19 that poster because of the soccer or because you

20 didn't want me to smoke?" So, thank you.

21 Joy Epstein, Joy, if you'll stand, is

22 Special Assistant to Dr. Thomas Devatney, Director of

23 the HH&S of International Health, and chaired the

24 U.S. delegation to the World Health Organization's

25 Commission on Tobacco Control, and a longtime friend






1 to state tobacco control efforts of state health

2 departments. Carol Velstalsky is a health policy

3 analyst for the Office of Smoking, U.S. Industry

4 Disease Control. If we could give them a brief round

5 of applause and welcome them here today.

6 On behalf of public health, we also want

7 to welcome those here who are from the public health

8 movement. In the last few years here in North

9 Carolina, we've done some remarkable things, both

10 working together with farming interests. We perhaps

11 started a few years ago.

12 We've had seminars over at the University

13 of North Carolina on the future of tobacco in the

14 South. We brought together health and farming

15 interests. I think Larry was there at one of the

16 meetings we had. We produced a publication two years

17 ago that had eighteen articles both from health and

18 farming perspectives about the future of tobacco

19 itself. For the last two years, we've had a grant

20 from the American Medical Association's Robert Lee

21 Johnson Foundation, that has brought together the

22 public health and farming community to look at things

23 that we can do together, and things that we can

24 inform each other, even when we disagree. Through

25 the work of RAFI, who I'm sure you'll hear of later






1 from Betty Bailey, there have been innovative models

2 to work with supplementation and alternatives for

3 farmers here in North Carolina. Some of you may even

4 be participating in that.

5 We, through the North Carolina Medical

6 Society, and American Cancer Society, the American

7 Lung Association, and American Heart Association, and

8 the Tobacco Prevention and Control Branch of the

9 State Health Department, we've worked together to

10 come up with ways to reduce youth smoking, and ways

11 that we can promote alternative lifestyles.

12 I think that one thing we do agree on in

13 this state in both public health and farming

14 interests is we don't want kids addicted to tobacco.

15 We have agreed upon that. We've looked at the Core

16 Principles document that's on the website for this

17 Tobacco Commission, to come up with those statements.

18 We certainly don't want to see any of our loved ones

19 dying of lung cancer if it can be prevented. We

20 certainly want to protect farm-dependent communities;

21 we want to promote economic independence in those

22 farm-dependent communities. Those are the Core

23 Principles that we have agreed upon.

24 I think for the future of public health

25 and this Commission, I just want to say in closing






1 that I can recommend five things that we think about.

2 One is, we have to be creative. This is the

3 opportunity for us to go out of the black box in our

4 thinking. Certainly the Core Principles document

5 between farming and public health interests was a


6 great start several years ago. That was probably

7 version 1.0. We need to move to version 3.0 or 4.0

8 in our thinking. We need to be bold and

9 comprehensive in what we think about, so that not

10 only can we solve situations for our farm dependent

11 communities, but resolve situations for addicted

12 children to tobacco, and resolve ways to help those

13 who want to quit, do so.

14 We also have to be very specific. The

15 Core Principles were general in their approach and

16 they served us well at the time, but at this point in

17 time, this Commission probably needs to give us very

18 specific things that can help us in the field with

19 what we're doing.

20 We have to be positive. The (inaudible)

21 several years ago that's helped us reduce rates of

22 youth access to tobacco were very good, but it

23 penalized states if it didn't go forward with

24 reducing youth access. At this time, we have to

25 think about a positive way to get some incentives in






1 both the public health and the farming community to

2 do what we know needs to be done.

3 Finally, I would say to be scientific. As

4 a scientist and as a physician, this is the hallmark

5 of what I do. In the public health community, for

6 instance, we know that the greatest way to reduce

7 youth smoking and adult smoking is raising the price

8 of the product. Several years ago in the North

9 Carolina Medical Society, we passed a resolution

10 calling for an increase of our State excise tax to

11 $1.00; we'd send 70 percent of that back to tobacco

12 farmers. That would generate some $700,000,000 a

13 year, $500,000,000 which would go back to the farmer,

14 and the rest of it would go as legislators saw fit.

15 We may not be going in that direction, but I think

16 again, if you base it on science, and you say, this

17 we know, if we do these kinds of actions, not only do

18 we help farm dependent communities and reduce the

19 health burden on tobacco use, but we'll be on firm

20 scientific ground. Thank you.

21 Mr. Larry Wooten: Thank you, Dr.

22 Goldstein. At this time, I will call on one of the

23 co-chairs of this hearing or this Commission, Mr. Rod

24 Kuegel. I introduced Rod as the President of the

25 Burley Tobacco Growers Cooperative of Kentucky. I've






1 known Rod for many years. We know him as an

2 articulate spokesman for tobacco and tobacco farmers.

3 Rod, welcome to North Carolina.



6 Mr. Rod Kuegel: Thank you, Larry. It's a

7 pleasure for the Commission to be in North Carolina

8 today. I'm going to be very brief, especially since

9 the hotel didn't have a printing facility, or a

10 computer to print out my opening remarks. We're just

11 happy to be here and we want to hear what you have to

12 say. There are no preconceived opinions on this

13 Commission. We want to take input from the

14 grassroots, and try to develop that into a direction,

15 into a path for this Commission to proceed. We want

16 to know your ideas, and not only do we want to hear

17 the problems, but we'd like to hear some ideas for

18 solutions which I think we will. We look forward to

19 your comments, and we will be gleaning from those.

20 Thank you.


22 Ms. Sally Herndon Malek: Good morning.

23 I'm Sally Herndon Malek. I want to welcome you and

24 thank you all for being here. There's much at stake

25 for what we do here today; livelihood, a way of life,






1 and even life itself. Those of us who are here as

2 health professionals know that there are many health

3 related issues that stem from tobacco. One of them is

4 that health is harder to come by with the tremendous

5 fear, stress, and economic uncertainty, conditions

6 that exist in almost all of our farming communities

7 these days.

8 I'm a native North Carolinian, and I know

9 that here we all have some relationship to tobacco.

10 Some of us have benefited economically. Many of us

11 have suffered ill health effects from its use, or

12 lost loved ones who have suffered. Some of us has

13 experienced both.

14 Tobacco touched my life in a very personal

15 way. About two years ago, my mother died of

16 emphysema caused by smoking. By today's standards,

17 she died a relatively young woman, making her loss

18 all the harder for us to accept. At the same time, I

19 know there are many people in North Carolina who make

20 their livelihood on tobacco, people who, if it had

21 not been for this crop might otherwise have lived in

22 poverty. Each of us brings a different perspective

23 into this gathering. Sometimes those views may seem

24 like they're worlds apart. But at other times, you

25 may find that we were closer than you ever imagined






1 possible.

2 For instance, I think one thing we all

3 agree on is that we don't want our children to smoke,

4 spit, or chew. That's where I come in. You see, I'm

5 head of the Tobacco Prevention and Control Branch,

6 for the North Carolina Department of Health and Human

7 Services. My top priority is to cut teen smoking in

8 half by the year 2010. That will be hard to do

9 because we know that an alarming 40 percent of our

10 kids in North Carolina, our high school kids,

11 currently smoke, spit, or chew. We also know that if

12 they do not stop, half of them will die prematurely

13 from tobacco related diseases.

14 How do we cut these rates? Well, we will

15 have to do it with a lot of support from youth

16 leaders, and not just the ones that are the

17 presidents of their student councils, but diverse

18 leaders all over the state, even the ones that rule

19 in the lower parking lot, if you know what I mean.

20 They need strong support from families, teachers,

21 health care providers, business people, faith

22 leaders, and decision makers throughout all of our

23 communities in North Carolina.

24 That's my job and I can tell you it's a

25 tough job, but I have a special incentive. Like far






1 too many North Carolinians, my mother started smoking

2 at a very young age, age twelve; that's about the

3 average. It's so young to start something that's so

4 addictive, and once she started, she couldn't stop.

5 It was a painful, last six years of her life, for

6 her, my father, and for our family. She was on

7 oxygen and she just couldn't breathe. But before she

8 left us, she asked me to help young people not to get

9 in the fix she was in. It was a noble charge; it

10 keeps me going, and I think it's something that we

11 all agree on.

12 One way you can help accomplish this goal

13 is by helping North Carolina tobacco-dependent

14 communities get a handle on the complicated fix that

15 we are in. We in the health community care very

16 deeply about the people of our state. We know that

17 the health of our citizens depends on many things,

18 including the ability to earn a decent living. North

19 Carolinians have successfully transitioned our

20 economy many times in many ways in the past, and I

21 know that we can work together to do it again, in

22 time. We are in this for the long road.

23 My mother didn't find her voice on this

24 topic until it was too late, but I'm so happy to work

25 with teens who are leaders across their State,






1 stepping up and speaking out and making a difference

2 in their communities, by asking for tobacco-free

3 schools, smoke-free environments, and helping friends

4 and family members who use, to quit. Teens asked

5 Governor Jim Hunt recently for 100 percent

6 tobacco-free schools, and he responded by asking that

7 all school boards make this happen in our

8 communities, so as to set a good example for our

9 kids. If we smoke at school, we are teaching our

10 kids to smoke. Is that really what we want for our

11 children and our schools?

12 We can support comprehensive evidence,

13 both tobacco and prevention and control programs, for

14 the citizens of North Carolina through Health Trust.

15 Our priorities are pregnant women, the vulnerable and

16 the underserved. So with all these things in mind,

17 we ask that today, please listen to each other's

18 stories. You listen with your heads and with your

19 hearts. You listen to understand. Attack the

20 problems, not the people. Develop solutions that

21 answer the question, how can we help communities that

22 are currently tobacco dependent to transition and

23 prosper in time, while at the same time, improving

24 the public's health, our community's health.

25 My question of you is that as you consider






1 the health of the farm economy, you also give serious

2 time and serious consideration to improve the health

3 of our citizens. More than 12,000 North Carolina

4 lives depend on it. That's how many tobacco

5 attributable deaths we have in our state each year.

6 Because after a while, the health of the economy will

7 mean little if our people are not healthy enough to

8 enjoy it.

9 Now I am very happy to welcome and

10 introduce Matt Myers to North Carolina, President of

11 the National Center for Tobacco-Free Kids and

12 co-chair of this Commission. I've worked with Matt

13 for over ten years, and many of you know him as a

14 strong advocate. But I want to tell you that he's a

15 very good listener, a very good collaborator, and I'm

16 happy to present Matt to our state. Thank you.



19 Mr. Matt Myers: Good morning,

20 Commissioner Graham, Mr. Wooten, Dr. Goldstein, Sally

21 Malek. I want to thank all of you for welcoming me,

22 and all the members of this Commission here. I think

23 I speak for all of us when I tell you that we are all

24 pleased to be here this morning. This Commission

25 truly reflects a unique combination of members of the






1 public health community and the tobacco growing

2 community. It reflects, I believe, a true belief

3 that the public health community and family farmers

4 who grow tobacco share many of the same beliefs,

5 values and concerns, and that together we have the

6 greatest opportunity of addressing the issues that

7 concern us all.

8 Today, we as a Commission are here to

9 listen and to learn. We are nonpartisan, and

10 nonpolitical. We do not enter these proceedings with

11 any fixed ideas or solutions. What you say today

12 will be heard and will make a difference.

13 I'm also particularly honored to have the

14 opportunity of co-chairing this Commission with Rod

15 Kuegel, the President of the Burley Cooperative, and

16 to serve with the other distinguished members of this

17 Commission. I think it is important for us to

18 recognize that this Commission would not have been

19 formed if it had not been for the leadership, hard

20 work, and determination of many individuals and

21 organizations from both the public health community

22 and the farming community.

23 These discussions led to the issuance of a

24 core set of principles that we all recognize have

25 demonstrated how much we truly have in common. We






1 are both members of one community, we want our

2 children to be healthy, and our brothers and sisters,

3 husbands and wives, mothers and fathers, to live

4 long, healthy lives. None of us want our children to

5 smoke, and all of us want to reduce the harm caused

6 by tobacco use. At the same time, we all want our

7 communities to be well off, economically as well as

8 medically, and we believe that hard-working people

9 deserve to be treated fairly, and to be rewarded

10 honestly for both their short term and long term

11 efforts. If change is occurring, family farmers who

12 grow tobacco in their communities deserve to have

13 their needs addressed.

14 This Commission was created in part

15 because we recognize that in recent years there have

16 been fundamental changes in the dynamics affecting

17 the economics of growing tobacco. On the surface, it

18 appears that the real change has already occurred.

19 This change is caused by a multitude of factors,

20 equally important, given the significant recent

21 declines in quota, the increase of tobacco being

22 grown overseas, the increase in use of foreign grown

23 tobacco, and a rapidly rising manufacturing capacity

24 overseas. Even more change is inevitable, whatever

25 the pace of change that occurs due to public health






1 concerns.

2 The challenge for us all is managing these

3 changes in a way that will protect and promote both

4 the public health and tobacco producing communities.

5 I believe that we can rise to this challenge, and I

6 know that each of my Commission members share these

7 views. As a Commission and as a community, we have

8 many challenges and questions that we'll be grappling

9 with. We should not expect a simple solution or a

10 silver bullet. Our hope on this Commission is that

11 we can join together to better understand the issues

12 and agree on a set of far reaching recommendations,

13 that when implemented will both promote public health

14 and the economic well-being of family farmers and

15 their communities.

16 Today, we are all looking forward to

17 learning more, not only about the problems that

18 affect tobacco growers and their communities, but

19 also the kinds of activities, ideas, and solutions

20 that are being proposed and ought to be implemented.

21 I know that I speak for all of my fellow

22 Commissioners in expressing our commitment for

23 carrying out the mandate that the President set in

24 his executive order, in seeing that this Commission

25 perform real work, for real people, with real






1 solutions, that can make a difference in all of our

2 lives. Thank you.

3 Ms. Sally Malek: Now, it's my pleasure to

4 introduce Doug Richardson, the Executive Director of

5 this Commission. Doug was born and raised on a

6 tobacco farm here in North Carolina in Stokes County,

7 and had a thirty-three year career with the US

8 Department of Agriculture. Bless his heart, he

9 retired in August of 1999, but was reactivated to

10 come out of retirement for this position. He will

11 facilitate this session, beginning with protocols for

12 today's forum. I want you all to join me in thanking

13 Doug for the hard work that he is about to embark on.



16 Mr. Doug Richardson: Thank you, Sally. I

17 appreciate those remarks, and you did keep it short

18 and I like that. It's not that I'm getting old; it's

19 that I can't see my notes down there and I can't see

20 you guys out there, so you'll just have to bear with

21 me as I work with these glasses. I'm trying to get

22 used to them.

23 I want to thank everyone for welcoming the

24 Commission to North Carolina. I want to thank all of

25 the FSA people and the health community people that






1 helped get the publicity out to have such a crowd

2 here. I do appreciate that. I will take just a

3 minute. I don't have a lot of people to introduce.

4 The only ones on the whole staff of the Tobacco

5 Commission is myself and Eloise Taylor. Eloise,

6 where are you? That is our staff, so if you call in

7 and get an answering machine, it's probably because

8 we're on the telephone, but that is the staff.

9 I also want to thank Phillip Farlan, the

10 SED, the North Carolina State SSA office, for

11 providing six people to help us today keep everything

12 going on the floor, I do appreciate that; Mickey

13 Smith with the Tobacco Grading Service and Flue Cured

14 Stabilization, for providing transportation for the

15 Commission today. We appreciate that.

16 We are going to go ahead and start the

17 testimony very shortly. Let me just give you a few

18 rules we are going to try to go by. I will call you

19 to testify. When I do, please give your name and

20 address when you start your testimony. I will

21 apologize up front for any mispronunciations of your

22 names; I know I will do that. We ask that you drop

23 off two copies of your oral testimony. If you will

24 please leave those at the registration tables at the

25 back of the room.






1 We ask that you hold your testimony to

2 five minutes, unless you have contacted the

3 Commission and been granted a longer period of time.

4 I think we only have four people that we've done that

5 on. We already have thirty-five people registered to

6 testify, so if we can hold it to five minutes, we can

7 hear more people and get more input. It's been said

8 that this is what this Commission is here to do.

9 As you are presenting your testimony, we

10 have an SSA person, and I use acronyms. SSA, and I

11 think everybody knows, is a farm service agency. It

12 used to be ASCS. I use them interchangeably. We

13 will have a person there, and when you get to one

14 minute to go in your testimony, they will hold up a

15 one, to alert you that you've got one minute to

16 summarize. When the time is up, we will let you know

17 by turning the card around, which I believe says

18 zero. We're not trying to cut anybody off; we're

19 just trying to hear from as many different people as

20 we can. If you have longer written testimony, it

21 will get in the record. I assure you, it will get to

22 all the Commissioners to review.

23 One other thing. As to people who are

24 testifying, I will ask that you give them your

25 undivided attention. We hate to disappoint you, but






1 many of you have been here for the Flue Cured

2 Stabilization annual meeting, and at twelve o'clock

3 these doors will go up and there is a free barbecue

4 lunch. That is not going to happen today, I hate to

5 tell you. We don't have that kind of money. As a

6 matter of fact, we're going to work straight through

7 lunch. You can have a snack at the concession stand

8 that's open in the back.

9 Did I leave out anything that I was

10 supposed to say? Rod points out that we ask that you

11 provide us with two copies of written testimony, but

12 that is not a requirement. We would just appreciate

13 it. One other thing before we start the testimony,

14 there is a brown Ford in the parking lot, license

15 number WN2376; your lights are on. Oh, it's black?

16 I will learn to use these one day; I hate them. I

17 think I'll have eye surgery.

18 First, we'll begin testimony with John

19 Cyrus. John is testifying, representing the North

20 Carolina State Grange. He's going to try to keep it

21 to five, John, and we'll take your written testimony.

22 Thank you.



25 Mr. John Cyrus: Mr. Chairman, and






1 distinguished members of this important Presidential

2 Commission. On behalf of the North Carolina State

3 Grange, who recognize the economic importance of

4 tobacco to our rural communities, we are pleased that

5 you have chosen North Carolina to hold this, your

6 first hearing.

7 The Grange endorsed the concept of this

8 Committee, with the hope it will provide a vehicle to

9 assist our tobacco farm families and their

10 communities, as we face an uncertain future.

11 From the information on your website, in

12 the sectioned titled, "Supplementary Information," we

13 became concerned as to the purpose of this

14 Commission. From your information, it appears that

15 you are to report to the President regarding changes

16 occurring from the reductions in tobacco production,

17 but it appears the main objective is not the economic

18 well being of our family farmers, but rather

19 continuing efforts to end the use of tobacco

20 products.

21 The State Grange went on record at our

22 convention last month supporting efforts to maintain

23 tobacco farming as a legal enterprise, and also for

24 the continuation of a sound tobacco program. For

25 more than 25 years, tobacco farmers have been






1 diversifying. Tobacco once provided more than 50

2 percent of the state's farm income, but is less that

3 20 percent today. Our state is the third most

4 diversified agricultural state, and has been at the

5 top of net farm income because of tobacco. Farmers

6 would be interested to know what commodity to raise

7 that is not being produced in excess or wouldn't

8 quickly be in excess if they moved to that crop. So

9 the question we ask is what crop will provide a

10 profit as tobacco has.

11 In information you presented, you referred

12 us back to the January 1998 Core Principles

13 Statement, stating that "tobacco producing

14 communities came together." The Grange did not sign

15 onto the Core Principles Statement, and I do not

16 believe any tobacco or general farm organization in

17 North Carolina did, with the exception of the

18 Stabilization Cooperative. The Grange's position on

19 the 1998 Core Principles has been filed with the

20 Commission.

21 The information on your website requested

22 our comments on eight specific questions. Because of

23 the time factor, the Grange has responded to these

24 questions in its brief which has been filed with the

25 Commission.






1 We thank you for letting the Grange

2 present our position on the topic of concern to this

3 Commission. We will work with you, and other

4 organizations where there is a sincere interest in

5 improving economic opportunities for our tobacco

6 farmers, and all farmers. We must not forget that

7 communities are people living and working together,

8 and if people are doing well, the communities will be

9 okay. Thank you.

10 Mr. Doug Richardson: Thank you, Mr.

11 Cyrus. I did forget one thing. I probably will

12 think of more. When you come in, please pick up one

13 of the fact sheets on how you can contact the

14 Commission. It's got our website address, our fax

15 numbers, and all those kinds of things. You can also

16 get the Core Principles Statement that's been

17 mentioned several times this morning.

18 With that, the next person to testify is

19 Betty Bailey, and Betty is testifying here today as

20 the Executive Director of the Rural Advancement

21 Foundation International, better known as RAFI, for

22 North Carolina.



25 Ms. Betty Bailey: Thank you, Doug. Thank






1 you for the opportunity to testify this morning.

2 RAFI is a non-profit organization. We work with

3 farmers in rural communities, and we also focus on

4 agricultural policy.

5 Today, I want to try to address in my

6 verbal statements two questions the Commission

7 raised. The first is your question about where

8 programs exist that are supportive of diversification

9 in tobacco-dependent communities, and the second is

10 about agricultural policy on a federal level, that

11 can support or can undermine the viability of the

12 tobacco farming communities.

13 Regarding the first question, our

14 organization has been operating for three years a

15 pilot program called, Tobacco Communities

16 Reinvestment Fund. This is the only program of its

17 kind in our tobacco regions except for the one

18 operated by the Burley co-op subsidiary, the

19 Commodity Growers Co-op; these are two kind of

20 parallel programs. These are set up to provide

21 financial support to individual farmers and to

22 communities by doing their own, on-farm testing and

23 community testing of other sources of income to

24 supplement tobacco income, to replace lost tobacco

25 income.







1 In 1997 and again in 1999, RAFI, with the

2 help of Wake Forest University, surveyed 1,200

3 tobacco farms and fourteen of North Carolina's most

4 tobacco-dependent counties. In the survey, farmers

5 let us know things that are no surprise to other

6 people in the office, how concerned they are about

7 the future of tobacco. They let us know that more

8 than half of them will not encourage their children

9 at this point to grow tobacco because of the

10 uncertainty. But they indicated they want to stand

11 firm, and the majority were very interested in

12 supplementing their tobacco income.

13 We asked them then, what stands in the way

14 of your supplementing your income from other sources?

15 There were some very key barriers identified by this

16 group. First of all, there's a lack of capital for

17 expanding other enterprises on the farm. There's

18 also a lack of marketing and a lack of processing

19 facilities. So we established this reinvestment fund

20 to operate as a pilot to demonstrate how funds might

21 be used to support farmer's efforts, to increase

22 income from other sources.

23 The fund now has seventeen demonstration

24 projects in six tobacco-dependent counties in North

25 Carolina. Those are both individual producing






1 projects and community projects. We modeled the

2 program on several programs in operation in our

3 State, and nationally. One was the USDA's SARE

4 producer grant program, the Conservation Cost-Share

5 program of the State, and also a program that had

6 been operated by A&T State University in past years.

7 We made sure that the program had as

8 little red tape and as few bureaucratic layers as

9 possible. We certainly got feedback from farmers

10 that one of the reasons that government programs

11 don't work so well for them is that it takes -- there

12 are a lot of barriers in the way to just directly

13 getting the support that they're seeking. The

14 program is also designed to be accessible to farmers

15 who may not have a lot of formal education or don't

16 have a lot of experience as far as paperwork or

17 formal applications, and we try to make the rules

18 absolutely crystal clear. We try to have a really

19 transparent process so that people going in and

20 applying for this financial support know how things

21 are going to be judged, and the scope of those rules.

22 Those are key factors if you want to consider setting

23 up a program of this type.

24 It's very important to create decision

25 boards as we did, which is populated by farmers with






1 expertise in diversifying their income, and with

2 others who have special expertise to bring about

3 practicalities. Are we at the end?

4 I'll be happy to share lot more details

5 about this program. I think it's something that --

6 now we have three years into it, it's a test program,

7 and it's for consideration as a federal initiative.

8 The second thing I want to speak to you


9 about very briefly, and I imagine others here will

10 speak to this, is federal policy. One of the most

11 important things that we can do at this time, given

12 that contract farming is moving very rapidly into

13 tobacco. It's my understanding that contracting will

14 be in place in flue-cured in two years. The goal for

15 all growers is, to provide contract protection

16 rights. It's my understanding that Senator Harkin,

17 just last week, introduced a bill which both provides

18 a set of protections for contract farmers, and also

19 provides bargaining rights for the voluntary

20 associations. I urge you to recommend this kind of

21 federal action in your report. Thank you.

22 Mr. Doug Richardson: Thank you, Betty.

23 Another thing I forgot this morning. The

24 Commissioners may have questions of you before you

25 leave. Do you have any questions of John Cyrus?






1 Mr. Rod Kuegel: Betty, could you give us

2 more background on the Harkin bill and where it is,

3 that has just been produced, and what kind of support

4 is available for it?

5 Ms. Betty Bailey: Yes. It was just

6 introduced last week so that puts it on the table to

7 hopefully move to Congress in the next session. Mr.

8 Harkin's bill has two major elements; one is to

9 provide the possibility for farmers not just to have

10 to negotiate contract terms as individuals with

11 tobacco companies, but to be able to do that better

12 as a group, where voluntary associations and

13 cooperatives, that the cooperatives might be able to

14 negotiate terms for them, and thus get a fairer deal

15 than what otherwise might be a lopsided relationship.

16 The second thing it does is to provide

17 certain basic rights and protections for farmers

18 entering contract arrangements. That's based on an

19 initiative that's now been put forth by sixteen, I

20 believe, of the attorney generals, to protect

21 contract farmers.

22 Mr. Rod Kuegel: Any other questions?

23 Mr. Jesse White: I'd like to ask John

24 Cyrus a question if I could, and that is, what were

25 the reasons Grange did not sign on with the State






1 Core System Program?

2 Mr. John Cyrus: We really thought that it

3 was probably reaching too far into issues that would

4 be adverse to the continuation of our tobacco program

5 and the livelihood our tobacco farmers have become

6 accustomed to in growing tobacco.

7 Mr. Doug Richardson: Any other questions?

8 Thank you, Mr. Cyrus. Our next person to testify is

9 Tommy Bunn. Tommy is the Executive Vice President of

10 the Leaf Tobacco Growers Association.



13 Mr. Tommy Bunn: Thank you, Doug.

14 Co-chairs Kuegel, Myers, and members of the

15 President's Commission, thank you for being here

16 today to hear our concerns about the tobacco economy.

17 I am Tommy Bunn from Raleigh, North Carolina. I am

18 speaking on behalf of the Leaf Tobacco Exporters

19 Association, whose members buy from farmers and

20 process and handle most of the U.S. tobacco entering

21 the export trade. Our member companies provide jobs

22 for several thousands of workers throughout the

23 southeast tobacco producing region.

24 From our perspective, the greatest

25 economic probably facing the tobacco industry today






1 is its weak competitive position in the international

2 marketplace. Several factors contribute to this lack

3 of competitiveness. Today, we will address the two

4 factors we consider most threatening to the short and

5 long-term economic well-being of tobacco producers,

6 leaf dealers, and the communities in which they live

7 and conduct their businesses.

8 First, the high price of U.S. leaf, which

9 is the result of a price support system that

10 guarantees U.S. growers a significant margin over

11 cost of production, regardless of world demand or

12 crop quality.

13 Second, non-value-added costs needlessly

14 push up the cost of our commodity in the marketplace.

15 These are costs resulting from inefficiencies in the

16 federal tobacco program and the tobacco marketing

17 system, that add no value to the commodity in the

18 world market. In particular, the cost of leasing

19 tobacco which is rising sharply as a result of small

20 quotas.

21 Because U.S. leaf tobacco is not

22 competitive in the world market, our export trade is

23 shrinking at an alarming rate. U.S. leaf exports

24 fell 10.6 percent in the last year, and dropped

25 another 10 percent in the first half of this year.






1 Today, our leaf tobacco exports are at an all-time

2 low, about half what they were two decades ago. The

3 result has been predictable: Leaf dealers are

4 closing processing plants and laying off workers.

5 Manufacturers are consolidating factories. Auction

6 warehouses are closing their doors across the

7 Southeast, and many growers are being forced out of

8 business while many, many more are struggling to

9 survive in the hopes that better times will soon

10 come.

11 Certainly, the workforce reductions in

12 this industry has created hardships and unemployment

13 in tobacco-dependent communities across this country;

14 but you know, it's interesting, not one bit of this

15 hardship has led to fewer cigarettes being consumed

16 around the world.

17 Let me be clear on this: Not one tobacco

18 related job loss has resulted in the consumption of

19 fewer cigarettes. In short, ladies and gentlemen,

20 our overseas competitors are eating our lunch,

21 because our tobacco is not competitive in the world

22 market.

23 We are trapped in a vicious spiral of

24 escalating non-value-added costs, fueled by an

25 inefficient marketing system during times of






1 shrinking demand. High U.S. prices, particularly

2 when world prices are down, compel our customers to

3 look elsewhere for a cheaper source of tobacco. As

4 demand falls and more leaf ends up in our inventory,

5 our quota formula forces supply to shrink even

6 further, which pushes up prices again, which pushes

7 away even more customers, and the spiral continues.

8 It is increasingly clear that any real improvement in

9 the prospects for U.S. leaf tobacco exports will not

10 occur until we make significant changes in the

11 federal tobacco program to enable U.S. leaf to

12 compete in the world market.

13 Complicating our situation is the fact

14 that leaf tobacco is not allowed to participate in

15 the GSM loan guarantee programs that are available

16 for other agricultural commodities. Many countries

17 simply cannot manage private financing for commodity

18 imports. These customers want our tobacco, but they

19 either cannot afford it or have been unable to get

20 authorization to spend their hard currency.

21 Excluding tobacco from GSM income loan guarantees,

22 the U.S. government is seriously damaging our tobacco

23 growers' ability to make a decent living. Again,

24 this does not reduce the number of cigarettes

25 consumed. It is only hurting our economy.






1 If you truly want to help the individuals,

2 businesses, and communities dependent on the tobacco

3 economy, if you want to improve trade opportunities

4 for U.S. tobacco, then you can help growers identify

5 and implement changes in the current system that will

6 enable them to supply a quality product that is

7 affordable to the export customer, and so they can

8 also make a decent living in the process.

9 Thank you for the opportunity of being

10 here today and testifying before you.

11 Mr. Doug Richardson: Thank you, Tommy.

12 Any questions of Tommy?

13 Mr. Ron Kuegel: Mr. Bunn, at what level

14 are you asking growers to reduce their price before

15 we can make a difference in the amount of exports

16 that we are able to achieve in the world market?

17 Mr. Tommy Bunn: I don't have a figure

18 because it depends on how much of the world market we

19 want to service. If we are interested in serving a

20 large segment of the world market, it would demand

21 large price concessions. If we want to service a

22 small segment, which we're certainly doing now -- it

23 depends on whether or not we just want to service the

24 premium market or we want to move beyond that, and

25 service elements of the market that cannot






1 necessarily afford premium priced.

2 Mr. Rod Kuegel: How much would it take to

3 stop the downturn and to get an upturn in exports?

4 Mr. Tommy Bunn: That's a figure -- I

5 suggest that you look at our economists, and look at

6 what the last statistics for supply and demand are.

7 We can certainly come up with a figure based on the

8 economics of sound judgment and world market

9 conditions.

10 Mr. Doug Richardson: Any other questions?

11 Thank you, Mr. Bunn. The next person to testify is

12 Tony Delucia. He represents the board of directors

13 of the American Lung Association. If you would,

14 please stick close to the microphone, sort of like

15 you're kissing it. I think it will take out some of

16 that background reverberation I'm hearing up here a

17 lot.



20 Mr. Tony Delucia: Co-chairmen and members

21 of this distinguished and important Commission, my

22 name is Tony Delucia. I'm here to present you some

23 of my views relating to the daunting challenge your

24 Commission faces. The work ahead for this

25 President's Commission is vitally important to both






1 the public health community which I represent and the

2 tobacco community, and I'm here also to wish you the

3 very best in your efforts.

4 My involvement in the several issues

5 before the Commission is severalfold: I am a former

6 smoker, although not one that made the tobacco

7 companies rich, and even less likely to have made

8 growers rich. My life's work has consisted of trying

9 to make the world a better place to breathe. I try

10 to work at the local, state, regional, national and

11 international levels to accomplish that end. I have

12 lived, worked, and prospered for the last 23 years in

13 an area of northeast Tennessee/southwest Virginia

14 known at the Tri-Cities, where I am part of the

15 faculty of the James H. Quillen College of Medicine

16 in Johnson City, Tennessee.

17 The earliest part of my academic career

18 was in lung research. The latter part was in

19 community service, a transition made possible as I

20 have developed a deep and passionate commitment for

21 the work of the American Lung Association. I am

22 Chairman of that organization. The American Lung

23 Association and its Tennessee constituents see and

24 hear quite a bit from me on the issues we are

25 discussing today. I think I have a unique vantage






1 point within that organization as a result of my

2 training, my passion for my work, and my

3 volunteerism, including frequent excursions out into

4 diverse communities in the area I live. As you well

5 know, northeast Tennessee consists of many small

6 tobacco farms growing burley and this crop

7 contributes greatly to the economic stability of the

8 area.

9 Along with one of my fellow board members,

10 a physician from Lexington, Kentucky, I am a

11 volunteer in the ALA, who often sees the ravages of

12 this disease and many youth and adults addicted to

13 tobacco. I also know that ALA staff are here today

14 to work to implement our many important education

15 advocacy and treatment programs which we believe

16 impact favorably the disease-burdened in our

17 communities.

18 You should know that first and foremost,

19 reducing the burden is the driving force behind the

20 work of volunteers and staff of the ALA. You should


21 also know that as the ALA evolved from its grassroots

22 involvement in tuberculosis control, it had to

23 partner in pioneering efforts to build an

24 infrastructure to deal with that disease.

25 I'm here to state that ALA knows how to






1 address tough issues for which resources are limited

2 and for which the existing political and regulatory

3 structures have not seemed suited. We embrace a

4 challenge with passion and commitment. We are

5 energized by our work with diverse partners in

6 producing heretofore unattainable results.

7 On the health side, we know that tobacco

8 addiction is ultimately responsible for nearly

9 434,000 deaths in this country. We would like to see

10 this country mount an all-out assault on tobacco use,

11 because at this time we feel there is no safe

12 cigarette or other tobacco-containing product for

13 human consumption and we predict none in the

14 foreseeable future. We know that such a successful

15 assault on tobacco use would dramatically reduce

16 tobacco consumption domestically. While there is

17 uncertainty about the global implications of our

18 efforts, it is likely that a big reduction will occur

19 eventually in other markets.

20 If, while decreasing demand, our

21 production of tobacco is maintained at the same

22 levels as we currently experience, we will be doing

23 several things which confuse and frighten the ALA:

24 increasing exporting tobacco, growing tobacco for

25 which there is no current market, utilizing land and






1 resources unwisely. Our hope is that tobacco

2 producers will not feel threatened by these views and

3 will shift in the direction we perceive, which is the

4 direction of the writing on the wall.

5 One of ALA's strengths is its work with

6 various groups, including state and federal

7 governmental agencies, to effect meaningful policy

8 change. I think that ALA would welcome a role in

9 working with the several agencies mentioned in the

10 Core Principles. One problem might be to form an

11 interagency or hybrid state/federal agency work

12 group. The talents of this work group could be

13 expanded by inviting advocates and consultants with

14 public health and agricultural production experience.

15 All parties need to think "outside of the box"

16 about roles they might play in future tobacco policy,

17 including mutually agreed-upon regulation. The FDA

18 is mentioned ahead of the others merely because in

19 the existing Core Principles document the issues

20 surrounding the nature of FDA involvement could

21 provide the basis of future discourse.

22 By way of clarification, the Board of ALA

23 do not provide restrictions on local organizations'

24 action endorsing the Core Principles. For reasons of

25 honoring friendships and maintaining its role in






1 Washington, of arguing the needs of all lung

2 associations, ALA has not changed its Board policy on

3 tobacco and has not chosen to endorse each and every

4 principle. Where states are likely to have been

5 highly involved, ALA might surely address local

6 decision-making authority, even endorsing it, without

7 feeling that it has potentially compromised. I'm

8 about to finish.

9 ALA has looked at the issue of buy-out

10 payments to land owners and quota owners. If

11 communities are looking for a way to transition

12 agricultural efforts and facing future market

13 uncertainty, it is likely that ALA would be

14 supportive and look to expanding partnerships.

15 Tobacco growers' cooperatives and boards, I might

16 suggest, should be included in developing and

17 promoting locally-responsive buy-out plans, again

18 with all the input necessary. As the plans are

19 operationalized and tested, major community

20 incentives could be included, and might be part of a

21 master settlement agreement. Since state

22 determinations of fund distribution may change in the

23 future, all possible ways of making a positive

24 difference need be explored.

25 We are not necessarily, the ALA, involved






1 enough in direct contract to make any overtures at

2 this time, but would like to know how to make this a

3 win/win situation for growers' communities and not

4 just for the tobacco industry. Thank you very much.

5 Mr. Doug Richardson. I have just been

6 handed a note that we have eighteen more people that

7 want to testify. If we can, please stick to the five

8 minute time-line. The next person is Bruce Flye,

9 President of the Board of Directors of the Flue Cured

10 Tobacco Farmers. Mr. Flye.



13 Mr. Bruce Flye: Thank you, Doug. It's a

14 pleasure to be here this morning, and I want to thank

15 the Commission for taking their valuable time in

16 undertaking this enormous task to solve this problem,

17 and help all of us come together. I am also a

18 tobacco farmer from Battleboro, North Carolina.

19 Since 1997, we have seen our quota change

20 from over one billion pounds of tobacco, to an

21 all-time historical low quota this past year of just

22 over five hundred and sixty million pounds. Our

23 tobacco farmers have suffered severe economic

24 consequences as a result of this instability. We are

25 here today to discuss solutions to the problems that






1 have recently plagued us.

2 As tobacco farmers, there are now many

3 things to be concerned about. We tobacco farmers are

4 in favor of discouraging youth smoking. We are in

5 favor of increasing adult awareness of dangers of

6 smoking; however, we know that many people are going

7 to continue to smoke and they are going to smoke

8 someone's tobacco. I feel that U.S. tobacco farmers

9 offer a product of integrity, backed by random checks

10 for unapproved pesticides and foreign material.

11 We only use approved pesticides and many

12 of us use professional crop consultants, which is

13 consistent with protecting beneficial insects and the

14 environment. We only plant strictly regulated

15 tobacco varieties approved by our land grant

16 universities. We tobacco farmers have a proven track

17 record of facilitating changes in our production to

18 make a product consistent with the goals of reduced

19 risk products.

20 Only when Congress enacted laws that

21 controlled production and offered price support did

22 our tobacco farmers and our communities begin to

23 thrive and overcome the chains of poverty. Look at

24 the other crops we grow: cotton, corn, and soybeans.

25 We could not afford to grow these so-called free






1 market crops if it was not for LDP, AMFA and crop

2 insurance. The only thing that's going to give us

3 tobacco farmers the kind of safety net we need is a

4 tobacco program.

5 Our tobacco program is the umbrella over

6 prices paid to tobacco farmers worldwide. In the

7 absence of a production-control program, prices to

8 U.S. tobacco farmers and tobacco farmers around the

9 world would plummet, resulting in a global glut of

10 cheap tobacco.

11 We must improve our tobacco program. We

12 must have a program that places the quota in the

13 hands of the actual tobacco farmers while

14 compensating quota owners. We should look closely at

15 the Ford LEAF Act in the failed McCain bill of a

16 couple of years ago. This kind of approach could go

17 far to correct some of our problems. This kind of

18 program would move tobacco quotas from non-farmers to

19 actual tobacco farmers, it would compensate those who

20 own tobacco quotas, and it would establish a more

21 competitive price in order to compete with tobacco

22 imports.

23 In closing, tobacco farmers are not in

24 favor of hurting those who purchase our tobacco. We

25 are in favor of tobacco companies working with us to






1 solve these problems, but in a fair business climate

2 that affords them the opportunity to make profits

3 just like any other business. Only with healthy

4 economic conditions for our tobacco farmers, a

5 climate of fairness for those who purchase our

6 tobacco and the cooperation between tobacco farmers,

7 purchasers, and public health advocates, will we meet

8 the goals of protecting our young people from the

9 dangers of smoking, increasing the awareness of risks

10 to adults who continue to smoke, and stabilize our

11 rural communities. Thank you.

12 Mr. Doug Richardson: Any questions of

13 Mr. Frye? Thank you. The next person to testify is

14 Gary Hodge. Gary is an advisor in Maryland with the

15 Southern Maryland Tobacco Board. He's going to

16 talk about the rumors in Maryland that they may have

17 a buy-out. Mr. Hodge.



20 Mr. Gary Hodge: Thank you very much. It

21 is an honor to be with you today. I'll try to cover

22 in a very few minutes a subject which has evolved

23 over the last three years in Maryland, an initiative

24 from the growers themselves related to the funding

25 that's going to all the states that produce tobacco,






1 through the Master Settlement Agreement.

2 For the past ten years, I've been advisor

3 to the Southern Maryland Tobacco Growers, which

4 represents the 1,200 full-time and part-time tobacco

5 growers in our state. In Maryland, tobacco

6 represents only about 5 percent of our agriculture

7 land in the southern Maryland region, but supports

8 economically about 150,000 acres of agricultural land

9 in the region. So it's highly important to us to

10 sustain agriculture in southern Maryland and also to

11 address the issues related to the loss of the tobacco

12 component of that agricultural economy.

13 Our growers are some of the most

14 self-reliant, independent, conservative people in the

15 State of Maryland. They don't like to take federal

16 money. They're not participating in the quota

17 program. They work within a free market enterprise

18 system selling their tobacco every year in an auction

19 market system.

20 Once the Master Settlement Agreement was

21 reached two years ago this fall, our growers through

22 the Southern Maryland Tobacco Growers took immediate

23 steps to take the initiative to develop a plan that

24 would address their needs and help them to deal with

25 the uncertainties that have been plaguing this






1 industry now for many years.

2 The dark clouds continue to gather over

3 this industry. I was just looking at the Web on

4 Monday and Tuesday; I see an article about the

5 European Union suing the major tobacco companies

6 because of smuggling activities. We see another

7 story on the Florida tobacco case. We see continuing

8 stories on the Federal lawsuit that's being

9 developed, which I'll have some comments on in a

10 minute.

11 So we're far from being out of the woods

12 on this issue. Those of us who have worked with

13 growers in our communities, and in my case, for the

14 past twenty years as the Director of the Regional

15 Planning Agency of Southern Maryland, it's incumbent

16 on us as public servants to try to find a way to

17 serve the people who I regard as our first citizens

18 in Maryland.

19 We wouldn't even have a State of Maryland

20 if it weren't for tobacco farming. We would be

21 somewhere in Virginia or Pennsylvania if it weren't

22 for the viability of our state that came as a result

23 of the tobacco industry.

24 So we have looked out for our first

25 citizens and addressed their needs in this time of






1 crisis. But what happened two years ago was this

2 tobacco board began to hammer out with growers a

3 program for the transition of Maryland tobacco. That

4 program involved the legislative leaders of our

5 State, it involved the Governor of our state, it

6 involved the University of Maryland and the

7 agricultural department there, the Cooperative

8 Extension Service, the Farm Bureau, and all of the

9 agencies that have an interest in the viability of

10 agriculture in Maryland.

11 None of these objectives can be achieved

12 unilaterally without partnerships and cooperating

13 with all of the agencies, organizations, and

14 officials of the state, and in fact, in the whole

15 southern region of the U.S. We've got to break this

16 problem down into manageable bite-size pieces.

17 I say that, looking at our experience in

18 Maryland, where we have a five county area that's

19 affected by this crisis. We have a carpet all over

20 the southern states, of regional planning agencies

21 that are headed by elected officials at the local and

22 state level, who know that agriculture is a key to

23 the economic prosperity of their regions, who know

24 that they have an obligation to serve the farmers of

25 those regions, and who can work within a five, six,






1 seven county region to bring that problem into their

2 strategic planning efforts and find a way to address

3 those needs, and be effective advocates for those

4 communities and those farmers at the state level

5 which is where a lot of the action is here.

6 With the Master Settlement Agreement

7 funds, those flow to the states. The states are

8 taking those into their treasuries for appropriation

9 by the legislatures. Where the action is on that

10 money is at the state capitol, and the farmers need

11 to have effective voices in the state capitol in how

12 to make some of those monies work to their interests

13 in this whole transition process and the management

14 of this crisis, and that's what we did in Maryland.

15 Now the plan we put together has lately

16 been summed up in one word, that's buy-out plan, and

17 it's really much broader than a buy-out plan. It

18 does have a buy-out component, and that is a

19 voluntary option that will be offered to our growers,

20 to take a dollar amount for their historic production

21 levels in 1997, 1998 and 1999 for the next ten years.

22 We also have a transition plan that will

23 allow farmers to scale back 10 percent a year their

24 tobacco production and get $1.50 a pound for the

25 tobacco production they scale back in the next ten






1 years.

2 We also have a research and development

3 component to this plan. It's very important that we

4 look down the road to the biotechnology field, and

5 the very important work that's being done in genetics

6 in the area of tobacco, in terms of a beneficial use

7 of tobacco, and healthy uses for tobacco for

8 industrial purposes or for other commodities that are

9 being produced. We have an enhanced agricultural

10 land preservation component in our plan.

11 But essentially what this delivers is that

12 this replaces the profit center of tobacco in our

13 ag-economy region. The Governor and the legislative

14 leaders have agreed to provide 5 percent of all the

15 MSA monies flowing to Maryland for the next

16 twenty-five years to fund this program which will

17 deliver to our 1,200 growers about $83,000,000 over

18 the next ten years, providing them with working

19 capital and putting money in their pockets to address

20 their needs.

21 I would be happy in the future, as the

22 Commission works on its recommendations, to be

23 available to your staff for any follow-up questions

24 or any material that you may need to develop your

25 recommendations to the President. But first and






1 foremost, the President should cease the federal

2 tobacco lawsuit that's being prepared, because if

3 that is successful, that will undermine our entire

4 efforts as a southern region to diversify the tobacco

5 economy of the region. Thank you.

6 Mr. Doug Richardson: Thank you. Any

7 questions of Mr. Hodge? The next person to testify

8 is S. L. Allen, and I think he's from Pinetops, North

9 Carolina, and he will be testifying as a farmer. Mr.

10 Allen.



13 Mr. S. L. Allen: Thank you for letting me

14 express some concerns and ideas on the effect that

15 tobacco contracts, associations, and cooperatives

16 have and will have on the small family farm.

17 My name is S. L. Allen and I'm from

18 Pinetops, North Carolina. I'm a poultry grower, a

19 cattle grower, and also an ex-tobacco farmer. I come

20 from Pinetops, a small community that has seen their

21 farmers decline drastically over the last several

22 years. One example is our rural fire department.

23 Just ten years ago, farmers made up at least 80

24 percent of the department. When we had a fire call,

25 you could feel safe to know that you had plenty of






1 fire fighters to show up. Today our department is

2 made up of less than 10 percent farmers. This means

3 that when there is a fire call during the day, you

4 will need mutual aid from other fire departments.

5 The main reason that this has happened is

6 due to the decline in our tobacco allotments. Our

7 small family farmers are no longer just farming, many

8 have left the farm completely. Others have had to

9 take on outside jobs to supplement their income. The

10 government needs to spend more dollars and time in

11 trying to find other uses and markets for our

12 tobacco.

13 Farmers that are left in our community are

14 seeking tobacco contracts to aid in their battle to

15 stay in tobacco farming longer. Others are starting

16 to diversify to offer contracts for row crops and

17 livestock. Poultry contracts have been around my

18 area since 1983.

19 Our non-poultry farmers really need to

20 talk to and listen to the poultry farmers. We can

21 tell you from experience what type of contracts to

22 expect from large companies, especially those with a

23 monopoly in their region. These contracts do nothing

24 to keep the farmers prosperous or even financially

25 sound.






1 A number of lawyers who have the

2 opportunity to read the poultry contracts have told

3 the farmers that their contracts are misleading and

4 too open-ended for the company. This will never be

5 the protection that a farmer needs from the markets,

6 rising inflation and company abuse. At this time,

7 poultry companies are changing pay rates, and I mean

8 they're lowering pay rates, not raising them; and

9 they change contracts at any time as their need

10 arises, while farmers can't change any line in their

11 contracts at any time, regardless of the effect it

12 has on them. If poultry companies are already doing

13 this, how long without the help of the government, do

14 you think it will be before other companies follow

15 the actions and contracts of the poultry companies?

16 We have at the present time a House bill

17 number 2830 and a Senate bill number 3243 addressing

18 these concerns. Farmers' livelihood is depending on

19 their government to do the right thing, pass these

20 bills, and make contract farming a fair and

21 prosperous season for everyone involved, including

22 the companies.

23 If these bills are passed, farmers can,

24 without fear, join associations of their commodity.

25 The association could play a vital part in the






1 bargaining and negotiation of prices and writing of

2 fair contracts.

3 Farmers are starting to form cooperatives

4 to gain power in numbers. Government could help

5 farmers diversify from tobacco and other crops by

6 making grants more available. These grants can be

7 used for research and education through our

8 cooperatives. The Carolina Producers Recycling

9 Cooperative received a grant from another

10 organization. We have for the past two years

11 researched the profitability of recycling tobacco for

12 protein and pelletize litter for fertilizer. Both

13 projects could help the company out tremendously, but

14 we have been unable to get any positive response from

15 them. Farmers are left with the company's waste to

16 dispose of.

17 My last statement will be, beware of the

18 contracts that are offered by large companies with

19 little or no input from your peers. Thank you.

20 Mr. Doug Richardson. Thank you, Mr.

21 Allen. Can you understand our speakers in the

22 audience? There is a terrible reverberation. We're

23 having a hard time -- I forget the gentleman's name

24 who's running the sound system, but if you could make

25 it not vibrate so much, or reverberate, whatever. I






1 am told the closer you get to the microphone, the

2 less it will do that. The next person to testify is

3 Peg O'Connell, and she will be testifying for the

4 North Carolina Prevention Partners.



7 Ms. Peg O'Connell: Thank you, Mr.

8 Richardson. Good morning, Commissioner Jim Graham,

9 Commissioner-Elect Meg Scott Phipps, Members of the

10 Commission. I am Peg O'Connell, Director of External

11 Relations for Medical Review of North Carolina. I am

12 currently serving as the Chair of North Carolina

13 Prevention Partners.

14 North Carolina Prevention Partners is an

15 organization of over 400 members, including the

16 American Heart Association, The American Cancer

17 Society, and the American Lung Association, our

18 state's largest hospitals and health plans, and many

19 public health and advocacy organizations.

20 NCPP was founded two years ago to increase

21 the focus on preventing health problems in North

22 Carolina, by improving environments, changing

23 policies, and creating programs to support positive

24 health behaviors.

25 Before I go on, please let me be clear






1 about one thing: The purpose of these remarks and

2 the health community of North Carolina as a whole, is

3 not to bash tobacco growers or to condemn

4 agricultural enterprise that has made this state

5 strong. We are all aware of the vital role that

6 tobacco has played in our State's history. One need

7 only look around these fairgrounds to see the

8 foundation which farming has laid for our state.

9 But North Carolinians face a grim reality.

10 Demand for domestic leaf is down, which is impacting

11 our long held family farms, and there are proven

12 health risks associated with the use of tobacco

13 products. If we are to be successful in changing

14 this reality, we must work together to improve both

15 the health and economic status of our citizens. I

16 commend President Clinton and the members of this

17 Commission for attempting to tackle such a difficult

18 issue.

19 In September of this year, NCPP released

20 the Year 2000 North Carolina Prevention Report Card,

21 which I've submitted with my testimony, that looked

22 at how risky health behaviors and life style choices

23 affect the health of our citizens. The Report Card

24 also assessed the cost of preventable illness to the

25 State of North Carolina.






1 North Carolinians carry some of the

2 highest rates of premature death and disability in

3 the nation from heart disease, stroke, diabetes,

4 neural tube defects, pulmonary disease, and lung

5 cancer, resulting in over 35,000 deaths per years and

6 over 180,000 hospitalizations. These conditions

7 obviously cause great suffering among individuals and

8 their families, and come at a high cost: nearly $6

9 billion a year to the State of North Carolina. The

10 cost of tobacco use alone in preventable illness and

11 death is in excess of $2 billion per year.

12 The Report Card shows that 15 percent of

13 pregnant women in North Carolina smoke, versus a

14 national average of 13 percent. We are all aware of

15 the negative effects that smoking during pregnancy

16 can have on the birth weight of children and on the

17 future health of that child.

18 In addition, the data gathered for the

19 Report Card demonstrates that tobacco use among North

20 Carolina youth is on the rise, especially among

21 middle school students. Currently 38 percent of

22 9-12th graders smoke, and 18 percent of seventh and

23 eighth grades use tobacco products. Only five

24 percent of our local school systems are 100 percent

25 smoke- free. Clearly, if we are to have a healthier






1 population in North Carolina, we must address the

2 issue of tobacco use among young people and children.

3 There is activity in North Carolina on

4 this issue, including an initiative by the Governor

5 to encourage all of our public schools to become

6 smoke free. NCPP applauds this first important step.

7 But we realize that reduced tobacco consumption comes

8 at a price to those who make their livelihood growing

9 the golden leaf. We also realize that economic

10 status is one of the leading predictors of health.

11 Health concerns are not a high priority to a person

12 who is struggling to feed his family.

13 So how do we solve this dilemma? What can

14 we do to reduce the negative health effects of

15 tobacco use while maintaining a vibrant economy.

16 There are no simple answers. However, working

17 together, we can make progress.

18 In North Carolina, health advocates

19 working in concert with representatives of the

20 farming community were successful in getting the

21 passage of House Bill 1341, the legislation which

22 established both the Health and Tobacco Trust, to

23 utilize the $4.6 billion of tobacco settlement funds.

24 In addition, Prevention Partners is working with the

25 agricultural community to develop a healthy dining






1 program to utilize locally grown produce in order to

2 bring the things that we grow here in North Carolina

3 to the market more quickly.

4 I appreciate the opportunity to be here

5 today. North Carolina Prevention partners is

6 committed to improving health through prevention and

7 to working in cooperation with tobacco producing

8 communities to achieve a healthier, economically

9 strong North Carolina.

10 Mr. Doug Richardson: Thank you. Any

11 questions of Ms. O'Connell? Could I have everybody's

12 attention in the back? I know you want to chit-chat

13 and talk. I'd love to be back there with you myself,

14 but it's beginning to rumble up here and we need to

15 give the testifiers our full attention. So if you've

16 got to carry on a conversation, if you would, please

17 step out to the entranceway there. Thank you, Peg.

18 Our next speaker is Mr. Larry Wooten from the North

19 Carolina Farm Bureau. Larry.



22 Mr. Larry Wooten: Thank you, Doug, and

23 members of the Commission. Thank you for this

24 opportunity to share our thoughts on this

25 Commission's charge from the White House.






1 Tobacco continues to be an important

2 component of the economic, social and political

3 fabric of North Carolina. Any effort, no matter how

4 well-intentioned, to separate our rural economy from

5 reliance on this crop will have disastrous

6 consequences. To move too rapidly away from tobacco

7 production without proven and viable alternatives

8 will certainly adversely affect the well-being of

9 millions of individuals who are directly and

10 indirectly supported by the farming of tobacco. To

11 artificially transition an economy that has relied on

12 and prospered from the golden leaf since the 1600's,

13 in my opinion, is risky and should be undertaken only

14 with clear, attainable goals with a broad base of

15 political and financial support.

16 North Carolina is the third most diverse

17 farm economy in the United States. Our

18 diversification efforts began here as a response to

19 the first health warnings placed on cigarettes and

20 the developing anti-tobacco climate. The economic

21 and social impacts on the rural communities from loss

22 of tobacco farming revenues will be enormous.

23 Property values will plummet, causing the tax base to

24 be evaporate, affecting everything from funding of

25 county fire and police protection, to community






1 health departments, county health departments, public

2 libraries, even the public school systems. There is

3 a tremendous dependence by county governments on

4 sales and property tax revenues generated by tobacco

5 farms.

6 Loss of farmland in North Carolina is a

7 growing issue, certainly in a fast growing state like

8 ours. Between 1982 and 1992, our state lost more

9 prime farmland than any other state in the nation

10 except Texas. As tobacco farming declines, farmland

11 in many of our counties goes under streets,

12 subdivisions and shopping centers rather than

13 remaining in agricultural production.

14 The Master Settlement Agreement is a major

15 contributing factor in the downward trend of tobacco

16 quota. A major component of the quota formula is the

17 purchase intentions submitted annually by domestic

18 cigarette manufacturers. The primary goal of the

19 Master Settlement Agreement was to reduce consumption

20 of tobacco and tobacco products.

21 Ladies and gentlemen, and members of the

22 Commission, it is working. The impact of the Master

23 Settlement Agreement is long-term and its impact on

24 farmers is likely to continue, causing farm

25 consolidation and the economic restructuring of






1 tobacco farming. The world price of tobacco hovers

2 just below the price of our American tobacco. We

3 recognize that the price of U.S. leaf is a factor,

4 but if we arbitrarily reduce U.S. tobacco prices,

5 history has shown that our competitors respond with

6 similar reductions in price. They ferociously

7 protect market share and will not easily give it up.

8 Regaining market share through fierce price wars

9 certainly will turn the U.S. tobacco farm economy

10 upside down with many disastrous consequences.

11 Tobacco production in many competing countries is

12 controlled by the same multinational cigarette

13 manufacturers and leaf dealers that operate here.

14 We are currently, in this country,

15 experiencing changes to our marketing system brought

16 on by three years of quota reductions. We recognize

17 that contracting with individual producers poses a

18 serious challenge to the price support program. It

19 also presents great challenges to the current auction

20 market system of our heritage. However, we believe

21 the contracts over growing tobacco must coexist with

22 an alternative marketing system within a supply

23 control program. We recognize though not every

24 farmer will seek a contract, not every farmer will

25 accept a contract if offered one, but we certainly






1 must protect our foreign markets as it is about one

2 third of our annual production.

3 North Carolina Farm Bureau feels that

4 farmers who contract directly with the manufacturers

5 should be the biggest supporter of the price support

6 program because it sets a minimum price for their

7 crop and it provides a ready opportunity to sell the

8 crop if contracting terms become unfavorable.

9 In short, the program provides the only

10 safety net for these farmers. A strong marketing

11 system must be made available to our farmers and our

12 tobacco producers as an alternative to contracting

13 and certainly as a place for price discovery. We

14 continue very strongly to support the Federal price

15 support program and are working closely with other

16 flue cured and burley groups and farm organizations

17 to improve and bring about meaningful changes.

18 North Carolina Farm Bureau policy has

19 strongly supported programs to prevent youth smoking

20 and will continue to do so. We believe the Federal

21 Government is the only entity that can properly

22 monitor and supervise a supply and control program.

23 Certainly, a major frustration for our tobacco

24 farmers is that the Federal Government does not grant

25 equal access to export market programs for tobacco.






1 Tobacco farmers have not asked for special treatment

2 in the use of export enhancement funds, but certainly

3 we must have equal treatment.

4 There continue to be serious discussions

5 concerning a federal buy-out of the tobacco program.

6 Recent past experience has shown that these types of

7 proposals easily take on a life of their own, and the

8 legislative outcome is unpredictable at best. It is

9 certainly easy to raise false hope and expectations

10 in farmers. It is quite a different matter to

11 deliver on those promises in today's political

12 climate. Serious talk about a complete buy-out of all

13 tobacco quota must include all parties involved in

14 tobacco and we must understand that a buy-out places

15 continuation of the current price support program in

16 serious jeopardy.

17 In conclusion, tobacco is a legal product

18 for adults. It is not illegal to manufacture

19 cigarettes. Farmers sell tobacco to cigarette

20 manufacturers. We do not sell tobacco to Glaxo, not

21 IBM, not Kelloggs. The profitability of growing and

22 selling tobacco is directly tied to the profitability

23 and viability of the domestic cigarette

24 manufacturers. Displacing American tobacco with

25 foreign leaf and eliminating America tobacco






1 producers will not result in one less cigarette being

2 manufactured either here or overseas. The reality of

3 today's tobacco politics demands that solutions not

4 only be bi-partisan, but include the manufacturers as

5 part of the solution, not a part of the problem.

6 This is an inescapable fact of life. Thank you very

7 much for this opportunity.

8 Mr. Doug Richardson: Thank you, Mr.

9 Wooten. Larry, I think there is a question of you?

10 Mr. Matthew Myers: Larry, is there

11 agreement on the difference between domestic price

12 for tobacco and the world price; and what is the

13 difference? I thought I heard two different things

14 this morning.

15 Mr. Larry Wooten: Your question again,

16 Mr. Meyers, is there a difference?

17 Mr. Matthew Myers: You said the world

18 price for tobacco hovers just below the U.S. price?

19 Mr. Larry Wooten: Historically, the

20 America tobacco is priced higher than foreign

21 tobacco. As the previous speakers have said, our

22 price forms the umbrella for tobacco prices around

23 the world. We lower our price, and the other prices

24 fall in reaction, so competing nations are dedicated

25 to their tobacco industry, certainly as a source of






1 foreign currency and employment, as we are in the

2 tobacco industry in this country.

3 Mr. Matthew Myers: So what is the

4 difference today between our price and the world

5 price?

6 Mr. Larry Wooten: In terms of money?

7 Mr. Matthew Myers: In terms of -- yes,

8 the gap?

9 Mr. Larry Wooten: I don't know exactly.

10 Someone else may. The market varies from country,

11 from competing county to competing country. I don't

12 know what the difference is.

13 Mr. Doug Richardson: Mr. Flye says it's

14 50 to 75 cents per pound below U.S. tobacco.

15 Mr. Larry Wooten: I see Dan Stevens

16 nodding his head in agreement, so I certainly take

17 that --

18 Mr. Matthew Myers: The other thing I was

19 trying to understand, one other speaker was talking

20 about the importance of a way to lower U.S. price. I

21 thought I was hearing you say that if you lower U.S.

22 price, you lower the world price. I'm trying to

23 understand what your recommendation is.

24 Mr. Larry Wooten: Tobacco is priced

25 around the world. Certainly as we lower our price to






1 maintain our market share, at some point, the

2 competing countries can't lower their price, but they

3 certainly, in an effort to maintain their market

4 share, they will continue to do so.

5 Mr. Doug Richardson: Any other questions

6 of Larry? Thank you. The next person to testify is

7 John Mark Hack. John Mark is representing the

8 Governor's office from Kentucky. John Mark is the

9 Director of the Governor's office on Agricultural

10 Policy. Mr. Hack.



13 Mr. John Mark Hack: Good morning. Thank

14 you, Chairman Kuegel, Chairman Myers, Mr. Richardson,

15 Mr. Hatcher, and other members of the Commission for

16 the opportunity to address you this morning for this

17 critically important initial meeting of what is

18 clearly a historic group.

19 As Mr. Richardson noted, my name is John

20 Mark Hack, and I serve as Executive Director of

21 Kentucky Governor Patton's Office of Agricultural

22 Policy. In my capacity I have served as the

23 Executive Director of Kentucky Agricultural

24 Development Fund, created by Kentucky's Tobacco

25 Settlement Appropriation for Future Agricultural






1 Development, and as President of the Kentucky Tobacco

2 Settlement Trust Corp, our phase II certification

3 entity.

4 I'm especially glad to be with you today

5 because of Governor Patton's instrumental role in

6 convincing President Clinton and Vice President Gore

7 to establish this group at this important juncture.

8 While the groundwork for this Commission has been

9 laid over the past several years by collaboration

10 between the individual groups you represent, it was

11 Governor Patton's conversation with the President and

12 Vice President that built the inertia many of you had

13 established to put this Commission in place.

14 President Clinton and Vice President Gore

15 are to be commended for their vision and foresight to

16 formally establish this group at the very highest

17 level of government. In the twilight of the

18 Clinton/Gore administration, it's also appropriate to

19 applaud the unwavering commitment of this

20 administration to the farm families of this country,

21 and in raising our collective national conscience to

22 the dangers represented by tobacco use among our

23 children and young people.

24 In several of his numerous trips to the

25 commonwealth, President Clinton has reaffirmed his






1 support, time and again, for the farm families of our

2 state and the Federal Tobacco Program. These two

3 issues, the future of tobacco farm families and their

4 communities, and the future of public health, were

5 bound to converge at one or another.

6 Now with the irony of more smokers in this

7 country and the world than at any point in history,

8 and with tobacco farm families in Kentucky and across

9 the Southeast on the edge of economic ruin because of

10 severe reductions in the amount of tobacco they are

11 allowed to grow and sell, the issues have come

12 together and are, from this point forward,

13 inextricably linked.

14 The timing is near perfect. The stakes

15 are unimaginably high, and your task is critical. We

16 can develop a plan to address the long-term economic

17 insecurity of hundreds and thousands of tobacco

18 farmers across the Southeast, and a plan to help us

19 better combat and prevent the devastating health

20 consequences associated with tobacco consumption by

21 our young people. You may hear nay-sayers in the

22 near future claiming that this Commission is nothing

23 more than a political maneuver by President Clinton,

24 and that it will most likely be dismantled if the

25 Governor of Texas is elected President.






1 That should not deter you from working

2 between now and December 31 when the President

3 expects your initial report, to permanently set the

4 record straight, for the highest level of government,

5 that as cigarette manufacturers' profits decline, as

6 smokers increase in number here and around the world,

7 and as more children get addicted to cigarettes, and

8 as the economic futures of tobacco farm families here

9 and across the Southeast becomes more and more

10 uncertain, that substantial movement by the Federal

11 Government is imperative and the need for such a

12 movement is urgent.

13 This is a family health issue, farm

14 families and families with young smokers. On the

15 tobacco production side, we believe there are some

16 relatively simple steps that can be taken and should

17 be taken, to make American flue-cured and burley

18 tobacco producers more competitive. Before I share

19 some of our thoughts toward those desired ends, let

20 me state strongly that the Patton administration

21 believes firmly in the freedom of adult choice, and

22 that tobacco use for legal practice should stay that

23 way. We believe that America tobacco is the finest

24 quality, safest product in the world. We also believe

25 that the Federal Government bears the responsibility






1 for taking the steps necessary to facilitate America

2 tobacco producers to gain a larger domestic and

3 export market share.

4 We recognize that the future of America

5 tobacco production and protection of public health

6 should be inextricably linked and it's totally

7 appropriate. But recommendations that we will share

8 in written form with the Commission today, are aimed

9 at the tobacco production side of the equation that

10 you've been charged to complete. Basically our

11 desired ends are the movement of the right to produce

12 and market tobacco in the hands of the tobacco

13 producers, to eliminate leasing as a non essential

14 cost of production, and to provide adequate

15 compensation to the non-active quota holders for the

16 asset that they have experienced over the course of

17 the last three years, a 60 percent reduction effort.

18 We will share those in written form. We

19 look forward to your visit to Kentucky tomorrow.

20 Thank you very much for the opportunity to address

21 this Commission.

22 Mr. Doug Richardson: Any questions of

23 John Mark? Thank you. The next person to testify is

24 Mr. Jerry Jenkins. He is Chairman of the Flue Cured

25 Tobacco Committee of the Virginia Farm Bureau.








3 Mr. Jerry Jenkins: Good morning,

4 Co-chairmen and member orthopedic surgeon the

5 Commission. I am Jordan M. Jenkins of Lunenburg

6 County, Virginia. I am a tobacco farmer and Chairman

7 of the Virginia Farm Bureau's Flue Cured Tobacco

8 Committee.

9 We appreciate the opportunity to appear

10 before the President's Commission this morning.

11 Thank you for the opportunity.

12 The issues set forth by the Commission in

13 preliminary times and for this meeting are currently

14 very fluid and will continue to be and driven by a

15 number of complex forces. Many of these forces are

16 not even yet identified. However, we do know that

17 they will shape, and continually reshape the future

18 of our tobacco production areas and their

19 communities.

20 In this regard, I will focus on three

21 areas that are particularly relative to those of us

22 that grow tobacco.

23 First, the tobacco program. As someone

24 who makes a living, has raised and educated a family

25 as a tobacco farmer, this program is a personal issue






1 for me. The bottom line is, it has protected the

2 producer against severe price declines and provided

3 the industry an adequate supply of tobacco at a

4 quality level that is world class. There is no doubt

5 about that. In order to accomplish this, it has been

6 modified many times and has worked to the advantage

7 of the entire industry, both manufacturers, leaf

8 dealers and growers, over seven decades.

9 However, we have to be realistic. If the

10 federal program is not sustainable in the future,

11 then I would recommend a privatized program initially

12 funded and chartered by the Federal Government. This

13 would be similar to the so-called Robb Tobacco

14 Transition Act, included in proposed tobacco

15 legislation a couple of years ago. It would be a

16 mandatory program and would include the following: A

17 buy-out of $8 per pound to quote holders over a

18 period of 5 - 10 years; a forty cent per pound

19 transition payment to active producers over a 10 year

20 period or to equal $4.00 a pound; the present quota

21 system would be replaced by a licensing system to

22 limit production, and unlike quota, would not be a

23 liquid asset; the license would go to qualified

24 producers based on their qualifying transition

25 payments. By eliminating quota, producers would not






1 face the expense of leasing or buying quotas, and

2 thereby reduce cost of production.

3 Without some type of program, I would

4 predict that tobacco would be grown by anyone who

5 wanted to within the U.S. It would be produced at a

6 much lower price, and much of the tobacco could

7 easily be put into the market in the form of

8 cigarettes by small individual operators. There

9 would be a great problem with dealing with taxation

10 requirements; and also as opposed to someone to

11 modify the use of tobacco, this would certainly let

12 the cat out of the bag or the mule out of the barn.

13 Quota reductions and their effects, it's

14 my opinion that the recent drastic quota cuts were in

15 part a result of a combination of world-over supply

16 and domestic cooperatives' large supply of tobacco on

17 hand. But mainly, it was the result of

18 manufacturers' reactions to how they were going to

19 pay for the Master Settlement Agreement and the

20 predicted decrease in domestic consumption.

21 When you have drastic quota reductions,

22 everyone associated with the production and marketing

23 of tobacco suffers economically. To what extent the

24 grower suffers has to be examined in an individual

25 basis; it cannot be based on any category such as






1 size.

2 Regarding world price, which has been

3 identified here several times this morning, it has

4 been my experience that world price is determined by

5 the U.S. price, and moves up and down accordingly.

6 I have always contended that the federal

7 tobacco program could be considered a method of

8 contracting as we look at the future of contracting.

9 The USDA determines how much you can grow each year

10 in return for price support. It also determines the

11 quality standards, pesticides and tolerances and

12 other factors. I believe that contracting can exist

13 within a tobacco program, but only with modification

14 to protect growers without contracts, small domestic

15 purchasers, export customers and to protect the

16 grower cooperatives from becoming a catch-all.

17 Also if contracting becomes the only

18 method with or without a program, we would benefit

19 greatly and certainly need a Bill of Rights to

20 protect contract farmers, and needs to be patterned

21 after an initiative that's been proposed by the Iowa

22 Attorney General's office.

23 On the other issues, I would say that the

24 Virginia Farm Bureau did sign on to the Core

25 Principles several years ago. Virginia legislation






1 provides that the Master Settlement Agreement monies

2 received be divided as follows: 50 percent to the

3 growers and their communities, 10 percent to the

4 health groups, and the remaining 40 percent to the

5 Commonwealth itself.

6 Also, while we have supported adult

7 smoker's rights, we have always been against youth

8 smoking. I note that none of my children smoke and

9 firmly believe that curtailing youth smoking begins

10 at home.

11 In closing, I'd like to quote what I think

12 is something appropriate for this group to consider.

13 This is from Alfred Whitehead, "The goal of progress

14 is to preserve order amid changes, and to preserve

15 change amid order." We appreciate the opportunity to

16 express our views at this time. Thank you.

17 Mr. Doug Richardson: Thank you, Mr. Jenkins.

18 Any questions?

19 Ms. Lynn Carol: I have a question, and I

20 apologize if I didn't hear you address this in your

21 comments, but you brought up the issue of a buy-out

22 at 40 cent transition fee. Did you address how you,

23 your views on how this should be financed or the cost

24 for such things could be generated?

25 Mr. Jenkins: Well, it's our feeling that






1 with the sum of money that we're talking about, that

2 should at least be initiated through some type of

3 federal program.

4 Ms. Carol: Are you talking about the

5 remaining 40 percent of the state's settlement money?

6 Mr. Jenkins: No, we're talking about

7 federal.

8 Ms. Carol: I'm sorry?

9 Mr. Jenkins: We're talking about federal,

10 at least the -- some funding.

11 Mr. Doug Richardson: Any other questions?

12 Thank you, sir. The next person to testify will be

13 Mr. Brooks Wood. He is a tobacco farmer's son.


15 Mr. Brooks Wood: Good morning. My name

16 is Brooks Wood. I'm from Martin, North Carolina

17 which is located in Greene County, and I'm here to

18 share with you exactly what tobacco means to me.

19 First of all, tobacco means early morning

20 and late nights working on my family farm. The chill

21 of the early morning dew while I sand-lug tobacco, or

22 the sound of the barns outside my window as I drift

23 off to sleep. These are experiences that each of

24 you, young or old, can relate to, if you live on a

25 tobacco farm as I have for the seventeen years of my






1 life.

2 I want you to know that I am a typical

3 teenager and I do not smoke. It's not because of the

4 demise of Joe Camel. It's not because of the

5 departure of the Marlboro Man. It's not became of

6 the removal of billboards near my school. I just

7 simply think you should not smoke. Another

8 explanation is that my parents, as well as other

9 tobacco producers, do not encourage teen smoking.

10 They feel that the decision to smoke or not to smoke

11 should be made when a person reaches adulthood.

12 I have a GPA of 3.98 at my high school,

13 and I am a recent North Carolina State University

14 Park Scholarship nominee. The reasons behind my

15 accomplishments are the work ethic and values that

16 the family tobacco farm instilled in me. I don't

17 know if I'll get that Parks Scholarship or not, but I

18 sure hope I get some type of assistance because the

19 tobacco allotment has decreased by 45 percent over

20 the past three years. What that exactly means is,

21 nearly half of our tobacco income has completely gone

22 down the drain. That's why I say that the tobacco

23 settlement should come to tobacco producers to help

24 them through this period of hard adjustments, so that

25 future generations may experience the same benefits






1 as I have growing up on a family farm.

2 I don't know the answer to the structuring

3 of a buy-out plan or other governmental programs, but

4 I am here to emphasize to you the importance of the

5 family farm, and how essential it is to preserve it

6 and its heritage.

7 On my family farm, we have a sign that

8 reads, "Wood Farms, a family tradition." Please help

9 me keep our tradition alive by remembering young

10 people like me when deciding on important tobacco

11 legislation.

12 Whether you people like it or not, all of

13 you might be the people of today, but me and my

14 generation are the people of the future. In closing,

15 I thank each of you for all you do, but most

16 importantly I say, "Thank you, tobacco. Thank you

17 for shaping lives that shape America. You've

18 certainly shaped mine."

19 Mr. Doug Richardson: Thank you, Mr. Wood.

20 The next person to testify is Pete Burgess, and he is

21 Chairman of the North Carolina Farm Bureau Tobacco

22 Committee. Mr. Burgess.



25 Mr. Pete Burgess: Thank you, Mr.






1 Chairman. That's a hard speech to follow. I'll do

2 the best I can.

3 Mr. Chairman, thank you so much for the

4 opportunity to present my views to the President's

5 Commission this morning. My name is Pete Burgess,

6 and I am a tobacco farmer in Nash County, North

7 Carolina. Tobacco has been very rewarding to me and

8 my family. It has provided us with a good quality of

9 life. It gave us the opportunity to have a

10 comfortable home, to educate our children to the

11 point where they're productive citizens of this

12 state, and helped to provide me and my wife with

13 adequate security from this point through our

14 retirement.

15 Economic opportunity for our community in

16 the future is dependent on a strong agricultural

17 economy in general, and certainly a strong tobacco

18 sector in particular. While we produce crops in

19 addition to tobacco, it is the only one that provides

20 us with an income to support our living requirements.

21 Too often our production of other crops is subsidized

22 by tobacco income in our efforts to find income

23 producing crops which have to this point not been

24 successful.

25 Protection of public health is important






1 and a goal that I think everyone supports, but the

2 elimination of tobacco production in this country

3 will not achieve this goal, because we know that

4 other countries around the world would increase their

5 production to cover any reductions made here.

6 This last week, I had the opportunity to

7 visit the tobacco producing region of Brazil. While

8 there, statements made by one of the production

9 supervisors of that country, that they already have

10 in place the infrastructure to increase their

11 production by 30 percent, if the opportunity for more

12 exports were available to them. They already market

13 tobacco for production, so transferring our

14 production opportunities to other countries, all it

15 does is it takes away economic support for our

16 tobacco farmers, our families, and the communities in

17 which we live.

18 I believe our -- that our tobacco program,

19 by keeping the production in balance with demand, has

20 been successful and that this program should be

21 continued. However, if government action and action

22 by other groups has as its goal the elimination of

23 our tobacco production in this country, then some

24 form of compensation to the tobacco farmer should be

25 in place to pay them for their investments, quota,






1 equipment, and support infrastructure which will no

2 longer have any value or use.

3 Mr. Chairman, thank you very much for this

4 opportunity to make this comment to you this morning.

5 Mr. Doug Richardson: Thank you,

6 Mr. Burgess. Any questions for Mr. Burgess? The

7 next person to present testimony is J. T. Davis, and

8 he is from Brookdale, Virginia and he's speaking for

9 Concerned Friends of Tobacco. Mr. Davis.



12 Mr. J. T. Davis: Mr. Chairman, Commission

13 members, I thank you for accepting the challenges

14 offered this Commission to seek and find long term

15 solutions for the many issues before you.

16 My name is J. T. Davis and I am here today

17 representing Concerned Friends for Tobacco, a

18 grassroots organization located in Virginia,

19 comprised of tobacco quota holders, producers, and

20 others who understand the economic important of

21 tobacco to tobacco-dependent communities.

22 It is comforting to see a number of

23 familiar faces on this Commission, individuals who I

24 have a great deal of admiration and respect for. The

25 tobacco farmer issue should be viewed as not






1 necessarily about tobacco, but more of a people

2 issue, an issue about honest, hard working,

3 God-fearing people who only want the best for their

4 families and people who want desperately to keep

5 their family farm intact.

6 I think before this Commission starts to

7 formulate a plan which will take our

8 tobacco-dependent communities to the 21st century

9 with a goal of making them whole, you must first

10 understand who we are, or as important, who we are

11 not.

12 We are not the large plains farmer with

13 acres as far as you can see. We are small in

14 comparison. 1992 census figures show the average

15 tobacco acreage is 6.6 acres per farm in Virginia.

16 The same census figures showed some 142,270 to farms

17 in 18-plus states. 90 percent of the 18,800 black

18 farmers live in the south. Tobacco accounts for 50

19 percent of total sales of nearly 1/3 of black

20 operated farms in the Raleigh service region. There

21 are 600 American Indians who grow tobacco; 52 percent

22 of tobacco quota holders in my county are women, a

23 socially disadvantaged group as defined by the USDA.

24 A large number of burley tobacco growers

25 live in poverty stricken areas of Appalachia where






1 poverty levels consistently run 15 to 20 percent.

2 The average median income for a family of four is

3 $12,700. Another staggering statistic is the top

4 four tobacco producing states are also the top four

5 states with limited resource farmers. Drastic policy

6 changes will affect these groups first. The people

7 you want to hurt the least could be hurt the most.

8 I applaud you for agreeing to build on the

9 Core Principles. As most of you know, Concerned

10 Friends is a signatory of the Core Principles.

11 Moreover, our organization played an integral part in

12 drafting these principals. I urge you to allow these

13 Core Principles to serve as a filter in determining

14 your approach in adopting a course of action. This

15 document is a monumental move by both the farm

16 community and public health community toward workable

17 solutions to complex problems.

18 I'd like to just clear the air about when

19 we talked a little bit about how the Core Principles

20 affect the program. When the farm community sector

21 went in, we were adamant that the program be

22 protected. We never compromised our position. We

23 think that the Core Principles should be used as a

24 filter, and I'll just paraphrase what the Core

25 Principles say concerning the program. A tobacco






1 production program is in the best interest of the

2 public health community, and the tobacco producing

3 community, and from a farm reduction standpoint, it's

4 in the best interest for the public health community

5 to support assurances that enhance stability and

6 price protection for domestic grown tobacco. Again,

7 I did want to clear the air about how the Core

8 Principles addresses the program.

9 The Master Settlement Agreement has

10 forever changed the landscape as it pertains to

11 tobacco production. Wholesale cigarette prices

12 continue to climb due to the Master Settlement

13 Agreement.

14 As tobacco is price-elastic, we know price

15 increases are connected to consumption decrease,

16 which in term ultimately means less domestic

17 production for domestic consumers. As public health

18 concerns increase, we see reduced consumption

19 continue, thereby making the probability in the long

20 term for continued reduce quotas.

21 Notwithstanding, these 44 percent

22 cumulative quota cuts over the past three years

23 cannot be attributed altogether to Master Settlement

24 Agreement payments. Elastic correlation shows we

25 should have received approximately an 11 percent






1 quota cut rather than 44 percent. This means there

2 have to be other contributing factors.

3 We, as tobacco producers, see the shift to

4 more offshore tobacco by manufacturers and leaf

5 dealers as an alarming trend which threatens our mere

6 survival as a farmer. I would suggest this

7 commission go in and look at the work of people like

8 Jasper Womack and Tom Capehart, regarding the subject

9 to tobacco situation and outlook.

10 The free market approach is anything but a

11 free market when it comes to tobacco. Just take time

12 to research the proliferation of growth of tobacco

13 offshore by the manufacturers and leaf dealers. One

14 such production area is Brazil. In 1998, the

15 Brazilian crop was approximately 728 million pounds.

16 Their 1999 crop was approximately 948 million pounds.

17 This shows a 30 percent increase, while at the same

18 time we were taking double digit quota cuts. The '99

19 Brazilian crop was 42 percent larger than our '99

20 crop and the trend continues. This trend should be

21 eye opening and quite alarming, particularly when you

22 consider very little tobacco was grown in Brazil in

23 1970.

24 A general lack of environmental,

25 pesticide, and labor regulations make developing






1 countries fertile ground for expansion. This

2 presents a major health issue with millions of pounds

3 of tobacco coming into this country each year,

4 subject to no restrictions as to pesticide

5 application. This tobacco should come under the same

6 scrutiny as domestic grown tobacco.

7 It's time to level the playing field. We,

8 the America tobacco farmer, are dedicated to

9 providing the adult consumer with the cleanest,

10 safest commodity available. We have recently

11 demonstrated this by moving across the board to

12 producing low nitrosamine tobacco. Many

13 opportunities will present themselves as we enter

14 into the 21st century, to lower or remove toxins as

15 technology advances. This opportunity will not

16 present itself in places like Brazil or Zimbabwe.

17 We, the America tobacco farmer, should be viewed as

18 part of the solution rather than part of the problem,

19 particularly when it comes to youth access.

20 When tobacco legislation was being

21 considered in 1998, we supported and continue to

22 support the Tobacco Market Transition Act. We urge

23 the Commission to take a closer look at the TMTA in

24 its entirety.

25 Contracting is an imminent threat to the






1 program as we know it. We do feel a program, and I

2 emphasize a program rather than the program, can

3 survive and should survive should marketing move more

4 toward direct contracting. Contracting without some

5 type of intermediary is a threat to the mere

6 existence of the small family farm. We must protect

7 this endangered species. As one prominent burley

8 grower stated, "with contracting, the farmer becomes

9 an appendage of the company."

10 Contracts over a period of time will

11 probably move more toward the Brazilian tobacco

12 farmer contract. Then we, the America farmer, will

13 be no more than an indentured servant. Deregulation

14 or a free market situation under contracting,

15 according to tobacco Ag economists as well as the

16 USDA, predict flue-cured prices to drop by one-third

17 while production increases. A similar scenario is

18 laid out for burley.

19 Publications on implications or removing

20 APG by Ag economist, Blake Brown, of North Carolina

21 State, and Will Snell, University of Kentucky, as

22 well as USDA economic research services should be

23 studied extensively by this commission. It makes

24 absolutely no sense for public health concerns to

25 push for more regulation on the finished product end,






1 while allowing total deregulation on the production

2 end.

3 Elimination of a program carries with it

4 health consequences. The current program provides

5 many oversights which carry health safeguards. I

6 have heard one of the commission members, Andrew

7 Shepherd, on many occasions elaborate on this issue.

8 Price protection, as provided by a

9 program, provides a degree of stability for the

10 tobacco farmer and the tobacco producing communities.

11 I'll provide you with a dramatic example of how the

12 price support program provides a strong degree of

13 stability.

14 In 1992, the average flue-cured tobacco

15 price was $1.72 per pound in the U.S. and $1.31 per

16 pound in Zimbabwe. In 1993, poor world market

17 conditions caused the Zimbabwe flue-cured price to

18 drop to 58 cents per pound. However, in the U.S.,

19 flue-cured producers received an average of $1.69 per

20 pound, due to the support price system within the

21 tobacco program. Moreover, a price protection

22 program prevents a massive transfer of wealth from

23 the farm community to the manufacturers. In a letter

24 which was distributed to senators on Capital Hill,

25 June 9, 1998, states the transfer of wealth to be as






1 much as $1 billion annually in the U.S., and

2 approximately $4 billion worldwide. Other

3 implications of a free market approach are outlined

4 in this letter. I urge the Commission to review this

5 letter, as we feel these implications are right on

6 target.

7 Given the fact tobacco prices in 1998

8 averaged 62 cents in Malawi, 59 cents in Brazil, and

9 31 cents in India, matching word prices is an

10 impossible goal. Our input costs are much higher

11 than the aforementioned prices.

12 As we consider needed program changes, I

13 would suggest this Commission study discussion points

14 and recommendations offered by the five state

15 flue-cured committee. These points go a long way

16 toward changing the program to a program which

17 addresses today's changing tobacco environment.

18 One of our goals is to replace the

19 imported, cheap, heavily chemically laden tobacco

20 with a cleaner, pesticide free, American tobacco

21 which will provide a reduced risk to the adult

22 consumer. It is time policy and legislation be

23 geared to supporting the America farmer rather than

24 the Brazilian tobacco grower. Displacing the some

25 400 million pounds of tobacco imported into this






1 country in 1998 alone will go a long way toward

2 stabilizing our farm economy, thereby protecting the

3 some 100,000 plus small family farms, which grow

4 tobacco in the U.S.

5 This Commission needs to realize that the

6 tobacco farmer is the same farmer who helps provide a

7 safe, stable and affordable supply of both food and

8 fiber for this country. Elimination of the small

9 tobacco farm family is a giant step toward corporate

10 farming which brings on a whole different set of

11 problems. I'll just go a step further and say that,

12 and the people in the health community have heard me

13 say this time and time again, that putting the

14 American farmers out of business will not keep one

15 cigarette from being made. We are part of the

16 solution and not part of the problem. Thank you.

17 Mr. Doug Richardson: Thank you. Any

18 questions for Mr. Davis? If not, the next person to

19 testify is Mr. Ernie Averette, and he is testifying

20 as a farmer and county commissioner.



23 Mr. Ernie Averette: Thank you, ladies and

24 gentlemen, for coming to tobacco country to hear our

25 case and discuss this issue.






1 I'm appearing before you today as a County

2 Commissioner, District Five, Danville County. I

3 represent many tobacco growers. An 80 acres tobacco

4 grower and quota owner myself, a father, and the

5 seventh consecutive generation to tend our plantation

6 dating back to 1923. Because my time is limited,

7 pardon me for being direct and specific.

8 In 1980, fertilizer cost $150 a ton, a

9 good pickup truck cost $10,000, labor ran about $3.50

10 an hour and tobacco sold at market, good quality

11 tobacco, sold at about $1.85. Today, fertilizer

12 costs $300 a ton, a good pickup truck right about

13 $25,000, labor runs $9 to $10 an hour. When all

14 costs are considered, a good quality of tobacco sells

15 for $1.85 a pound.

16 Compounding this set of facts is that we

17 have now endured three consecutive quota cuts. I

18 would submit to you that there is no business policy

19 advocated by any school of business in the United

20 States that can ameliorate simultaneously lower

21 prices of a commodity in conjunction with lower

22 volume of that commodity.

23 While we have made great strides in

24 efficiency, efficiency can only take us so far, and

25 we are literally at the end of our rope in terms of






1 marketing. This year, Phase II monies came on line

2 and were of great benefit. Two, other sources of

3 income, Key Lap (inaudible) programs were beneficial.

4 I would also submit to you that were it

5 not for these two programs and monies that accrued to

6 our growers, that most of the growers in this room,

7 including myself, would not plant a tobacco crop next

8 year. Knowing this, these programs are possibly

9 short lived, particularly the Key Lap, (inaudible)

10 are predictable, and possible to plan for.

11 When this is considered with the backdrop

12 of statistics I gave you earlier, you can see the

13 difficulties that myself and all our growers face.

14 It is an unhappy set of facts, and quite frankly no

15 one in the growing community that I know of, is

16 optimistic at the point.

17 A good question is what is the answer. I

18 know I'm not smart enough to have that answer for you

19 today, but I do feel it is absolutely essential that

20 a buy-out take place for our growers, at 8 and 4,

21 (inaudible) and we begin again, a new program that is

22 based on some system of licensure, that will evolve

23 as we go forth.

24 I'm convinced that there are people out

25 there who are smart enough, that can devise this






1 program, but I would tell you that the time is

2 limited. We cannot wait two years; we cannot wait

3 three years before things rectify themselves, because

4 by then, we will have lost our best growers, most of

5 our growers. Talent in this business, once lost,

6 does not come back. It is not easily replaced.

7 If I might close on a personal note, I

8 said I am a father, and I have an infant son. I once

9 had a great hope that he would be the eighth

10 generation to tend my plantation. My current hope is

11 that I will farm long enough that he will see me farm

12 and remember it as an adult. Thank you very much.

13 Mr. Doug Richardson: Thank you, Mr.

14 Averette. The next person to testify will be Keith

15 Parrish. He is a tobacco farmer from Benson, North

16 Carolina.



19 Mr. Keith Parrish: I'm sorry I was little

20 out of place. I didn't know what the schedule was.

21 Honorable members of the Commission,

22 special guests and my fellow farmers, I am Keith

23 Parrish, a tobacco farmer from Coats, North Carolina.

24 I also serve on many boards that help to set policy

25 for tobacco. Presently, I serve as Executive






1 Director of the National Tobacco Growers Association

2 which represents both burley and flue-cured farmers.

3 I'm here today as a fourth generation

4 tobacco farmer. I love what I do just as I love the

5 county in which I live. Fairness and common sense

6 have been my approach to the resolution of the many

7 problems we have today. I am also very involved as a

8 lead plaintiff in the federal suit, DeLoach vs.

9 Philip Morris and others. There are approximately

10 6,500 of us who are pleading for help.

11 Over the past three years, tobacco quota

12 in flue-cured and burley has endured huge cuts.

13 These cuts were out of our control as growers. The

14 tobacco manufacturers have been in direct control of

15 the tobacco program since the 1980s.

16 No net cost, the buy-out of stocks, and

17 legislation sealed our fate. We have been on a

18 roller-coaster ride that never seems to end. The

19 tobacco program has served us well. It provided

20 security but it also allowed for value to be placed

21 on our quota. That value in the form of rent,

22 created higher prices and a cost added to our product

23 that the companies felt gave them no returns. It

24 placed our crop well above world prices.

25 This problem and our unwillingness to vote






1 out our program seems to have initiated a plan by the

2 companies to destroy it from within. Planned quota

3 cuts and continued manipulation of the auction system

4 has put us well below any means to earn a profit.

5 Under this suppressed time, contracts are suddenly

6 introduced. Every major tobacco organization signed

7 a proclamation against contracts at a meeting in Lake

8 Lanier, Georgia. The manufacturers ignored burley

9 and flue-cured growers and our willingness to make

10 changes demanded by them to our program. The

11 companies know that the farmers have no choice but to

12 grab the first lifeline thrown their way. Survival

13 is what we plead. Desperation is what we feel.

14 Contracts offer us a job, not our usual way of life

15 and our independence.

16 Along with contracts comes the nitrosamine

17 issue. Farmers are being forced to invest in

18 something that is not proven science. We have no way

19 to recoup our investment. The manufacturers are the

20 only ones who can do that. If they really believe

21 the perception is real enough to warrant this demand,

22 then they should do as some companies and pay the

23 entire bill.

24 This is just one way to force thousands of

25 farmers out of business. They don't need us all.






1 Many of us will not get contracts or loans to

2 retrofit barns. The retrofit units cost $4,000 each

3 or more. One industry official stated that,

4 "Everyone wants to go to heaven, but we all know

5 everyone won't make it." That is a true statement as

6 it relates to contracts and our survival.

7 "Divided we fall," is another quote stated

8 by Judge Phil Carlton in a meeting in Charlotte,

9 North Carolina. He asked us to fight against bills

10 in Congress that would have provided monetary relief.

11 We did as requested with their promise of help and

12 security for the future. That was a lie. We have

13 been treated as puppets, not as a member of a family,

14 as they like to call us.

15 We have problems under our present auction

16 system. We know that our auction is not an auction

17 at all. We know that allocation, corruption and

18 intimidation are the norm. Tie bids are prevalent on

19 all markets, and flue-cured included. What would our

20 price received on the floor be if certain companies

21 allowed competitive bidding?

22 Our problems are many. They seem

23 insurmountable. It is my belief that we have very

24 few choices. We can stay where we are and watch the

25 companies control our future or we can stand






1 together. We must make changes. Our leadership must

2 represent everyone. Many leaders were the first

3 offered contracts. We must not allow personal gain

4 and self-survival to cause us to forget our fellow

5 farmers. We should say, it's all for one and one for

6 all. Changes and decisions made based on this

7 concept will be fair.

8 It would be great to maintain production

9 control and price support based on production costs.

10 That may not be realistic. We must admit that we are

11 not as politically needed as we once were. Our

12 numbers are smaller and decreasing every day. We

13 must go after the money.

14 We have to take the value out of quota and

15 have those who grow in control. We need a plan that

16 allows no future value to accrue. You cannot achieve

17 this without a buy-out of quota and compensation of

18 growers. Make it simple and fair. Base the buy-out

19 on the quota we had in 1997. This plan was actually

20 presented to Congress as the amended Lugar bill.

21 If freedom is what companies desire, then

22 those who are damaged the most, the producers, must

23 be compensated. A buy-out plan that only allows us

24 to produce under contract, with no monetary

25 compensation, only makes us slaves to the companies






1 and leaves us no independence.

2 The major reason we are demanding a

3 buy-out is profit. There is no profit in growing

4 tobacco today. I commend the public health community

5 because I know that they are well aware of the

6 importance of protecting the family farm. I applaud

7 their efforts to come to the table; however, I

8 believe you cannot regulate personal choice for an

9 adult.

10 I beg this commission to be realistic in

11 its recommendations. Let fairness and common sense

12 be your guide. Please help preserve our way of life.

13 Let our young farmers have a future. Set free with

14 dignity, those who wish to exit. We must not allow

15 thousands to perish when their only crime was they

16 played by the rules. Farm families are proud.

17 Please allow us to stay that way. Thank you very

18 much for allowing me to speak.

19 Mr. Doug Richardson: Any questions of

20 Keith?

21 Mr. Andy Shepherd: Keith, in your

22 testimony just now, did you indicate that you were in

23 favor of the Lugar bill?

24 Mr. Keith Parrish: I said a plan similar

25 to the Lugar bill could be used. I had much more to






1 say, but in my time frame, I couldn't really expound

2 on what I had in my speech, but that's simply a plan

3 that gives you eight and four over a three year

4 period of time. I feel it's what farmers have to

5 have because of the dire straits we find ourselves

6 in. A short period of time, such as the amended

7 Lugar, eight and four over three years, will keep

8 many more people able to survive and make up their

9 own minds as to what their future will be.

10 Mr. Andy Shepherd: Are you in favor of

11 any kind of future supply control mechanism?

12 Mr. Keith Parrish: I think that what we

13 need to do is get the eight and four, get the farmers

14 in a stable state, so that they are able to do,

15 enable them to organize how they're going to react to

16 contracts. I firmly believe contracts are here both

17 in flue-cured and burley, so that's going to be one

18 of the things that decides for us how our future will

19 be. The only way to address that is for us to have

20 enough money in our pockets to say, no, we don't want

21 to do this, or yes, we will take your offer. That's

22 what I believe.

23 Mr. Doug Richardson: Any other questions

24 of Keith? Thank you, sir. The next person to testify

25 is Mr. Scott Ballin, and he is testifying as a






1 tobacco and health consultant. Scott.



4 Mr. Scott Ballin: Co-chairmen and members

5 of the Commission, my name is Scott Ballin. I'm a

6 resident of the state of Virginia. It is a pleasure

7 to be able to appear before you today to provide you

8 with my views and thoughts about the critical work

9 you are undertaking. What you do will serve as the

10 basis for much work that will need to be accomplished

11 in the coming months and years, at the national,

12 regional, state and local levels. Tobacco has been

13 far too political over the last four decades and the

14 result has been devastating to the health of this

15 nation and now is affecting the livelihood of

16 thousands of producers of tobacco, their families and

17 their communities.

18 As you are well aware, there has been a

19 great deal of work that has preceded the formation of

20 this Commission. Some of these efforts go back to

21 1985. I first met in 1985 with President Carter,

22 when growers and health groups first sat down.

23 If there was one element that I would say

24 has allowed the progress that has been made to go

25 forward, it has been the element of honesty, trust






1 and integrity. It was these elements that allowed

2 for the development of the Core Principles and it

3 will be these elements that will allow us to move

4 forward in the coming months and years. I want to

5 personally acknowledge all of those in the High Point

6 community as well as the agricultural community for

7 their diligent and never-ending efforts.

8 In the time that I have, I want to address

9 several issues for your consideration. These are my

10 own views but I believe that they are representative

11 and consistent with the thoughts of many in both the

12 public health sector as well as the agricultural

13 sector who I have been able to work with over the

14 last several years.

15 First, I believe that there is a unique

16 opportunity that will allow us to fundamentally

17 change the way in which the tobacco companies have

18 conducted their business for the last 45 years, and

19 craft a system that protects public health and

20 ensures the economic viability of tobacco producing

21 communities. This involves dealing with many

22 overlapping and complex issues ranging from the

23 production and growth of tobacco, right through the

24 manufacture, sale, and distribution marketing of

25 tobacco and tobacco products. It means recognizing






1 that new technologies, new alternatives to tobacco,

2 as well as new uses for tobacco, are on the horizon.

3 I would encourage the Commission focus on

4 what kind of structure and system is needed in the

5 years ahead that will deal with existing and ongoing

6 challenges in the production arena. Such a system

7 must be flexible and enforceable. It might mean

8 establishing some sort of national or regional

9 tobacco control board that involves growers, health

10 groups, environmental groups, community development

11 experts, and others, to work on these issues on a

12 collective basis. Whether this is a private sector

13 or governmental entity, such a board should also

14 include ex officio representatives of the USDA, the

15 EPA and the FDA.

16 In addition to considering establishing

17 such a board, I would hope the Commission would

18 support and encourage the establishment of a private

19 sector, nonprofit entity that could serve as a think

20 tank for policy development and advocacy on issues

21 relating to the complex issues that this Commission,

22 public health groups, and growers are facing, on

23 national, state, and regional levels.

24 We clearly need to be looking at how the

25 partnerships that have been established can be






1 further developed and expanded so that ongoing

2 attention can be given to finding meaningful win/win

3 solutions.

4 I want to make some comments about the

5 role of the FDA. I believe growers should not fear

6 the agency, but rather embrace it as a rational and

7 logical basis for ensuring proper controls over the

8 labeling, sale and distribution and marketing of all

9 manufactured tobacco products. The FDA is the key

10 health agency charged with ensuring that manufactured

11 products including drugs, devices, foods and

12 cosmetics, are properly manufactured and fairly

13 marketed.

14 Why, when we know that tobacco products do

15 cause disease, and are addictive, should they be

16 treated any differently than other products. If the

17 FDA can regulate a package of broccoli, why can't and

18 shouldn't it regulate packaged tobacco. Just as many

19 farmers believe that there should be a tobacco

20 program, the public health community believes the FDA

21 is the cornerstone to the public health community's

22 national agenda.

23 We need to have a regulatory agency in

24 place that can deal with complex health and safety

25 issues in a flexible and ongoing manner. Growers who






1 chose to stay in the tobacco business need to be

2 thinking about these issues now. As I have said on a

3 number of occasions, responsible growers and the

4 organizations that represent them need to be a part

5 of the solution, not part of the problem, and I heard

6 J. T. Davis say that same thing today. I concur with

7 that.

8 As the Commission looks at issues related

9 to the production side of tobacco, I hope that it

10 will strongly reaffirm its support of the FDA as the

11 lead agency for ensuring the proper regulation of all

12 manufactured tobacco products.

13 The public health community has generally

14 supported the concept that buying out farmers is one

15 way of reducing the economic dependency on tobacco.

16 Obviously, this is one of the issues that the

17 Commission will have to deal with.

18 Where should the funding come from?

19 Obviously the federal and state excise taxes should

20 be considered as viable options. Excise taxes in the

21 tobacco producing states are the lowest in the

22 country. It would make sense to consider raising the

23 tax on tobacco products in those states to assist the

24 growers as well as support public health issues. We

25 will also have the added benefit of serving as an






1 incentive to keep kids and adolescents from taking up

2 the habit.

3 I find it interesting that the tobacco

4 companies will argue against taxes that could benefit

5 growers and public health because they claim

6 consumers will have to bear the burden. Yet when one

7 looks at the facts, it is not the federal excise tax

8 that has resulted in the high costs of cigarettes for

9 consumers. The excessive price hikes by the

10 companies from which the profits go directly into

11 their corporate coffers. If cigarette prices are

12 going to be high, that revenue should go directly

13 back to tobacco growers, families in communities, as

14 well as to protect public health.

15 For both domestic and international

16 reasons, I believe that some type of tobacco program

17 governing the production of tobacco needs to be

18 seriously considered by this Commission. This does

19 not mean preserving the status quo, but it does mean

20 that for those who continue to produce tobacco, they

21 will be doing so in a new context, one that looks at

22 production as a part of the chain of tobacco, but

23 also includes manufacturing and marketing controls.

24 A program of production and price controls

25 must also include standards for issues related to the






1 health and safety of the leaf, including pesticides,

2 handling, processing, reconstituted tobacco, testing

3 requirements. Many growers fear that if the tobacco

4 program is eliminated, the growers will be at the

5 mercy of the tobacco companies who will dictate

6 contractual terms for production, making growers mere

7 appendages of the companies and giving the companies

8 control over the production.

9 If contracting is coming, I would suggest

10 to the Commission that you consider ways of

11 maintaining a program but looking at ways that

12 contracting can be accomplished that gives the farms

13 and the cooperatives primary responsibility for

14 defining the terms and parameters under which such

15 contracts are entered into.

16 One of the charges of this Commission is

17 to consider the tobacco related health consequences,

18 not just in the U.S. but also abroad. What occurs

19 here in the U.S. affects the production and

20 manufacture of tobacco and tobacco products, while it

21 also impacts on both the production and manufacture

22 of tobacco overseas and vice versa. I think U.S.

23 growers and public health groups are in a very unique

24 position of helping shape how tobacco and tobacco

25 products will be grown and manufactured in the






1 future.

2 It's interesting that there are those who

3 argue that the plight of the tobacco farmer is the

4 result of public health policies and reduced

5 consumption. A look at the facts show otherwise.

6 Manufacturing plants and leaf processing plants

7 funded and built by U.S. companies are springing up

8 all over the world. Companies purchase tobacco at

9 rock bottom prices in countries where there are few

10 controls over health, safety and labor standards.

11 For a number of years now, the tobacco

12 companies have been using more and more foreign leaf

13 in their products, including in so-called U.S.

14 domestic, "made in America" cigarettes. In 1960,

15 approximately 90 percent of the tobacco used in U.S.

16 cigarettes was grown here. Today, that has plummeted

17 to almost 50 percent. As we look at what is

18 happening overseas, we should be concerned about the

19 use of pesticides on foreign crops, and the labor

20 standards and condition in which these crops are

21 being grown.

22 If anyone had asked me just a couple of

23 years ago what the state of tobacco would be in the

24 next five to ten years, I would have given them a

25 very different answer than I would today. Much






1 progress has been made but much more needs to be

2 accomplished. There is no one answer, no one

3 solution that will resolve the challenges facing the

4 tobacco-producing states, or which will accomplish

5 our public health objectives. Quick fixes and

6 band-aid approaches must be replaced with both short

7 term and long term planning that involves a broader

8 spectrum of people and organizations living and

9 working in these states.

10 The outcome of the national, state and

11 local elections should not make a difference in what

12 needs to be accomplished. Regardless of party

13 affiliation, the goal should be the protection of

14 public health and the preservation of its

15 communities. Health organizations should be viewed

16 as pro-health, not anti-tobacco, and growers and

17 their communities should not be identified as

18 pro-tobacco, but as pro-families and communities.

19 Whether it's public health or farming communities, we

20 are in the people business. We want to see a quality

21 of life preserved for generations. I believe this can

22 be done. Thank you.

23 Mr. Doug Richardson: Thank you, Scott.

24 Are there any questions of Scott? Let me just say,

25 I've just counted the list. We've got 26 more people






1 who want to testify. Please hold your testimony to

2 five minutes or less. If not, we'll not get to all

3 who want to testify today. The Commission must leave

4 here by no later than 3:00, and that's dangerous

5 because the plane flies out at 4:05. We've got to be

6 in Louisville for tomorrow. Please keep that in mind

7 and help move it along as best you can. Again, if

8 you turn in your testimony, the Commission members

9 will see it, and they will also see a transcript.

10 With that said, the next person to testify

11 is Amy DeLoach. She is testifying as a tobacco

12 farmer's wife.


14 Ms. Amy Deloach: Good morning ladies and

15 gentlemen, and I am scared to death, so bear with me.

16 My name is Amy Deloach, and I understood it, I'm

17 supposed to talk to you about tobacco. I don't know

18 all the pertinent numbers in these issues and I can't

19 give you many percentages either, but I can tell you

20 what I know about tobacco.

21 I was raised in a small town called

22 Hopeulikit, Georgia. Though during his adult life,

23 my father did not farm, he came from a farm family,

24 as did my mother. I grew up adjacent to my uncle's

25 farm and remember riding the tractor with him and






1 swearing he was never going to be able to make that

2 turn at the end of the row quick enough to keep us

3 out the ditch. He grew tobacco when it was strung on

4 a stick and hung in wooden barns to cure by fire.

5 The only job I was considered able to perform was to

6 hand it to the ladies stringing it up.

7 Today each morning when I wake up and open

8 the curtains in our bedroom, I see 62 DeCloet tobacco

9 barns that sit directly behind our house. Our county

10 tax assessor claims they're worth a lot more than

11 they really are, and now corporate powers that be

12 claim we have to spend around $4,000 on each one to

13 retrofit them so we can produce nitrosamine free

14 tobacco, which the companies may or may not buy and

15 we may or may not be allowed to grow.

16 Last year, we had to buy balers because we

17 were told that was the only way the companies were

18 going to buy tobacco. That turned out not to be

19 true, on two counts. First, they bought it in sheets

20 just like they did this year, and secondly, they

21 didn't buy our bales. Personally, I think we lost a

22 lot of weight in our bales just from the breeze the

23 buyers kicked up each time they passed us by.

24 Also, last year came talk about

25 contracting. Contracting is great if the companies






1 happen to like you. And they pretty much only like

2 those farmers who still believe their rhetoric or at

3 least present the appearance of believing.

4 Contracting will effectively dismantle the tobacco

5 program we have operated under for the last 65 years.

6 No more price support, no safety net for farmers, and

7 don't let Morley Safer confuse you on this: deducted

8 from every farmer's check is a percentage earmarked

9 solely for the continuance of the tobacco program.

10 We pay for it, nobody else.

11 And let's talk a minute about the last 65

12 years. Philip Morris has taken in trillions of

13 profit dollars since the inception of the program.

14 Farmers have grossed 86 billion in that same time

15 frame. According to Phillip Morris' annual stock

16 report, their profits for 1999 were near nine billion

17 dollars. That's almost one-tenth of what the farmers

18 have made in the entire 65 years of the program.

19 Still, we are supposed to believe that the

20 companies are "looking out for you." Well, some of

21 us chickens are a might tired of the fox guarding the

22 coop. Companies told us our future was in getting

23 the quota into the hands of the producers. So we all

24 tried to do what we could in that regard. Three

25 years and 45 percent in quota cuts later, amazingly






1 enough, they collectively fold their arms and deliver

2 to us a well-rehearsed spin, that we had not made the

3 most prudent business decisions in purchasing quota.

4 We made these decisions based on

5 information provided to us by our "caretakers," so

6 when we finally decided not to blindly follow along

7 anymore and began to take stock of our history with

8 the companies, a few things became glaringly clear.

9 It seems our family, as they like to call themselves,

10 has been guilty of abuse. They cared for us as long

11 as it served their bottom line. They lied to us when

12 it didn't.

13 Well, enough about that. I'm already

14 terrified, and I'm just getting mad.

15 I am a smoker and I am a grown up smoker,

16 meaning that I am aware of the hazards of smoking. I

17 can read and have once or twice noticed the warning

18 on the sides of the packs that I buy. I also had to

19 fly here yesterday from Georgia and took a cab to the

20 hotel, all of which are potentially life threatening

21 scenarios but all of which I chose to do. Lighten

22 up. Nothing in life is guaranteed. I will make my

23 own choices, and cigarette smoke is not more

24 offensive to me than is the individual loudly

25 complaining about it.






1 Lamar and I have a two-year-old daughter.

2 We both smoke and yet she manages to live and thrive

3 in our household. Go figure. And we, like all other

4 well-meaning parents, will teach our child right from

5 wrong, and will provide her with the best advice we

6 can, to enable her to make her own choices.

7 Three years ago, twenty-four hours before

8 our home and our farm were to be sold on the

9 courthouse steps, Lamar finally found a lender

10 willing to take us on. I believe the Lord was just

11 sick of hearing from me everyday and gave Lamar and

12 Himself some relief.

13 We are a large farming operation but our

14 troubles are no greater, in perspective, than that of

15 a five acre farmer. Foreclosures and bankruptcies

16 are a way of life in agriculture today. A couple of

17 months ago, Lamar told me about a farmer in south

18 Georgia who had tried to collect insurance on a

19 cotton picker. Come to find out he had a dug a hole

20 and buried the thing, just to collect insurance.

21 That's how bad agriculture is today. Can you imagine

22 the desperation that farmer must have been feeling to

23 have done such a thing? You don't collect a million

24 dollars of insurance on a cotton picker, but it might

25 have been enough to hold the banks off another day or






1 two.

2 Mr. Doug Richardson: Thank you, Ms.

3 DeLoach. Are there any questions?

4 Ms. Amy DeLoach: I hope not.

5 Mr. Doug Richardson: The next person to

6 testify is Blake Brown, a Professor at NC State

7 University. Blake. You're going to help us out and

8 hold it down a little bit?



11 Mr. Blake Brown: I'll see what I can do.

12 I appreciate the opportunity to testify this morning.

13 I hope my comments are helpful.

14 Tobacco is the nation's sixth largest crop

15 in terms of cash receipts and North Carolina produces

16 about one-third of that crop and about two-thirds of

17 the nation's flue-cured, and a smaller quantity of

18 burley tobacco. Within the seven major tobacco

19 producing states, tobacco still ranks seventh in

20 terms of overall cash receipts.

21 Given the uncertainty facing the tobacco

22 industry, many tobacco farmers have diversified their

23 income base. North Carolina has the third most

24 diversified agriculture in the U.S., following only

25 California and Florida. Few alternative agricultural






1 enterprises can consistently rival the net return per

2 acre of tobacco. Despite these diversification

3 strategies, a large percentage of farms growing

4 tobacco are still, as you've heard today, heavily

5 dependent on returns from tobacco.

6 Under the U.S. tobacco program, tobacco

7 farmers agreed to restrict supply via marketing

8 quotas in exchange for minimum price guarantees.

9 Since U.S. tobacco has historically garnered

10 significant market power in the global market for

11 tobacco, the supply restrictions have been effective

12 in substantially raising the price of U.S. tobacco

13 above the price of other tobacco in the world market.

14 Price supports act not only as a safety

15 net, but more importantly, as price targets that

16 determine the levels at which national quotas must be

17 set in order to achieve these prices. The price

18 support system is financed by growers and tobacco

19 buyers.

20 Health concerns, the Master Settlement

21 Agreement, increased state and federal cigarette

22 excise taxes, and continued litigation against U.S.

23 cigarette manufacturers, have resulted in declining

24 U.S. cigarette consumption and consequent declines in

25 the quantity of tobacco used by U.S. cigarette






1 manufacturers. Declining U.S. cigarette exports have

2 also contributed to the decline in use of U.S.

3 tobacco by U.S. cigarette manufacturers.

4 Further the effectiveness of these supply

5 restrictions in raising U.S. tobacco prices depends

6 critically on U.S. and foreign tobacco buyers being

7 willing and able to continue to pay more for U.S.

8 tobacco than they pay for tobacco produced elsewhere.

9 This market power has been eroded over the past two

10 decades by intense competition from foreign tobacco

11 producers, particularly in Brazil.

12 The decline in U.S. market power is also

13 illustrated by the decline in the percent of the

14 world tobacco crop produced in the U.S. In 1975,

15 they produced 27 percent of the world's flue-cured

16 tobacco and 51 percent of the world's burley tobacco.

17 In 2000, the U.S. will likely produce 6 percent or

18 less of the world's flue-cured tobacco and 13 percent

19 or less of the world's burley tobacco. U.S. tobacco

20 production has declined while world production has

21 increased.

22 As a result of the decline in domestic

23 demand and increasing global competition, that

24 national marketing quotas for tobacco have fallen

25 dramatically with the flue-cured quota, declining






1 from an average of about 875 million pounds in the

2 1990s to 543 million pounds in 2000.

3 Declining demand for cigarettes in the

4 U.S. combined with the declining market power of U.S.

5 tobacco in the world market threaten to undermine the

6 future success of the U.S. tobacco program, in

7 maintaining farm prices and incomes.

8 Solutions to this dilemma are not easy.

9 The forgiveness of Commodity Credit Corporation loans

10 for the tobacco cooperatives by Congress, declines in

11 Zimbabwean tobacco production, and the initiation of

12 the U.S. tobacco exports to China, could stabilize or

13 even increase U.S. tobacco quotas. Funds for tobacco

14 farmers made available by Congress in 1999 and again

15 this year, plus Phase II funds from cigarette

16 manufacturers have helped maintain farm income in the

17 face of declining quotas.

18 However, neither the Congressional relief

19 nor the Zimbabwe crisis provide long term solutions

20 to the problem of declining market power. Erecting

21 import barriers to protect U.S. tobacco farmers is

22 not a possibility in a world moving toward freer

23 trade and would likely damage exports in the long

24 run. Restoration of export promotion funds to

25 tobacco as are available for other farm commodities,






1 could help U.S. tobacco compete more favorably with

2 foreign tobaccos.

3 Other remedies have long been discussed.

4 Lowering of price supports would make U.S. tobacco

5 more competitive with foreign tobaccos, thereby

6 stopping or even reversing the decline in national

7 quotas; but this measure is controversial because it

8 would change dramatically the distribution of income

9 between growers, quota owners, and tobacco

10 purchasers.

11 Providing quota owners with compensation

12 in return for a lowering of price supports could

13 result in quota owners being just as well off after a

14 price reduction as before. Price reduction with

15 compensation could result in tobacco growers being

16 better off since quotas would increase and U.S.

17 tobacco would become more competitive with foreign

18 tobacco. Leaving some sort of supply control program

19 in place with support prices or deficiency payments

20 could still provide farmers with a safety net.

21 Retaining a supply control program might also be

22 palatable to health advocates with concerns about

23 unrestrained tobacco production. This type of price

24 buy down program is a potential compromise solution

25 between health groups, tobacco growers, quota owners,






1 and tobacco purchasers but would require funding.

2 One question often asked of me is, "What

3 would happen without a tobacco program?" Elimination

4 of the tobacco program would result in substantial

5 structural change in tobacco farming. Tobacco prices

6 would fall toward the world price, making U.S.

7 tobacco more competitive in world markets, but income

8 and value from tobacco quota would disappear. While

9 tobacco production would increase, many tobacco

10 farmers would leave tobacco farming, particularly

11 smaller tobacco farmers and those in geographical

12 regions with the highest production costs.

13 The end result would be many fewer but

14 larger tobacco farms producing more tobacco at lower

15 and more volatile prices. Because of the growth in

16 tobacco sales, cash farm sales from tobacco might

17 grow, but despite lower prices and lower net returns

18 per acre. In the flue-cured areas, Virginia likely

19 would produce less tobacco, while North Carolina,

20 South Carolina, and Georgia likely would produce more

21 tobacco.

22 The problem of declining market power and

23 demand for U.S. tobacco is not likely to disappear,

24 despite temporary reprieves. As such, policy makers

25 and farm leaders will continue to face challenges in






1 maintaining incomes in tobacco-dependent communities.

2 Thank you.

3 Mr. Doug Richardson: Thank you, Blake.

4 Any questions of Professor Brown before he leaves?

5 Thank you for making it short; we will take your

6 written testimony. The next person to testify is

7 Pender Sharpe. Mr. Sharpe is testifying as a tobacco

8 farmer.



11 Mr. Pender Sharpe: Good morning. My name

12 is Pender Sharpe, and I appreciate the opportunity to

13 be here and certainly appreciate the time and effort

14 the Commission has given to having these hearings and

15 hearing both sides of this issue. I don't envy the

16 task that you have before you.

17 I'm a tobacco farmer from Wilson, North

18 Carolina. Along with my father, brother and two

19 sons, we own and operate a five generation,

20 diversified family farming corporation. We grow

21 tobacco, sweet potatoes, cotton, pickles, cucumbers,

22 corn, wheat, soybeans, cantaloupes, watermelons,

23 strawberries, and have a 4,000 head swine operation.

24 Since the first colonial settlements,

25 farmers discovered that tobacco was a high value crop






1 that could be grown on small acreage, with family

2 labor, and provide more income than any other crop.

3 This has not changed in over 200 years. On our farm,

4 for instance, family members provide the ownership,

5 management, and much of the physical labor. Even

6 after diversity, into as many 10 additional

7 enterprises, tobacco still accounts for about 40

8 percent of our income.

9 It's not only farmers that benefit from

10 this crop, but the entire community as tobacco

11 dollars multiply themselves five times in our

12 economy. Farm suppliers, banks, equipment dealers,

13 car dealerships, shopping malls, homebuilders, and

14 every other business imaginable is now feeling the

15 effects of a declining tobacco economy.

16 On our farm, we tend 62 different farms

17 and rent land and tobacco allotments from over 50

18 people. Many of these people are widow ladies that

19 lived conservatively, and worked alongside their

20 husbands to save their tobacco allotment for

21 retirement income.

22 As necessary as this is for our elderly

23 and our economy, therein lies much of our problem

24 today. Allotment value added to our production cost,

25 has priced us out of the world market. A generation






1 ago the U.S. produced nearly 60 percent of the world

2 tobacco, and we have watched our market share shrink

3 to less than 6 percent today because of price.

4 The solution to our dilemma may be a

5 buy-out of the tobacco program. Eliminate the

6 current tobacco program through a buy-out of existing

7 quota and also compensation for growers. The tobacco

8 program served to stabilize farm income for over 50

9 years, but as public policy and perception changed on

10 smoking and health issues, and tobacco production and

11 manufacturing globalized, the program has become a

12 noose around the necks of tobacco farmers. There are

13 now nearly 10 times more quota owners than there are

14 growers. The inflated value of quota causes U.S.

15 tobacco to be over-priced in the world.

16 We should also compensate quota owners

17 through a buy-out. Many farmers and landowners have

18 invested their after- tax dollars in the purchase of

19 tobacco quota because of the security of a government

20 backed program. Quota ownership served not only as a

21 livelihood but also as a retirement income.

22 We need to compensate growers through the

23 buy-out. By 1997, growers had invested tremendous

24 amounts of borrowed capital into tobacco production,

25 only to see quotas cut by nearly 50 percent in the






1 next three years. This resulted in twice too much

2 equipment on farms, causing this equipment to become

3 virtually valueless.

4 With a buy-out, many growers could afford

5 to retire or otherwise leave the business. Those

6 remaining would probably contract with tobacco

7 companies. With tobacco continuing to be grown,

8 financial impact in local communities would continue

9 to be strong. This effect is extremely important.

10 If we are allowed to grow tobacco, local economies

11 will fare quite well. Limit tobacco production to

12 counties that have historically grown tobacco. This

13 would severely limit any potential for increased

14 production of tobacco nationwide.

15 Anti-smoking efforts are not impacting

16 tobacco quotas. In the last three years, cigarette

17 consumption has fallen probably 9 percent, while U.S.

18 tobacco production has fallen nearly 50 percent.

19 Because the tobacco program inflates U.S. tobacco

20 prices, companies are importing cheaper, offshore

21 tobacco, in order to maintain cigarette production.

22 Simply put, the tobacco program today is shifting our

23 production to South American, at the expense of quota

24 owners, growers, and local communities that depend

25 upon tobacco money to survive.






1 We as a society can bring a halt to

2 teenage smoking without destroying an industry that

3 is so vital to the economic well-being of a vast

4 region of our country. Long-range efforts to curb

5 smoking in adults will depend upon our efforts to

6 stop smoking among young people, not by eliminating

7 tobacco production in this country. If the

8 production side of this industry is destroyed,

9 companies will simply buy the product from offshore,

10 to maintain cigarette production. Even if you drive

11 tobacco companies out of this country, the domestic

12 tobacco economy will be destroyed only to see

13 imported cigarette sales boom.

14 Please do not export our economic future

15 to South America for a social experiment, but fix the

16 problem. Tobacco production and health issues are

17 two different problems. Treat them as such and solve

18 each problem individually without adversely impacting

19 the other. Thank you.


20 Mr. Doug Richardson: Thank you, Pender.

21 I believe we have a question.

22 Mr. Jesse White: Mr. Sharpe, you said

23 that, if I understand you correctly, that there are

24 ten time more quota owners than there are growers;

25 did I understand that correctly?






1 Mr. Sharpe: I think that's correct. You

2 can look at the numbers that were gathered during

3 Phase Two, but it was somewhere in that range, that

4 many more quota holders in North Carolina than there

5 were growers.

6 Mr. Wise: Were those quotas then leased

7 out to growers, and if so, did they tend to be leased

8 out to large growers, so there was sort of a

9 concentration of growers already occurring as a

10 result of quota leases, or were they tending to go to

11 small farmers?

12 Mr. Sharpe: There's no particular pattern

13 in that. Leasing a quota is simply a supply and

14 demand situation. What is happening within the

15 industry as we built up over the years to 1997, we

16 put the capital investment on farms that grow a

17 million pound quotas, and as we've seen these quotas

18 cut by 50 percent, not because of smoking/health

19 issues, but because we imported cheap tobacco. As

20 we've seen that happen, we have seen the demand for

21 quota lease rates go higher. What it is, is the same

22 number of growers chasing a smaller number of plants,

23 so there's not necessarily a pattern of it going to

24 larger growers. It depends on the community and the

25 business within that community.






1 Mr. Wise: Is the pattern similar between

2 burley and flue-cured; or do you know?

3 Mr. Sharpe: I can't address the burley

4 situation.

5 Mr. Doug Richardson: The next person to

6 testify is Mr. Don Anderson, and he is representing

7 the Virginia Tobacco Association. Mr. Anderson.



10 Mr. Don Anderson: Thank you. Ladies and

11 gentlemen of the Commission, you have a monumental

12 task before you and I appreciate your willingness to

13 deal with the diverse issues facing you in the coming

14 months. My name is Don Anderson, and I'm a tobacco

15 grower in Virginia, and I represent the Virginia

16 Tobacco Growers Association. Membership in our

17 association is composed of growers, quota holders,

18 and agribusiness people from across the flue-cured

19 region of southside Virginia. Our livelihoods are

20 dependent upon a successful tobacco economy.

21 I am a fourth generation tobacco farmer

22 from Halifax County and I sincerely hope that our

23 farms and thousands of other family farms throughout

24 the flue-cured area can be preserved for future

25 generation.






1 Flue-cured production has declined 44

2 percent in the past three years, resulting in lowered

3 farm income, closure and consolidation of many

4 agricultural suppliers.

5 Our problems and concerns mirror the

6 purposes of this Commission, maintaining our farms

7 and communities while being responsible citizens in

8 the area of youth access to tobacco products and the

9 production of less harmful tobacco products.

10 We are a signatory of the Core Principles

11 and believe that this document can be used as a basis

12 for formulating tobacco policy in the future.

13 I would like to focus on the production

14 and marketing side of these discussions from the

15 perspective of Virginia producers.

16 We think a production control and price

17 support program is necessary for our survival. We

18 support the present program. Our terrain does not

19 allow for large fields. We also have a shorter

20 growing season. With no production controls we felt

21 that production would move to lower cost areas that

22 can use a higher degree of mechanization.

23 We know that our present tobacco program

24 has been a model of success for over 60 years.

25 However, it needs to be updated. In 1998, the grower






1 organizations of Virginia with the cooperation of

2 Senator Robb's staff, developed the Tobacco Market

3 Transition Act. We firmly support the concepts of

4 that legislation which briefly are as follows.

5 A buy-out or compensation for quota owners

6 for their quota. We realize that one of the main

7 problems of our present program is the fact that much

8 of the quota is owned by non-producers, as we have

9 heard this morning. However, this quota is valuable,

10 and in many cases, in an important part of one's

11 retirement or base of assets. We feel that

12 compensation for this is fair, and we think it must

13 be mandatory for all quota.

14 Secondly, a redistribution of production

15 rights to tobacco producers in the form of a

16 non-transferable license to produce. This is to be

17 based on historical production.

18 Third, changes in the price support

19 formula that reflect the elimination of quota costs.

20 This should allow U.S. tobacco to be more price

21 competitive in the world market. Our present system

22 contains the artificial cost of quota, which limits

23 our sales both here and abroad.

24 The right to produce needs to move into

25 the hands of the producer. This program would allow






1 for that with fair compensation for the present

2 owners of quota. The production license would keep

3 tobacco production in the communities in which it

4 historically has been produced.

5 With this plan, life goes on.

6 Ag-suppliers and other tobacco related businesses

7 could continue in their present location, causing

8 less disruption within our communities. Our

9 marketing system could continue to evolve as it has

10 in the past.

11 I would like to briefly address the market

12 system and shift to contracting for just a moment.

13 Nearly one-third of Virginia's flue-cured tobacco was

14 cured using low nitrosamine technology this year, and

15 was sold under contract to Star Scientific. We know

16 that, in the burley area, a significant amount of

17 this year's crop will be sold under contract.

18 R. J. Reynolds is now contracting a significant

19 portion of its flue-cured leaf. It would seem that

20 contracting is inevitable. What has made these

21 contracts workable for the producer is the price

22 support program and the price benchmarks that it

23 creates for different grades of tobacco. This needs

24 to be maintained.

25 Contracting can work for both the grower






1 and the buyers if we maintain our grower cooperatives

2 as the intermediary between the buyer and the seller,

3 thus maintaining the foundation of our marketing

4 system. Consolidation of markets and a reduction in

5 the number of markets have been a reality for quite a

6 while. Contracting is a continuation of this

7 consolidation.

8 In summary, we, just as our previous

9 speakers from Virginia have stated, firmly support a

10 price support, production control program, and think

11 that our present legislation should be modified to

12 reflect those changes. Thank you for your efforts.

13 Mr. Doug Richardson: Thank you, Mr.

14 Anderson. The next person to testify is Mr. David

15 Radin, President of Crop Tech. If I could, just

16 before Mr. Radin starts, could you keep the chatter

17 down in the back, please? Thank you.


19 Mr. David Radin: Thank you for this

20 special opportunity to bring the story of my company,

21 CropTech, to the Commission's attention. My name is

22 David Radin. I'm the founder and Chairman of

23 CropTech. CropTech is based in Blacksburg, Virginia

24 and for the last eight years, we have been building a

25 high technology business which, we believe, has






1 tremendous potential as a future economic development

2 opportunity for alternative tobacco markets for

3 tobacco- dependent communities.

4 Mr. Rod Kuegel: Mr. Radin, could you move

5 closer to the microphone; we are not able to hear

6 you.

7 Recent scientific advance in plant

8 biotechnology, have demonstrated that plants and

9 tobacco in particular, can be genetically engineered

10 to incorporate DNA and genes from foreign species

11 into their chromosomes. These genes can be inherited

12 between plant generations and can also be activated

13 or expressed so that new genetic information is

14 translated into protein products.

15 CropTech, along with other businesses and

16 academic research groups, have led in demonstrating

17 that these so-called transgenic plants, and

18 particularly tobacco, can be commercially important

19 protein products, such as human enzymes and blood

20 proteins for treating genetic diseases, cancer and

21 heart disease, and even vaccine components for

22 preventing other human diseases. Transgenic tobacco

23 plants also will be useful for producing industrial

24 enzymes and products for agricultural uses.

25 Tobacco has special cost, safety and






1 scale-up advantages over most of the other industrial

2 methods for producing these types of products.

3 Although other crops have been developed for

4 production of these types of proteins, tobacco is

5 quicker, easier and cheaper to genetically engineer

6 and scale-up for commercial production. It's no

7 accident that tobacco has been the laboratory model

8 or "white rat" for development of this technology of

9 plant genetic engineering.

10 When foreign genes are inserted into

11 tobacco, they are very stable and are transmitted to

12 progeny plants through seeds. One transgenic tobacco

13 plant makes over a million seed, which facilitates

14 more rapid production scale-up. Tobacco is also one

15 of the most productive crops in growth of leaf

16 biomass.

17 As I've suggested, transgenic tobacco

18 manufacturing would target a diverse array of

19 lucrative commercial markets in health care,

20 industrial chemicals, environmental remediation, and

21 agriculture. Between 1991 and today,

22 biopharmaceuticals alone, encompassing those products

23 that could be produced in tobacco, has grown from 4

24 percent to 18 percent of the entire pharmaceutical

25 industry, equaling about $16 billion in sales. By






1 2013, the U.S. biopharmaceutical market is projected

2 to be 40 - 50 percent of these products.

3 CropTech has begun to work directly with

4 tobacco farmers in Virginia to develop the methods

5 and agricultural infrastructure to produce transgenic

6 tobacco for alternative products. Recently a grower

7 cooperative called Tobio was formed to work with

8 CropTech. This alliance between a biotech company

9 and a farmer's group is unique and could be a model

10 for other states and even other countries with

11 similar tobacco industry challenges.

12 The feasibility of this alternative plant

13 industry has now been demonstrated. However, growing

14 competition from other competitive technologies

15 suggest that tobacco interests should make a

16 concerted effort to take advantage of tobacco's

17 advantages to develop this industry in tobacco. This

18 effort could be accomplished by a partnership between

19 business groups and the private sector. We would

20 welcome the opportunity to partner with others to

21 accelerate this potential solution for alternative

22 economic development in our tobacco communities.

23 Mr. Doug Richardson: Thank you, sir. We

24 appreciate that. Any questions?

25 Mr. Rod Kuegel: David, did I hear you






1 right. You said by the year 2013, 50 percent of the

2 pharmaceutical needs in this country will be derived

3 from plant related sources?

4 Mr. David Radin: No. I said that 50

5 percent of pharmaceuticals in the pharmaceutical

6 industry will be bio- pharmaceutical; that means that

7 they will be produced by genetic engineering means.

8 A substantial proportion of those could be produced

9 in tobacco, if tobacco transgenic technology were

10 developed and merchandised.

11 Mr. Doug Richardson: Thank you, sir. If

12 I could ask one more time. I hate to be a teacher,

13 but if you would, keep it down in the back because

14 you cannot hear the people up here with the PA system

15 and everything. The next person to testify is Mr.

16 Bob Paciocco. Mr. Paciocco is the Executive Director

17 of the Mid-East Commission in Washington, North

18 Carolina.



21 Mr. Bob Paciocco. Good afternoon. Thank

22 you for allowing me this opportunity to present my

23 thoughts for your consideration. I am Bob Paciocco.

24 I am the Executive Director of a predominantly rural,

25 five county, Regional Council of Governments, in






1 eastern North Carolina. I have served in this

2 capacity for seventeen years, and prior to that, six

3 years in a similar rural organization in Virginia, as

4 well as serving as a rural county manager in

5 Virginia. I grew up in a small town in Virginia, I

6 love the country, and have chosen my professional

7 life to be in the country.

8 Today, I want to address my thoughts not

9 on the impact the loss of tobacco is having on

10 farmers and agribusiness and health care and

11 education. There are far better experts than I in

12 this room who have done that, and will continue to do

13 it. Instead, I want to focus my remarks first on the

14 social and emotional impact the loss of tobacco will

15 have and is having on our small towns and rural

16 communities, and secondly on the economic impact.

17 In a word, the social impact can be seen

18 in the loss of the true rural nature of North

19 Carolina and other parts of our country, and we have

20 known it all these years. With the loss of small

21 farms and small businesses, the loss of the country

22 grocery store, and the gas station with only two gas

23 pumps, we continue to see our rural sense of

24 community disappear. For some, this means growth;

25 for others, it means grief.






1 I believe what we're witnessing is a

2 domino effect at play. Statistics certainly show

3 that the loss of tobacco and other crops leads to the

4 loss of small farms. Usually, these folks then

5 either leave the farm to live elsewhere, or they find

6 a job nearby, usually in a city; and as their

7 lifestyle changes, their focus is in the larger areas

8 where they shop and where they interact socially.

9 This, in turn, leads to the further demise of country

10 stores, country life, living and as I like to call

11 it, our rurality.

12 Added to this scenario is another. Our

13 urban cousins now want to return to the country to

14 raise their children, or to return to the old home

15 place. This can certainly be good. However, after

16 they have settled in, they realize they don't have

17 all the niceties of city life, and they begin to

18 demand more services. They want city water and

19 sewer. They want bigger and better roads; they want

20 natural gas and street lights. They want cable

21 television and garbage pick-up.

22 The things they don't want are higher

23 taxes to pay for these services, or more land

24 restrictions to protect their property, but they

25 don't want that hog farm next door either. So with






1 the demand of services comes the challenge to provide

2 such services that our towns and our small

3 communities have to absorb. Very few citizens fully

4 realize the costs involved.

5 This brings us to the second impact, the

6 economic impact. Now we all realize that economic

7 development doesn't operate in a vacuum. Rather, it

8 depends on the interaction of a variety of forces.

9 These forces include such things as infrastructure,

10 jobs, growth opportunities, quality of life and a

11 sense of community.

12 Just in the area of infrastructure, we

13 have serious problems in that their services are

14 either totally non- existent, or what we have is

15 insufficient to meet the present needs, much less any

16 future needs.

17 For example, consider public water and

18 sewer facilities. In most rural counties, these do

19 not exist county-wide. Some of our small towns have

20 these systems, but most are antiquated and the towns

21 don't have adequate funding to rebuild them.

22 There's one other area of infrastructure

23 that holds real promise for us, and that's in the

24 field of telecommunications. If we could get all of

25 our rural areas linked via Internet, this would be a






1 tremendous boon to our economy. It would open many

2 opinions for job creation, and make it possible for

3 our young people to get educated and then stay at

4 home to work.

5 Even more important, and more high tech,

6 is the wireless revolution that's taking place. This

7 technology is ideally suited to rural areas in that

8 the cost is far more manageable. Installing towers

9 and dishes competes favorably with running miles and

10 miles of T-1 line cables.

11 One last concern that I would like to

12 mention and that's the loss of our tax revenue. I

13 think that's been well addressed by Mr. Wooten and

14 others, and I won't belabor that problem other than

15 to say our towns and our small cities need relief

16 when you're going to do away with their taxes. Thank

17 you.

18 Mr. Matthew Myers: Our next speaker will

19 be Dixie Reaves.


21 Ms. Dixie Reaves: I'm Dixie Reaves from

22 Blacksburg, Virginia, representing Virginia tech.

23 I'm pleased to be able to share some comments related

24 to an economic impact study that we did a few years

25 ago, as we foresaw the changes coming in the tobacco






1 industry. I will say, though, that none of us

2 foresaw the magnitude of the change, or the quickness

3 with which this change would take place.

4 I come to you as an agricultural

5 economist, but more importantly to me, I come to you

6 as a daughter of a family farm in Virginia. I did

7 raise my own tobacco that helped pay my way through

8 college, so I can relate to the younger generation

9 who spoke earlier.

10 When we look at economic impacts, we all

11 know that tobacco is regional in terms of its

12 production in the U.S. When we look at the sixteen

13 states producing, the top six are giving us 94

14 percent of our production. So when you look at

15 economic impacts, we can look at it on a lot of

16 different levels. We can look at it internationally,

17 we can look at it by state, we can look at it by

18 county. But I think what you've heard today is the

19 place where we really need to have our emphasis,

20 those individual producer farmers in those

21 communities that are being impacted.

22 We all know that tobacco is a high value

23 crop per acre; we know that it's the number one crop

24 in cash receipts in many states. What you may not

25 realize is that even after three years of quota cuts,






1 tobacco brings us 2.5 times more cash receipts than

2 the second ranking crop. So we do see a tremendous

3 economic impact on southern states, and see

4 tremendous economic dependence in a lot of our

5 counties.

6 Within Virginia, we do have 47 counties

7 producing both flue-cured and burley tobacco; we have

8 flue-cured at the southside; we have burley in the

9 southwest, but our top three counties are producing

10 60 to 70 percent of that.

11 So again, we see some counties that are

12 impacted much more than others, and yet regardless of

13 how concentrated that production is, we see those

14 individual communities as individual producers, as

15 you've heard from today, being affected.

16 Some of the economic numbers that we can

17 look at in terms of overlapping the agribusiness

18 sector, when you look at the input supply sector

19 that's been alluded to today just as an example, for

20 the very input supplies that you purchase to produce

21 an acre of corn, it takes you about $200 in seed,

22 chemicals, labor and equipment costs. When you look

23 at the input supplies required for flue-cured

24 tobacco, it's about $2,000. So yes, the farmers are

25 impacted, but so too are those agribusiness suppliers






1 out in the communities.

2 When you look at what you receive in terms

3 of returns above those variable costs, in a good

4 year, you might get $42.00 per acre for your wheat,

5 or $142.00 per acre for your corn, but you can get

6 $2,000 per acre for your flue-cured tobacco.

7 Some of these are things that we realize,

8 but we may not necessarily understand the magnitude

9 of those changes. You then have the warehouses, the

10 transporters, wholesalers, retailers; when you look

11 at economic impact studies in Virginia for southside

12 for six counties a few years ago, $180,000,000 of

13 tobacco sales that we had, actually generated

14 $156,000,000 of total economic impact, in that

15 southside region. So as we mentioned earlier, you

16 see that four to fivefold increase in terms of the

17 impacts.

18 I want you to look in your packet, if you

19 would. Andrew Shepherd is going to pass out some

20 material for you. There are some maps in the back of

21 that packet, and this is how I would like to close.

22 You see a map of Virginia there that represents key

23 economic variables. You see things like migration,

24 education by levels of poverty, unemployment, local

25 spending as compared to total spending in those






1 areas.

2 If you take the transparency that I gave

3 you, that overlays the southside communities and the

4 southwest communities, which are our tobacco

5 producing counties, and you look at those maps, the

6 places that are already the most economically

7 distressed, those are the ones without migration,

8 those with the highest levels of unemployment, those

9 with the most poverty, those that are already

10 economically distressed, are also those key tobacco

11 producing counties.

12 So in a time in which we have concerns

13 about the divergence of rural prosperity versus

14 non-rural prosperity, we see major differences in how

15 our rural people are living compared to our non-rural

16 counterparts, and it's in those tobacco producing

17 regions where it's already most pronounced.

18 I ask, today, what actions can we take to

19 try to close that gap, that divergence that we see in

20 prosperity across our nation, so that our tobacco

21 producing communities can benefit from the same types

22 of economic prosperity that the rest of the nation

23 has been enjoying. Thank you.

24 Mr. Matthew Myers: Thank you, Ms. Reaves.

25 The next speaker is Chris Beacham. Chris is the






1 Research Director of the North Carolina Economic

2 Development Center.




6 Mr. Chris Beacham: Thank you for having

7 me speak here today. I'll try to keep my comments

8 short, as what I was going to talk about has been

9 mentioned by people, by Dr. Brown, and was also

10 reiterated just a moment ago by Dixie Reaves.

11 I would like to present some results of

12 work that we've done. We've worked with Larry Wooten

13 of Farm Bureau and Betty Bailey of RAFI, and Blake

14 Brown of NC State University, and a lot of other

15 people, and it's basically involved two things:

16 Research within tobacco-dependent communities, and

17 outreach into those communities.

18 I want to describe the human and economic

19 consequences of a decline in tobacco on our

20 tobacco-dependent communities, and also reflect some

21 policy prescriptions offered to us through a series

22 of workshops that we had across the State of North

23 Carolina.

24 I will focus on three issues, first

25 describe how tobacco is intertwined within our






1 economy and culture; secondly, talk about the direct

2 and indirect and induced impacts that occurred as

3 tobacco has declined in North Carolina; and third,

4 talk about the voices being heard in the workshops

5 that I mentioned.

6 Tobacco is not a typical agricultural

7 commodity in North Carolina, largely because it's

8 virtually completely vertically integrated. It goes

9 from farms to warehouses for processing, to cigarette

10 manufacturers. What that means is that it has

11 severely dramatic economic impacts. There are over

12 12,000 tobacco farmers generating $800,000 to $1

13 billion worth of revenue within the state.

14 Tobacco generates perhaps $1,000 to $1,500

15 in profit per acre, which is much, much higher than

16 alternative crops like corn or wheat or soybeans,

17 within North Carolina. We have about 15,000 people

18 working in manufacturing of tobacco products, with

19 the average wage of $50,000 per employee. In total,

20 the tobacco industry generates 5-6 percent of the

21 gross state product in North Carolina.

22 In addition, one of the things you need to

23 look at, and I've attached a map to my testimony,

24 which shows the geographic location of activity of

25 farming and these other activities. What you need to






1 be aware of is the overlap between those. For

2 example, in Mr. Richardson's home county of Stokes,

3 tobacco accounts for about three-quarters of all

4 agricultural revenue within the county. It's also

5 the home of many workers who commute to Danville,

6 Virginia, and commute to Winston-Salem, North

7 Carolina to work within those plants. So it has

8 pretty dramatic economic impacts.

9 And the conclusion of this is that you

10 really have to look at this as not just an

11 agricultural issue, but must be seen within the

12 context of the whole community, as the title of the

13 Commission would imply.

14 I want to talk about indirect and induced

15 impacts. We took an input output model in working

16 with some folks at NC State University including

17 Blake Brown, looked at what the total impacts were of

18 the 1998 Tobacco Settlement, and this does not

19 include any impacts, say, from reduced exports, etc.

20 What we found is that you can have a loss of about $4

21 billion in output within the state, suffer 25,000

22 permanently lost jobs, and about 3/4 of a million

23 dollars in lost earnings. On the scale of the North

24 Carolina economy, that's really not very significant,

25 but when you get into a specific tobacco- dependent






1 community, it does become very, very important. It

2 means that these communities are in quite a hole that

3 they have to dig out of.

4 We took our tobacco-dependent communities

5 project out into the communities of North Carolina to

6 focus on outreach. I've provided a summary of the

7 input we received, so I won't go through all the

8 elements of the input that we got. I do want to

9 emphasize that one of the key things that we were

10 told when we were out there within these communities

11 is that they do want to preserve the farm community.

12 In addition, a number of the things that were

13 mentioned by Mr. Paciocco were also mentioned

14 commonly in these meetings across the state.

15 It would really be impossible to do

16 justice to the ideas we received, so what I want to

17 do is make clear the two things we heard. First,

18 agriculture is considered a fundamental part of these

19 communities and the communities want it to remain

20 that way. Secondly, the work of this Commission must

21 reflect the diversity of these communities. One size

22 does not fit all. Innovative, county based, and

23 county involved approaches are the best hope we have

24 for our tobacco-dependent communities. Thank you.

25 Mr. Matthew Myers: Mr. Beacham, I have






1 just a quick question for you. You've provided us

2 with data on lost jobs, lost earnings, et cetera,

3 that you've projected as a result of the Master

4 Settlement Agreement. Do you have comparable figures

5 for what's been described here today as the lack of

6 competitiveness with world tobacco, the loss of

7 tobacco overseas?

8 Mr. Beacham: No, we didn't. We looked

9 solely at the Master Settlement Agreement. What

10 Blake Brown did estimate, I'm trying to remember the

11 exact numbers, but it seems like he projected a

12 decline in tobacco production of 10 to 17 percent,

13 and those impacts were based on that; which means

14 that you may be able to look at what the decline was

15 then when you take into account lost export markets,

16 increasing imports et cetera, and matching those up.

17 We did not estimate that.

18 Mr. Matthew Myers: Okay. Thanks. Our

19 next speaker will be Brooks Wood, a tobacco farmer's

20 son. Oh, he's already spoken. Next will be Mike

21 Owens. Mike is a tobacco farmer from Georgia.



24 Mr. Mike Owens: I'm Mike Owens from Pitt

25 County, Georgia, and I'm proud to be a farmer for my






1 country. First of all, I'm glad that we've got a

2 panel like this who will work very hard for us. In

3 my opinion, I think you all are serving a major

4 purpose, this panel is, the way the situation is. I

5 know in the last three or four weeks, you all have

6 probably been the most important people than anybody

7 ever knew you were, and people are trying to talk to

8 you a little bit, you know. My theory is you try to

9 work from your heart and not from your head, just

10 really think what's right, the right thing to do.

11 Nothing is ever done right in courts; it's where it

12 fits.

13 I'm just saying, tobacco, I pay all my

14 bills off. I lose on corn, cotton, and peanuts, with

15 tobacco money. So a farmer, people don't really

16 realize that he's the most important person in this

17 county and the world. He feeds you, he clothes you,

18 he shelters you. And we do that for free for you.

19 There's a lot of things going on. I have,

20 about all of us, we have accounts, we call it minimum

21 accounts. You lay in bed at night and can't sleep

22 worrying about how I'm going to pay my bills. What

23 am I going to do. I've used my kids' college money

24 trying to hold onto my farm. I love farming. I'm

25 the most important person in this country, like I






1 said.

2 The economic impact on rural communities,

3 most of ours in Georgia is farming communities. A

4 farmer keeps his county going, because he's the one

5 who feeds it. He brings in the money that keeps our

6 agribusinesses, and businesses, and banks, everything

7 in my community running. That's what's happening to

8 our communities. If we don't get no more money, we

9 can't feed the pot.

10 It's a couple of simple issues that's

11 going on. Like I told you, I've got three or four

12 hundred people working for me. I don't know who they

13 are, but what I produce, it just turns. People work

14 for me who I don't know: my cotton, peanuts,

15 truckers, insurance people, bankers -- it's too much

16 to be dealing with.

17 Like I say, tobacco is the most important

18 thing. I'm trying to -- I've been working in this

19 kind of deal, a lobbyist I call myself; farmers are

20 so much in turmoil, you can't get nobody to help you

21 no more and try to work out what we need to do. I

22 get so broken hearted sometimes, I want to quit

23 myself, but I keep going. I've got two sons. They

24 need to be farmers. I want them to have the

25 opportunity; that was my main goal.






1 Another thing is, your kids and grandkids

2 and mine, eat the safest, best, cheapest food in the

3 world. This stuff overseas, it's skeleton feed, I

4 call it. We have to pay 600 a gallon to pay for

5 environmental and health issues to keep it the safest

6 in the world. We need to be looking at this. Food is

7 nothing to play with. It's like the commercial where

8 the guy took his boy to the World Series. It's

9 priceless, it's nothing to be played with.

10 We grow tobacco and that's what keeps the

11 county going, and the food source is one of the main

12 issues in the whole deal. You don't need to get rid

13 of farmers. In Georgia, there's 41,000 farmers;

14 there's 257 under the age of 25 years old. Who's

15 going to farm? Look at our gas situation. Look how

16 they're doing us with gas. Just think about your

17 food source now.

18 In Georgia, a hurricane came in. In

19 twenty-four hours, you could not find a gallon of

20 milk in my county. In twenty-four hours, the food

21 source was a two or three day supply of perishable

22 foods. There's so many issues, but the main one I

23 want to tell you is, when you do what you've got to

24 do, you just think from your heart, think about the

25 farmer. We always get slapped to the back end of the






1 line. That's the one we're going to throw out on the

2 porch out there. Leave him alone, you know, and

3 we're the most important people in this country, in

4 the world. Like I said, we feed the world.

5 The government, they give away supposedly

6 these bonds that --(inaudible)-- and they give away

7 the best thing they ever had; food. You take a man,

8 you can slap him, whatever you want to do, but you

9 get his young ones hungry and he'll go to his knees.

10 There's not no use for that.

11 I'm proud to be what I am. I'm as

12 important as any doctor. I'm a neurosurgeon, I'm a

13 special forces. There's nobody that can do what we

14 do. I've got an eighteen-year degree in agriculture

15 from U Plow State University, and I'm proud of it.

16 You all just realize that you need to think from your

17 heart, not from whoever's trying to guide you. Do

18 the right thing. We are the most important people in

19 this world, and I thank you.

20 Mr. Doug Richardson: Thank you, Mike. We

21 appreciate that. The next person to testify is O. C. Kearney.

22 I'm sorry, Mr. Kearney is going to be represented by

23 Jim Knight. Mr. Knight.








1 Mr. Jim Knight: Thank you, Mr. Chairman

2 and members of the Commission. I am reading the

3 testimony provided by Mr. O. C. Kearney who is a

4 member of the Board of Agriculture for the State of

5 North Carolina, that is the governing body for the

6 North Carolina Department of Agriculture.

7 I am O. C. Kearney, Jr. I live and farm

8 in Greene County, North Carolina, which is 75 miles

9 east of Raleigh. Greene County is the most dependent

10 county upon tobacco in North Carolina, and the second

11 most dependent county upon tobacco in the U.S.,

12 according to a recent study conducted by the U.S.

13 Department of Agriculture.

14 Today, as a tobacco farmer in North

15 Carolina, I feel as if my home has just burned to the

16 ground, and the insurance company has mailed my check

17 to the local fire department.

18 If I were to sell everything on my farm

19 pertaining to tobacco today in conjunction with the

20 monies I have received or will receive from the

21 Master Settlement Agreement, the sum total assets

22 would not enable me to reinvest in any

23 diversification, which would contribute sufficient

24 income to my existing farming operation. To each

25 tobacco grower and quota holder, their tobacco crop






1 represents a sizable investment. Tobacco quota was

2 bought and passed on to the next generation, much

3 like the investment in shares of stock. In the county

4 I reside and work, its fiscal operations depend more

5 upon tobacco than any other county in North Carolina.

6 $15.70 out of every $100 of county revenue is

7 generated from tobacco.

8 You might be able to understand my

9 situation better if I briefly explain my farming

10 history of 28 years. I am 52 years old, rapidly

11 approaching the average age of a North Carolina

12 farmer. In the early 1970's and '80's, I was able to

13 afford my family a comfortable lifestyle, by tending

14 45 - 50 acres of tobacco, 200 acres of corn, 75 acres

15 of soybeans, and a small beef cattle herd. Depressed

16 grain prices in the 1980s coupled with low beef

17 prices, escalating quota lease prices for tobacco,

18 accompanied with low commodity prices began to

19 cripple cash flow and inhibit investment growth.

20 In 1988, my wife and I decided we needed

21 new growth on the farm, so we built our first swine

22 finishing floor. Our intention was to complete

23 payment for the finishing floor in five years, while

24 operating the remaining operation exclusive of this.

25 We were successful only for one year, and found






1 ourselves more and more dependent upon swine

2 production because of continued low commodity and

3 rising tobacco lease prices.

4 As a result, in 1989 and 1991, we

5 continued to invest in the swine industry and build

6 four more finishing floors. We later refinanced our

7 finishing floors enabling us to realize more income

8 for day-to-day operations. My wife, my son and I are

9 constantly prefiguring assets and investments, trying

10 to realize more operational monies as we continue to

11 operate our family farm in the small community in

12 which we live.

13 In 1995, we again broadened our farming

14 practices by building three turkey brooder houses,

15 which also helps to provide year round cash flow.

16 Our indebtedness has increased as we have tried to

17 diversify. My economic opportunities at this age,

18 with a college degree, are very limited in rural

19 eastern North Carolina.

20 The average farmer finds himself in a

21 similar situation if he has decided to remain in

22 farming. Many farmers have resorted to stripping

23 hundreds of years of forestry growth and bits of land

24 sales for affordable housing in order to survive. The

25 recent drastic cuts in tobacco growth and production






1 have caused this indebtedness, and the amount of

2 moneys received by the farmer are not nearly enough

3 to offset the expenses of reinvestment. I have been

4 unsuccessful in finding any crop which will replace

5 the production of tobacco in my farming operation.

6 I challenge you as a Commission to tell my

7 story in Washington. The Federal Government appears

8 to be unaware of my existence, my struggles or my

9 plight. I own and operate a law abiding business

10 which feeds the world. I am a price taker, forced to

11 take what price is given me for my product and pay

12 what it necessary to produce commodities which are

13 deliberately price depressed, to allow the America

14 public to eat cheaply. I am constantly under attack

15 from governmental agencies and environmental

16 advocates.

17 My greatest need is money. Money to

18 sustain my farming operation and money to invest in

19 supplemental diversification. With an acceptable

20 plan for smart growth and expansion, farmers need a

21 resource for low interest loans to help them continue

22 to provide the healthiest, most efficiently grown

23 crops in the world. Thank you very much.

24 Mr. Doug Richardson: Thank you, Mr.

25 Knight. Any questions for Mr. Knight? The next






1 person to testify is Rocky Thompson from Georgia, a

2 tobacco farmer. Rocky Thompson?

3 Mr. Rocky Thompson: I'll pass.

4 Mr. Doug Richardson: Thank you, sir. The

5 next person to testify is Fred Wetherington, from

6 Georgia. Mr. Wetherington is testifying as a tobacco

7 farmer.



10 Mr. Fred Wetherington: Thank you. I'm

11 from Georgia. I grow tobacco, cotton, peanuts, and

12 pine trees. I'm also Vice-Chairman of the Georgia

13 Farm Bureau Tobacco Advisory Committee, and bring

14 greetings from Georgia.

15 There's 46 counties in South Georgia that

16 grow tobacco. Tobacco, cotton and peanuts are the

17 three major grown crops. It's the backbone of our

18 rural economy in South Georgia. There's also eleven

19 North Florida counties that border us on our Georgia

20 border, that are also in the same Agriculture economy

21 as we do.

22 We have faced almost 50 percent quota cuts

23 in the last three years; that's been mentioned

24 several times here today. I'm a third generation

25 tobacco farmer, and one of the saddest things about






1 this to me is that the folks my dad's age that have

2 lost this quota, that didn't have CD's, they didn't

3 have retirement investments; they were counting on

4 their tobacco quota and their tobacco farm to retire

5 on.

6 You know I'm young enough that if I get

7 forced, I'll land on my feet and I'll do something

8 else; that's not what I want to do. It's

9 un-American, in my opinion, what's happening to those

10 tobacco farmers down at home.

11 I was proud to serve this nation in the

12 military for seven years. I consider myself a

13 patriot. I served in Desert Shield and Desert Storm,

14 but what's happening to U.S. tobacco farmers is

15 unfair and un-American. We deserve compensation for

16 these cuts. We had no control over them. We've

17 invested in tobacco-specific equipment. You cannot

18 do anything with a tobacco curing barn except cure

19 tobacco in it.

20 We have a lot of capital invested in

21 growing tobacco, and now it sits on our farms worth

22 half or less today than it was three years ago. It's

23 like any of you all of a sudden getting your salary

24 cut in half or greater; you still have your house

25 payment, your car payment, whatever it is. We still






1 have the same bills, yet we're facing less than half

2 the income than we had three years ago.

3 I ask you please on the Commission just to

4 remember one thing; we all agree children should not

5 smoke. My three kids will not smoke while they live

6 in my house. They also will not drink while they

7 live in my house. But once they leave my house,

8 those decisions will be left up to them. Why in the

9 world would it be in anybody's best interest, since

10 we agree there are going to be adults that continue

11 to smoke, for us to import that tobacco. Why would

12 we import Brazilian and Zimbabwean tobacco, when we

13 know there's going to be consumption for years to

14 come.

15 I think all health advocates agree on

16 that; there's going to be smoking and tobacco product

17 use by adults for years to come, so let's don't lose

18 the U.S. tobacco farmer. That's not in anybody's

19 best interest. But that's absolutely what's

20 happening here today.

21 I ask you for your consideration, I

22 appreciate you allowing me to speak, and God bless

23 you.

24 Mr. Doug Richardson: Thank you, Mr. Wetherington.

25 Any questions of Mr. Wetherington? Thank you, sir.






1 The next person to testify is Audrey Powell from Pink

2 Hill, North Carolina, and testifying as a tobacco

3 farmer.



6 Ms. Audrey Powell: Thank you. I've got a

7 cough today, but I don't think it's from tobacco. My

8 name is Audrey Stroud Powell. I am a quota holder in

9 the small community of Pink Hill in Lenoir County,

10 North Carolina.

11 For over 200 years, my forefathers have

12 lived, worked and cherished the same land and tobacco

13 farm, and with which I am struggling to make enough

14 money to keep the bills and taxes paid, with the help

15 of tobacco money.

16 Thirty years ago this same farm, through

17 hard work and the sales of tobacco produced enough

18 income to support my father, my mother, my

19 grandfather, my brother, my aunt, and myself. Today

20 the same farm, due to cuts in the tobacco quota which

21 the system has inflicted upon us, barely allows

22 enough tobacco money to pay the taxes, let alone

23 support me, the one person left on the farm my

24 parents, grandparents and great-grandparents worked

25 and toiled so hard for.






1 I, myself, speak for the hundreds of small

2 quota holders in North Carolina who desperately

3 depend on tobacco income to pay electric bills,

4 telephone bills, winter heating bills, put food on

5 our tables, health insurance, and gas to go in our

6 vehicles. I really don't want to say this but I'm

7 going to say it anyhow. The America Cancer Society

8 and the Heart and Lung Associations would do the

9 American public a big favor by getting off the backs

10 of the tobacco industry and become concerned with all

11 the damage done to the citizens of the U.S., young

12 and old alike, by beer, wine and whiskey.

13 In conclusion, I would like for the

14 Commission to know, no one has a right to tamper and

15 meddle with the hard work and past financial

16 contributions to my community and state that my

17 forefathers gave through tobacco, and you have really

18 no right to hinder me and my descendants from our

19 financial contribution to our state, community and

20 country, without proper immediate compensation.

21 Mr. Doug Richardson: Thank you, Ms.

22 Powell. Any questions for Ms. Powell? The next

23 person to testify is Richard Renegar. Mr. Renegar is

24 from Harmony, North Carolina, and he's a tobacco

25 farmer.








3 Mr. Richard Renegar: Ladies and gentlemen

4 of the Commission, I am Richard Renegar, a tobacco

5 grower and quota owner from Iredell County, North

6 Carolina. Our farm, like most enterprises in this

7 state, is a multi-generational, family owned and

8 operated business.

9 I currently serve as Vice President of the

10 Tobacco Growers Association of North Carolina. In

11 the absence of our president, Billy Carter, who had a

12 prior scheduled engagement, I will direct my remarks

13 on behalf of the Tobacco Growers Association of North

14 Carolina.

15 Our organization has worked diligently to

16 determine the most common themes among our diverse

17 constituency. While we can expect much recurring

18 messages from persons speaking here today, I will

19 focus my comments on the major themes we continue to

20 hear from our membership across the state.

21 In 1999, a series of discussions began

22 among many of the stakeholders in our business. An

23 industry leadership group comprised of

24 representatives of grower leadership organizations,

25 as well as tobacco leaf dealers and cigarette






1 manufacturers assembled in efforts to reach accord on

2 concerns occurring in the industry. We adopted a

3 resolution to address, identified changes needed to

4 improve marketing tobacco, and to serve as a means of

5 continuing beneficial dialogue.

6 Much energy has occurred the past two

7 years to address those identified concerns by the

8 general leadership group. Areas such as improving

9 the integrity of the marketing process, making

10 individual grade loan rates reflect market value,

11 quality of leaf, stalk position harvesting, foreign

12 matter in tobacco, baled tobacco versus sheeted

13 tobacco, the two-for-one acreage requirements, and

14 the newest term in the industry, nitrosamine.

15 As all of you on the Commission are well

16 aware, the major issue remains the three sizable and

17 consecutive reductions in quota since 1997.

18 While there are still positive aspects

19 about growing tobacco, clearly there is much

20 apprehension regarding our individual abilities to

21 remain profitable growing just a little more than 500

22 million pounds of flue-cured tobacco.

23 It is our understanding that one area of

24 emphasis for this Commission is to better determine

25 the impact of these sustained cuts and forecast the






1 expectations of the people who own quota and grow

2 tobacco.

3 The Tobacco Growers Association of North

4 Carolina wishes to convey the following

5 consideration:

6 Farm foreclosures and persons desiring to

7 exit this business are occurring at an alarming

8 amount. Three consecutive quota cuts have greatly

9 devalued tobacco related assets. Farmers' net worth

10 has greatly been diminished. Lost value for quota

11 has also disappeared along with lost value for

12 remaining quota. Competitive reactions are driving

13 up the rental price of quota. Erosion of export

14 markets due to price of U.S. tobacco relative to the

15 world market price; continued legal attacks on the

16 industry that further constrain the buyers of our

17 leaf tobacco; and increased prices to the consumer,

18 demoralizes all of us invested in producing a legal

19 and legitimate commodity.

20 It is imperative that we as growers of

21 tobacco address the price of tobacco, as derived by

22 the costs of producing it and understand how it

23 positions us in the world market.

24 Perhaps the major issue for this

25 Commission to address is the price of our leaf






1 relative to that world market value. We need very

2 much to increase our export market for leaf. We

3 encourage this Commission to investigate the methods

4 of helping to move quota into the hands of the active

5 growers, while assuring fair and deserved

6 compensation for those quota owners who do not

7 product tobacco.

8 Many stakeholders have expressed interest

9 in exploring avenues to help them exit the tobacco

10 growing business. Considering that the tobacco

11 program is generated, controlled and administered by

12 the Federal Government, can we implement a plan to

13 aid growers and quota holders in divesting and

14 retiring from the tobacco farm?

15 Beyond this issue, we ask that this

16 Commission to investigate and report on opportunities

17 and real possibilities of implementing a Federal

18 buy-out of tobacco quota.

19 Yours is a daunting and important task.

20 We appreciate your willingness to work to the

21 economic well-being of the thousands of farm families

22 who earn their living growing tobacco. If you have

23 any questions, I'll be happy to answer them.

24 Mr. Doug Richardson: Thank you, Mr.

25 Renegar. Any questions? Thank you, sir. The next






1 person to testify is Debra Bryan from the American

2 Lung Association.



5 Ms. Debra Bryan: Thank you,

6 Commissioners, farmers and health concerned

7 advocates, and all who are here to look at the future

8 of the tobacco farming states.

9 The American Lung Association along with

10 many other groups, is concerned not only about the

11 physical health and well-being of our state and

12 region, but the economic future of our state. I'm a

13 native of this state and care deeply about its

14 future. I have fought within the tobacco settlement

15 legislation, both for health and for the economic

16 future of our state. We understand the tremendous

17 needs of our farmers and farming communities, and

18 cannot imagine anything worse than not having our

19 farmers to provide food and other agricultural

20 products that our nation depends on. It's not just

21 an issue of our own state's economics, but our

22 country's well-being.

23 At the same time, we have, each and every

24 one, known and loved someone who has died as a result

25 of using tobacco products, and again as many others






1 have stated, I remind everyone that this is the

2 leading cause of preventable illness and premature

3 death. It is ten times all the alcohol-related

4 illness, and that is why organizations such as ours

5 work to protect health and to assure that future

6 generations will have a life unburdened by this toll.

7 I personally have lost many, many loved

8 ones, and hope never to sit at the side of someone

9 who is gasping for breath as they leave this world.

10 I think the greatest legacy of all would be to give

11 this state a future for our children that gives them

12 a vital means of keeping the agricultural and health

13 communities vital.

14 We've got a long way to go, but we've come

15 a tremendous way. For the first time, we're looking

16 at resources that are available to help with this

17 transition. We have growing communities that have the

18 means to get some resources to be helped, and other

19 resources to their production.

20 We know that there is no one solution.

21 There is no one problem; there's no one thing that

22 every farmer can do that will replace what tobacco

23 has been in this economy. However, we do have the

24 intelligence, we have resources, we have the desire

25 to seek solutions. I think the most encouraging






1 thing that I have heard come out of the talks today,

2 is this desire for a future, for solution, that we're

3 all crying and saying, help. Help us solve this.

4 Don't make us keep losing lives. Don't make our

5 farmers and growing communities desperate. They need

6 a solution.

7 We look to this tobacco Commission to

8 identify those potential solutions, to give rural

9 North Carolina and other tobacco growing states the

10 vital future that we see in our metropolitan areas.


11 Personally, I've lived here all of my life. I love

12 this state like everyone else that's growing on our

13 farms in North Carolina. I grew up in Nash County.

14 Not many of my family are still there. I hate that

15 they're leaving North Carolina. I hate the fact that

16 also the two uncles I had who raised tobacco, died

17 young from it, and their widows are now fighting to

18 maintain the livelihood of those farms, dependent on

19 their tobacco income.

20 So to transition, you can't change to

21 saying, here's how we can solve it. It is our hope

22 in this Commission, we're delighted that President

23 Clinton assigned this body to study the issue, and we

24 look forward to your solutions. We remember that one

25 of the core issues is health, and that goodness grows






1 in North Carolina. That is our future, that

2 goodness, that potential for working together. We

3 are not enemies. We both care about what happens and

4 seeking positive change. Thank you.

5 Mr. Doug Richardson: Thank you,

6 Ms. Bryan. Do you have any questions?

7 Mr. Andrew Shepherd: Ms. Bryan, if I may,

8 I appreciate you testifying. As a Commissioner, I'm

9 interested to know, we don't have any answers yet,

10 but we've learned enough to know that the chance of

11 solving the problem is slim to none if we can't work

12 together and cooperate, and in doing that, we have to

13 embrace the set of Core Principles. Do you, the

14 American Lung Association, support the Core

15 Principals?

16 Ms. Debra Bryan: As I believe was stated

17 earlier, the American Lung Association allows each of

18 the individual states and their organizations to

19 consider the Core Principals and whether they elect

20 to sign onto those. In North Carolina, the American

21 Lung Association and many of our allies have worked

22 together with tobacco growing groups, particularly

23 through RAFI, in terms of advancing our cooperative

24 and mutual interests. So many have signed onto the

25 Core Principals. That remains to be decided by many






1 others, but we are very supportive of the ideas

2 behind the Core Principals.

3 Mr. Doug Richardson: Any other questions?

4 Thank you, Ms. Bryan. The next person to testify is

5 David Griffin from Spring Hope, North Carolina, and a

6 tobacco farmer. Mr. Griffin.



9 Mr. David Griffin: My name is David

10 Griffin, and I'm a tobacco farmer from Nash County,

11 North Carolina, and I might add that I'm a nervous

12 tobacco farmer. Thank you for allowing me to be here

13 with you today and help you in this process. I'm

14 nervous for two reasons. One is the problems that

15 we've heard discussed today concerning the tobacco

16 industry. The other reason is that, I'm sitting here

17 speaking before a Commission, and I'd be a lot more

18 comfortable at home driving a tractor.

19 First of all, to continue with my

20 presentation, I need to make a couple of assumptions.

21 I must assume that no serious thought is being given

22 to prohibit use of tobacco in this country.

23 Prohibition has been tried with other things, and it

24 doesn't work. Secondly, I must assume that this

25 Commission will not consider proposing the outlawing






1 of tobacco production in this country.

2 If these assumptions are valid, then I

3 predict that people in large numbers will continue to

4 use tobacco in this country. The quota then becomes,

5 who's going to grow that tobacco. We in this country

6 grow the best, safest supply of tobacco in the world.

7 We're quite confident of that fact.

8 We also have the tremendous ability to

9 adjust our production for quality and safety

10 considerations. If we're not careful, we may lose

11 our tobacco production to offshore sources over which

12 we have no control.

13 From the tobacco farmer's viewpoint,

14 tobacco is the only product that consistently pays

15 our bills. Of course, you've heard today how that

16 asset is eroding to the point that it also is having

17 trouble paying our bills. We're open to alternative

18 crops, but a good one to replace tobacco has not come

19 long yet. I think you've heard several times that

20 North Carolina is the third most diversified

21 agricultural state in the nation; most of that

22 diversity has come from the income that tobacco has

23 provided us.

24 We know how to grow tobacco. From our

25 viewpoint, American Lung Association, tobacco is






1 legal and pays a profit, it makes sense for us to

2 grow it. But centering on my point for today, price

3 seems to be the engine that drives the demand for our

4 tobacco. Our domestic companies have continued to

5 buy our tobacco, in varying degrees, even those who

6 have seen that our price is above market levels. The

7 problem we're having, of course, is that our export

8 market has eroded tremendously. If we're to save

9 tobacco farming, we must sell tobacco to the export

10 market. This is where our future lies.

11 There is basically no place in my costs of

12 production that I could cut substantially. Economic

13 of scale might provide some relief, but you see,

14 people are already using the economics of scale in

15 the present pricing situation. You see small farms

16 gobbled up by larger ones. It is not that those

17 larger farmers want to grow more tobacco; they've got

18 to grow more tobacco in order to produce the profit

19 that it takes to stay in business. We face smaller

20 quotas at the same time that economics of scale

21 require larger operations. Under this scenario,

22 small farm operations cannot survive.

23 We need more demand and the only place we

24 can get more demand is from export sources. We can't

25 get more demand from this source without reducing






1 price, and we can't reduce prices and stay profitable

2 under the current system.

3 The only relief I see is the elimination

4 of the cost of quota from my cost of production. This

5 Commission can recommend quota be transferred to

6 producers in a manner that removes it from the cost

7 of production. Now, I'm not suggesting that quota be

8 taken from anyone without compensation. Most of the

9 people from whom I rent are very dependent upon the

10 quota rent that I pay them. However, it is no longer

11 financially feasible for me to carry that cost.

12 Quota owners must be compensated from outside the

13 arena of tobacco production. Quota must then be

14 assigned to active producers annually, such that it

15 will never again have a market value.

16 Removal of the cost of quota from

17 production costs would allow us to reduce our price.

18 Economists at NC State University tell us that 25-30

19 cent cut in price would cause export demand to

20 outstrip our ability to produce within three years.

21 I see that as an opportunity for farmers.

22 So what can this Commission recommend?

23 Compensation for quota owners fairly for an

24 investment they were encouraged to make or keep.

25 Transfer quota into the hands of producers at no






1 charge on an annual basis so it will not build up

2 value. Strong worldwide demand for our crop would

3 solve many of the financial and market problems that

4 we face today. Removal of the cost of quota would be

5 the catalyst to promote that demand. Thank you.

6 Mr. Doug Richardson: Thank you, sir. Any

7 questions for Mr. Griffin? The next person to

8 testify is Sondra Riggs from Pollocksville, North

9 Carolina. She's a County Commissioner. Ms. Riggs.



12 Ms. Sondra Riggs: I am Sondra Ipock Riggs

13 and I'm a Jones County Commissioner. I will first

14 tell you about my county and then I'll get into my

15 side of the story. I have a three page letter here

16 and I'll give you two of them. Everybody's done said

17 the same thing I have in the letter.

18 A lot of you don't realize that the farmer

19 is 57 years; that's the average farmer in the U.S.

20 Let me tell you something, North Carolina alone, I

21 don't know nothing about the other states, but I do

22 know North Carolina. I've served under both of our

23 last governors for eight years on the migrant board.

24 I've been the Director of Neuse River Council of

25 Governments, part-time for two different times. I've






1 been Chairman of the Neuse River Council of

2 Government, Chairman of the Neuse River Basin. I

3 know all about boards, been on boards. I'm on

4 nineteen boards right now. But everybody don't think

5 and feel like I do as an elected official.

6 I don't play politics with nobody and I

7 hope to God you don't, because this is something that

8 you're dealing with people's lives. Nobody has no

9 right to come in here -- when my husband and I got

10 married in 1962 and borrowed over a quarter of a

11 million dollars; and I have paid county tax, state

12 tax, federal tax, on my tobacco, wheat and everything

13 else I own, and now they come in here and they've cut

14 me since I retired, half of my pay. It's illegal,

15 it's immoral and it's a sin for anybody to do this to

16 me or anybody else.

17 You have no right. But you say you do.

18 Down in your heart, if I was to come down and I would

19 not be just a County Commissioner and I would be

20 Governor, and I said, hey, I'm going to cut your

21 salary 40 or 50 percent today, oh, boy, there would

22 be some hell raising then. But it ain't enough

23 farmers to raise hell because the people have put

24 them out of business.

25 The lady, I done forgot her name, cornered






1 (inaudible). How do you make it without tobacco? I

2 figured it up. I've got seven farms that I bought,

3 two farms that was given to me in Franklin County,

4 and about seven and a half or really eight farms in

5 Jones County. Without tobacco, my tax of being

6 $4,000 would take a third of my income.

7 Now you tell me how I'm going to do it.

8 Here I am sitting here as a County Commissioner

9 without the tobacco, six million pounds, to give

10 Jones County. The State of North Carolina

11 legislation is continuously sending me a bill down

12 that I've got to pay 100 percent for this person to

13 work here, 100 percent there for that person. They

14 send us no money to do it. Jones County, Greene

15 County, Duplin County, I can name sixty-six counties

16 in this state will shut out in less than ten years.

17 Now people, don't you think I'm no fool,

18 cause you look at my hands. I've got combines and

19 harvester just like does my husband, yet I can get in

20 that classroom and teach just like a teacher. I've

21 been a jack of trades in a trade of nothing, I guess,

22 the way it looks. But I am a good Commissioner and

23 I'm going to fight anybody, lung, heart, whatever.

24 It they'd see how many people is killed on

25 Highway 17; because we live east of Raleigh, we don't






1 have the highways. We don't have nothing east of

2 I-95, and our tobacco farmers, 80 percent of tobacco

3 farmers of flue-cured is east of I-95, because the

4 state has very seldom given eastern North Carolina

5 nothing. That's nothing; roads, schools, and nothing

6 else. I don't only blame you. I blame you, not you,

7 but the people who we elected. That's the very

8 reason I come today. I hope to God with the change

9 on Tuesday, it will be different.

10 But don't take people's quotas. That's

11 not right. These people, you find how many people

12 died in Jones County from alcohol to tobacco, and

13 I'll kiss your foot; it ain't tobacco. I sit on

14 three ABC boards. Thanks.

15 Mr. Doug Richardson: Thank you, Ms.

16 Riggs. Any questions? The next person to testify is

17 Rocky Thompson. Rocky passed a little earlier but

18 now Mr. Thompson is ready to testify.



21 Mr. Rocky Thompson: I appreciate the

22 opportunity to testify before you all. I didn't

23 really know I was on the ballot. I didn't really

24 know I was.

25 Do you all realize who is benefiting most






1 from tobacco? It's the government. At least almost

2 half of every cost of a pack of cigarettes goes to

3 taxes. In Georgia in 1999, it was thirty-three

4 thousand for tobacco. At the retail level, each acre

5 of tobacco in Georgia generates $46,000. That's

6 $1,518,000 that Georgia's crop of tobacco produced in

7 taxes at the retail level. I keep wondering, people

8 talk about where could the buy-out come from? It

9 could come from the taxes it's already lodging

10 against tobacco.

11 Now, I'm going to tell you this. I

12 started farming when I was eighteen years old on my

13 own. I raised tobacco and I spent all fall trying to

14 lease a quota, because it was neighbor against

15 neighbor. Years and years and years, the USDA

16 allowed for us to buy and sell tobacco quotas; I

17 started buying quotas.

18 In the fall of 1996, when we were selling

19 tobacco and you would go to the warehouse and the

20 tickets was already marked $1.92, all we had to do is

21 put what company was going to get it. That sent the

22 signal that there was a strong future in tobacco. My

23 son in-law and my son, we decided to add 180,000 to

24 our quota in the fall of 1996 because some people

25 wanted to get out. So with the 1997 cut, we owned






1 700,000 pounds tobacco quota. Today, we own 400,000

2 pounds of tobacco quota. You tell me any kind of

3 business that can take a lick like that and keep

4 going? They can't do it.

5 We're sitting here and everybody's talking

6 about a buy-out. I can tell you before a buy-out can

7 transpire, you will put a lot of us out of business.

8 We need some low interest loans to help us along

9 until we can do better, because we've been hit below

10 the belt hard, very hard.

11 The other thing you need to realize, we've

12 been bullied by the Federal Government and bullied by

13 tobacco companies. I've got friends sitting right

14 behind me that work for a tobacco company, but I'm

15 sorry, the facts are there. There are only three

16 pennies worth of tobacco in a pack of cigarettes on

17 the farm level. Three pennies worth of tobacco at

18 the farmer level in a pack of cigarettes.

19 I'll shut up. Thank you very much.

20 Mr. Doug Richardson: Any questions of

21 Mr. Thompson? Thank you, sir. The next person to

22 testify is Mr. Tom Drew from Goldsboro, North

23 Carolina; an educator and a farmer.








1 Mr. Tom Drew: Thank you. This is a forum

2 I've been looking forward to. To more than to

3 survive, to thrive. Head high as a future tobacco

4 producer and consumer, my presentation will consist

5 of two major focuses. The first, to promote a future

6 use of the golden leaf, and the second, the

7 preservation of the past and present use of the

8 golden leaf.

9 To address the first focus, 27 years ago,

10 a Wake County farmer shared with me the understanding

11 that there was a tobacco research farm where the hogs

12 preferred tobacco feed over regular feed. That

13 tickled him and it tickled me. Since then, I've come

14 to understand that tobacco is the highest complex

15 protein found in a plant on the planet, and I also

16 understand in recent years there is success in human

17 consumption in a hospital setting, where transplant

18 patients needed a low bulk, high protein diet, and it

19 was the prime choice.

20 If one saw it at the local grocery store,

21 the top sources of complex plant-based protein to

22 enhance a newborn's diet, of the top three that do

23 grow well, one and one only could be found in the

24 grocery store, and that's the third highest complex

25 protein, soybeans. That same farmer twenty- seven






1 years ago was just beginning to grow soybeans, having

2 had a few calls from Raleigh saying, send me a sack

3 of beans. He responded; I guess he wanted to eat.

4 Now it's hard to find a product that doesn't have

5 soybeans in it in the grocery store.

6 Out of a congressional hearing on tobacco

7 in Wayne County a few years back, they came to the

8 understanding from our congressman that farmers could

9 have a right to grow unlimited acres of tobacco for

10 food, and it would not be taxed no higher than

11 potatoes or tomatoes.

12 At this point, I wish to recognize the

13 three potential political issues creating the reality

14 that newborn babies are being fed third rate protein.

15 And to understand why, I bet ten years back, the

16 federal and state researchers did not get out of

17 research, but backed out. The first one might be

18 that the corporate farms that were doing so well with

19 protein, recognized the only thing between them and

20 profit from protein and tobacco is the small family

21 farm.

22 The second possible reality is the

23 realtors, where the only thing between them and

24 profit on the last prime real estate on the East

25 Coast is the small tobacco farmer.






1 But the real reason, and I as an educator

2 first and farmer second, is smoking and health

3 issues. I spoke at the North Carolina tobacco

4 settlement public hearing held in Raleigh in February

5 of 1998, and addressed that I recognized the premise

6 of that hearing that day. We understood the whole

7 reason of how it came about, was as the speakers from

8 the health care field who spoke before me, that

9 tobacco is the leading preventable cause of premature

10 death. That day, I disagreed. I said, I disagreed.

11 Today, I wish to share a question with the

12 panel. Do they recognize tobacco as being the

13 preventable cause of premature death, that's "A"; or

14 "B" is loneliness and despair the leading preventable

15 cause of premature death; or is it "C", something

16 other. I recognized that day that it is loneliness

17 and despair. That is the hard real issue that

18 escaped that hearing that day, and I can see the

19 reality today, that health care issues are

20 compounding as we speak with respect to that. We

21 have a health care system that doctors get paid

22 whether you live or die. Patients are dying and they

23 want to get paid. They want to buy the tobacco

24 farmers out, bail out their system.

25 I really wish to debate this issue with






1 the American Lung Association, but also I wish to

2 offer them a peace offering. As an educator, I teach

3 a human anatomy class. I have an idea to help

4 recover health that's related to smoking. Tobacco

5 farmers who have worked in tobacco understand what

6 I'm talking about. There's one thing that will take

7 tobacco off the skin; and if it will take it off the

8 skin on the outside, it may help on the inside, where

9 they have problems with lungs. I'll be happy to

10 speak with them afterwards and find out where their

11 forums are for healthy debate.

12 Mr. Doug Richardson: Thank you, sir. Any

13 questions of Mr. Drew? The next person to testify is

14 Mr. Ray Galloway from Darlington County, South

15 Carolina. He is a farmer and Chairman of the Burley

16 Tobacco Advisory Committee.



19 Mr. Galloway: Thank you, sir. It's

20 flue-cured. I'm Ray Galloway, a tobacco farmer from

21 Darlington County, South Carolina, and Chairman of

22 the Farm Bureau Tobacco Advisory Committee. I thank

23 you for this opportunity to present to you

24 information that may be valuable to the deliberations

25 of the Commission in addressing their task.






1 Tobacco production in South Carolina,

2 along with the other flue-cured tobacco producing

3 states, has declined by nearly 50 percent during the

4 past four years. Along with this decline in

5 production has come a decline in income and land

6 values in the tobacco producing communities.

7 The economic ripple effect of this loss is

8 just beginning to be felt. Tobacco farms are

9 consolidating as farmers get out of the business.

10 Tobacco warehouses and farm suppliers are closing

11 their doors. Others that depend on the economic

12 activity that tobacco money produces are also

13 suffering through difficult times. These extend to

14 the local public institutions like schools, public

15 safety and hospitals that depend on a strong tax

16 base.

17 Even with these huge decreases in

18 production and income, tobacco remains a mainstay for

19 the South Carolina economy.

20 Tobacco communities do need additional

21 support during these difficult times. However, we

22 are concerned that some comments that have been made

23 to the Commission call for support but only with the

24 elimination of tobacco production in the U.S. The

25 Commission must be very careful in separating the






1 need for support in tobacco-dependent communities

2 from concerns related to tobacco consumption.

3 Further reduction in tobacco production will only

4 intensify the economic hardships that

5 tobacco-dependent communities are currently facing

6 and not have an impact on tobacco production

7 consumption.

8 The South Carolina Farm Bureau supports

9 programs to restrict youth access to tobacco

10 products, but does not feel that tobacco products

11 will be outlawed for adult consumption. Unless there

12 is a total prohibition on tobacco products in the

13 U.S. and other countries for that matter, there will

14 continue to be a demand for a legal raw product to

15 manufacture tobacco end products. Tobacco is

16 produced in other areas of the world and will

17 continue to be even if we were to ban production in

18 the U.S. The calls for eliminating growing tobacco

19 in the U.S. will not result in decreased production

20 of tobacco products, only a shift in where the raw

21 product is grown.

22 America tobacco farmers have proven time

23 and time again that they can and do produce the

24 highest quality, most desirable and safest leaf for

25 tobacco products. They have done this with many






1 restrictions on production practices that are not

2 mandated in other countries.

3 The second concern that our members have

4 is the call for getting out of tobacco production

5 through diversification. South Carolina farmers are

6 currently highly diversified in their production of

7 crops. They are also constantly seeking alternative

8 crops to help improve their financial condition. The

9 income that is the result of tobacco production would

10 be hard to be replaced by any alternatives that are

11 on the horizon. Crops that are often mentioned as

12 replacements to tobacco are typically small specialty

13 crops, and the market for these crops would be

14 quickly flooded and cause a crash in prices if a

15 large number of producers would shift to these crops.

16 This simplified solution offered to get farmers out

17 of tobacco production has not been viable to this

18 point.

19 The prospect of a Federal buy-out of the

20 tobacco program is often mentioned in relation to

21 your Commission. There are many areas where the

22 tobacco program needs to be revised and many of the

23 proposed solutions could require funds to reduce the

24 financial impact that these changes could have on

25 tobacco farmers and quota owners. The major hurdle






1 for past proposals has been getting the funding

2 necessary to cover these costs. We have often built

3 up expectations in farmers, only to later dash these

4 hopes and plans because the funding was not

5 available.

6 Buy-out proposals of the past also did not

7 take into consideration the tax consequences to

8 farmers or the tendency for Congress to limit

9 payments to farmers. This also goes back to our

10 original concern that many think that through a

11 buy-out, we will eliminate tobacco production in the

12 U.S.

13 Mr. Doug Richardson: Thank you, sir. Any

14 questions of Mr. Galloway? The next person to

15 testify is Joe Reams, who is testifying as a

16 flue-cured tobacco farmer.


18 Mr. Joe Reams: I appreciate the

19 opportunity to speak. I would like to thank the

20 Commission for accepting the job that they've taken

21 on. I remember not too very long ago that the public

22 health folks were the enemies of tobacco farmers. I

23 feel like that's passing. I know it is with me. I

24 think that our society is growing and learning. We

25 all realize that there's a lot more to learn about






1 the effects of smoking.

2 I'm a fifth generation tobacco farmer. I

3 grew up on a tobacco farm, and leased tobacco up

4 until 1998, and I had the opportunity to purchase a

5 farm with a tobacco quota, and listening to some of

6 the other quota holders, it seems like an unusually

7 high number, a 100,000 pound quota. I don't know

8 anybody with that much quota around our house. But,

9 in Florida we have a little different situation than

10 you all do in North Carolina.

11 Our communities are not tobacco-dependent

12 communities. We buy a lot of our supplies, a lot of

13 things we buy, from Georgia and all around. It's

14 just a totally different situation where we are. We

15 as farmers and quota holders, are the only ones that

16 are tobacco-dependent, and we are totally

17 tobacco-dependent. I don't have an outside job.

18 Up until two years ago, our tobacco farm

19 grew. But with these quota cuts, keep in mind I

20 bought the farm in 1998, so I've eaten all three of

21 the cuts. I started some stockyard cattle

22 production; I tried my hand at watermelons this year,

23 which was a bad mistake.

24 I just mainly want to stress, I don't want

25 to echo everything everybody's already said, I just






1 want to stress the urgency of this situation. Right

2 now, speaking for myself and my father, we are in

3 extremely dire straits financially. Like I said,

4 when your debt payments stay the same and your income

5 is cut in half, it doesn't take long. Interest is

6 clicking every day.

7 A few points I'd like to touch on are that

8 tobacco farmers, every tobacco farmer I know is very

9 resourceful. When given the opportunity, we can find

10 a niche, in whatever market and grow whatever. But

11 we don't really want to be lumped together and taught

12 how to grow blueberries or anything like that. I

13 think that that would be a waste of money in my

14 estimation. I think what tobacco farmers need is

15 money. We need money so we can have working capital

16 to be able to do what we know how to do, and that is

17 to get out and farm and make money.

18 The tobacco program has been a very good

19 program, and I think it was an ingenious program that

20 was put together, and it really helped a lot of

21 families, including my own for five generations. I

22 think it's outdated. I think that we definitely need

23 to make changes to it. But we're obviously not going

24 back to status quo. Again, we've learned as a

25 society, some of the effects of smoking, the hazards






1 of smoking, and all of this has really pushed things

2 along at a very rapid pace.

3 Our assets have been devalued by close to

4 50 percent, while our debts are the same. I just

5 want to stress that tobacco farmers and quota holders

6 have a common denominator here. We in Florida have a

7 different situation than here in North Carolina, but

8 we're still tobacco growers and quota holders. We

9 are the common denominator, and we think that we

10 should be given some kind of compensation in the form

11 of a buy-out to give us some working capital to get

12 out and make something happen on our farms. Thank

13 you.

14 Mr. Doug Richardson: Thank you, Mr.

15 Reams. Any questions? The next person to testify is

16 Rick Tharrington from Goldsboro, North Carolina, and

17 he is testifying for NCASCOE; that's the North

18 Carolina Association of State and County Office

19 Employees.



22 Mr. Tharrington: Good afternoon and thank

23 you for your time. As Doug said, I am Rick

24 Tharrington. I'm the Country Executive for Wayne

25 County, North Carolina. I was born and raised on a






1 flue-cured tobacco farm, and am a native of Franklin

2 County, a farm that my mother now depends on for her

3 retirement.

4 Today I am here to speak to you as the

5 Vice President of North Carolina Association of State

6 Office Employees, an employer organization of county

7 office employees that believe in loyal, courteous

8 service to our farmers and to our community.

9 Recently North Carolina lost sixteen staff

10 positions due to work load and budget cuts. These

11 positions will need to be continued to service the

12 farmers of North Carolina. At the same time, our

13 workload figures were adjusted; other states'

14 workload figures were adjusted and allowed to

15 increase their level of employment.

16 The tobacco program needs support, to be

17 continued to insure stabilization of prices, and

18 stable income for our farmers. At the same time, the

19 tobacco program needs administrative support at the

20 same level as other commodities administered by the

21 USDA. Thank you for your time.

22 Mr. Doug Richardson: Thank you, Rick. We

23 appreciate that. Any questions? The next person to

24 testify is Chuck Bridger, and he is testifying for

25 the American Cancer Society.









4 Mr. Chuck Bridger: Hello. My name is

5 Chuck Bridger, and I am the Director of Tobacco

6 Initiatives for the American Cancer Society here in

7 North Carolina. I am very pleased to see familiar

8 faces on the Commission and am confident that your

9 final recommendations will provide useful advice to

10 the President concerning the tobacco growing

11 community. Like many speakers here today, I grew up

12 in a farm community in the eastern part of the state,

13 and now live in a similarly tobacco-dependent county

14 in the Piedmont.

15 I was recruited for this job with the

16 American Cancer Society specifically because I could

17 appreciate the necessity of seeking improvements in

18 public health within the context of a state whose

19 rural economy has largely been based for generations

20 upon tobacco growing small family farms.

21 As Andy and Lynn-Carol and others on the

22 Commission are aware, American Cancer Society staff

23 from North Carolina and other states were intimately

24 involved in the drafting of the Core Principles

25 document. We continue to believe that it provides a






1 good foundation for addressing the plight of tobacco

2 growers and their communities while acknowledging the

3 shared value of protecting public health. We would

4 encourage the Commission to build upon these

5 principles, while keeping the following issues in

6 mind.

7 Clearly there are many rural counties in

8 North Carolina and other tobacco growing states that

9 cannot readily shift to economies that are based on

10 traditional economic development principles of

11 attracting industry. Programs like those piloted by

12 RAFI who testified earlier, are designed to maintain

13 the viability of small family farms represent the

14 best hope for avoiding economic ruin, and the

15 consequences that brings.

16 The public health of these rural

17 communities likewise depends upon strategies that

18 provide for opportunities to transition away from

19 dependence on tobacco income while allowing for the

20 small family farm structure to remain intact and

21 economically viable. We would lastly urge that you

22 consider recommendations that seek to address

23 disparities in health care access faced by rural

24 communities as one factor in your efforts to address

25 quality of life issues in these communities.






1 Again, thank you for your time and

2 interest, and you know you have our continued pledge

3 of cooperation and collaboration on these issues.

4 Mr. Doug Richardson: Thank you, Mr.

5 Bridger. Any questions for Mr. Bridger? If not, the

6 next person to testify is Scott Marlowe, WAFI.



9 Mr. Scott Marlowe: Thank you very much

10 for the opportunity to speak to you today. My name

11 is Scott Marlowe, and I'm Program Director for the

12 World Advancement Foundation International.

13 From the comments of today, it's clear

14 that we must seize the opportunity to support

15 programs that will assist farmers with meeting the

16 tasks that they currently face.

17 I'm here to speak to you about two proven

18 opportunities. As farmers face increasing

19 challenges, they depend on information about

20 production and marketing. Increasing information is

21 a commodity which the producer must buy, as

22 increasing amounts of research is proprietary, and

23 information based technologies are marketed to the

24 farmer at an unprecedented rate.

25 More than ever before, it is imperative






1 that farmers have the tools not only to receive good

2 information, but to produce into. Since 1995, WAFI

3 has partnered with farmers, NC State University

4 Cooperative Extension service, and the North Carolina

5 Peanut Growers Association, to run an on-farm

6 research project for peanut farmers in poor North

7 Carolina counties. In that time, farmers have

8 reduced their cost of inputs by as much as $100 per

9 acre, without significant yield loss. They've

10 reduced their pesticide usage by 125,000 pounds of

11 active ingredient, and have made more money, keeping

12 their farms and their communities alive.

13 In this program, farmers use their own

14 equipment to run their own experiments on integrated

15 test management strategies with assistance from our

16 staff and the cooperative extension service. It's

17 statistically valid field experiments, and they

18 gather and share their information with other

19 farmers. This provides information which is

20 inexpensive, globally relevant, immediately

21 implementable. Increasing the commitment of land

22 grant universities and government agencies in this

23 type of research could effectively assist farmers in

24 answering their information needs.

25 The second issue is the human toll this






1 stress has taken on farm families which have

2 struggled year after year to stay on the farm. From

3 the 1980s, we know that farm communities are

4 associated with increased rates of depression,

5 substance abuse, child and spousal abuse, and suicide

6 among farm families. We also know that family farms

7 are unlikely to receive the assistance that could

8 help them deal with these issues. Those that do

9 often find that service providers have no

10 understanding of the issues that farm families face.

11 What is needed is an aggressive outreach program for

12 farm families, to help them deal with these issues,

13 and help them obtain services that are culturally

14 appropriate, available and responsive to their needs.

15 WAFI USA, an Illinois based farm research

16 center, in collaboration with the Agri-Medicine

17 Institute and the United Methodist Church, are

18 currently developing a pilot program for North

19 Carolina. This program provides outreach workers who

20 can sit with farm families at their kitchen table, to

21 develop together a plan of what the family needs.

22 Programs like these provide effective, efficient ways

23 to assist farm families to stay on the farm. Thank

24 you, very much.

25 Mr. Doug Richardson: Any questions at






1 this time? Thank you, sir. The next person to

2 testify is Joy Bechtold.


4 Ms. Joy Bechtold: Mr. Myers, Mr. Kuegel,

5 representatives of the Commission, thank you for

6 allowing me the opportunity to testify today. In

7 1999 in Virginia, the American Cancer Society along

8 with the America Heart Association and America Lung

9 Association, joined forces with the Virginia Farm

10 Bureau, Concerned Friends for Tobacco, and the

11 National Association for Black Farmers, in a

12 broad-based, bipartisan, and at the time,

13 unprecedented effort to pass legislation that

14 allocated Virginia's tobacco settlement funds to two

15 entities: The Virginia Tobacco Settlement

16 Foundation, and the Tobacco Indemnification and

17 Community Revitalization Commission.

18 The Virginia Tobacco Settlement Foundation

19 received 10 percent of the funds for the purpose of

20 conducting youth tobacco prevention efforts. The

21 Tobacco Indemnification and Community Revitalization

22 Commission received 50 percent of the funds to

23 provide a soft landing for tobacco growers against

24 future loss, and provide the capital necessary for

25 economic development and diversification in






1 tobacco-dependent communities.

2 This legislation attempted to strike a

3 balance between the need to control youth smoking,

4 and the need to protect Virginia's communities from

5 economic disaster. It was also an attempt to ensure

6 the survival of our rural communities. A community

7 in crisis is a public health concern.

8 Also in 1999 the American Cancer Society

9 and the American Lung Association funded a poll,

10 which measured Virginia's attitudes towards the

11 tobacco settlement. We found that 67 percent of

12 respondents favored spending settlement funds to help

13 tobacco farmers and workers shift their livelihood

14 away from tobacco. 86 percent of respondents

15 indicated that they supported spending these funds on

16 preventing children from starting to smoke.

17 Prior to 1999, American Cancer Society

18 played a key role in the creation of the Southern

19 Tobacco Communities Project. It was this project,

20 the dialogues from this project which resulted in the

21 Core Principals by which you now are so familiar.

22 Over the past three years, as we've heard

23 today, burley and flue-cured tobacco quotas have been

24 reduced by 65 and 45 percent respectively. We

25 believe that the primary factor influencing these






1 quota cuts has been tobacco companies' purchase

2 intentions from America grown tobacco, and their

3 foreign operations increase. The public health

4 community has been successful in educating people as

5 to the dangers of using tobacco products. However, we

6 do not feel that the recent quota cuts can be

7 attributed to our success.

8 Throughout the 1990s, adult smoking rates

9 have remained virtually unchanged, hovering around 25

10 percent, while youth smoking rates have shown a

11 decline about 1.6 percent between 1997 and 1999. We

12 do support a federal price support program. A repeal

13 of the federal quota program would mean the repeal of

14 the only measure that keeps tobacco a controlled

15 substance, and shift it to being a commodity with

16 tremendous negative public health implications.

17 In the past, American Cancer Society has

18 conducted and participated in various tobacco control

19 programs. Recently in Virginia, we have seen some

20 success with our Make Yours a Fresh Start Family

21 program, a cessation program for pregnant women. We

22 co-chair the ASSIST project, an NCI- funded

23 initiative through provided funds for local tobacco

24 control efforts. Much of our work has been in the

25 policy arena, advocating for the Clean Indoor Air






1 Act, restrictions on minors' access to tobacco

2 products, and FDA jurisdiction over tobacco. We will

3 continue our work in this regard.

4 I should clarify that when I say FDA

5 regulation of tobacco, we don't mean that we support

6 FDA on the farm. However, we do feel that there

7 ought to be some oversight to the manufacture of this

8 product, especially with the emergence of

9 contracting. An industry ought not to have complete

10 control of a product with such tremendous negative

11 public health implications.

12 In the future we will continue to work

13 with communities to reduce the health effects of

14 tobacco. Our newest tobacco control program,

15 Communities of Excellence, employs a systems approach

16 to tobacco control. I want to be clear, however, on

17 the American Cancer Society goals. We are an

18 organization dedicated to reducing the incidence of

19 cancer around the nation, and we do that by funding

20 new research and prevention.

21 We know that reducing the number of people

22 who use tobacco, especially youth, will reduce cancer

23 mortality across our nation. But we also recognize

24 that we cannot reduce the use among the general

25 public without affecting the growers and their






1 communities. Farmers grow a legal crop and they are

2 hard-working, decent men and women.

3 Tobacco farmers, their families, and

4 communities get cancer too. We want to continue to

5 move forward with you to help strengthen and

6 transition tobacco-dependent communities. We hope

7 that this Commission will work towards a long-term

8 solution for our family farms, while supporting the

9 efforts of those who are working to protect our

10 children from the health hazards associated with

11 tobacco use.

12 Mr. Doug Richardson: Thank you, Joy. We

13 have one more person to testify, and that is Mr.

14 Willard B. Harris, retired, is it farmer or finance?


16 Mr. Willard Harris: Thank you for this

17 opportunity to speak on behalf of improving economic

18 opportunities in communities dependent on tobacco

19 production. I grew up in North Carolina, I was a

20 tobacco grower in my earlier years. I was educated

21 in North Carolina; I worked as a CPA and was a

22 textile executive in North Carolina. My last job was

23 Vice President of Finance of a Fortune 500 company.

24 The problem that tobacco farmers are

25 facing was brought about by the lawsuit against the






1 tobacco companies brought by the State Attorney

2 General. For their settlement, they were awarded

3 $246 billion, with proceeds supposedly to reimburse

4 medical costs. Yet states are using the proceeds for

5 everything under the sun, and the tobacco industry is

6 paying the cost.

7 The effect of this settlement, the cost of

8 which was passed on to cigarette smokers in the form

9 of higher cigarette prices, was expected to reduce

10 the demand for tobacco. It has, with quotas being

11 reduced by 53 percent already.

12 Obviously the 124,000 tobacco farmers in

13 the nation would be adversely impacted by the reduced

14 demand. Tobacco was the 6th largest industry in the

15 U.S., and it was ruined by that tobacco settlement.

16 In North Carolina, a one billion dollar crop has been

17 ruined, and 30,000 tobacco farmers and their families

18 and other support persons in their communities have

19 had their income taken away.

20 Should they go on the U.S. welfare rolls?

21 Forget federal job training approaches. Train for

22 what? If there are no jobs available, what good

23 would training do? Textile workers in North Carolina

24 already know that training for no jobs does not pay

25 off. Recently I wrote a newspaper article






1 criticizing North Carolina Attorney General Mike

2 Easley as selling the tobacco farmers down the river,

3 by not negotiating effectively with tobacco companies

4 for funds to assist farmers in a transition to other

5 income approaches after losing their tobacco crops.

6 I felt that it was grossly unfair for

7 layers to be awarded fifteen billion dollars with

8 only five billion dollars set aside for farmers to

9 assist in transition.

10 Attorney General Easley's staff assistant

11 wrote a newspaper article stating that I was nuts and

12 did not know the difference between the proposals in

13 Congress to pay farmers from ten billion to

14 twenty-eight billion dollars for tobacco buy-out as

15 compared to the Phase II settlement of five billion

16 dollars.

17 My complaint is this: The tobacco companies

18 did not protest the amounts awarded to the lawyers'

19 group. Their position was that the entire $246

20 billion paid to the states, the $15 billion awarded

21 to the attorneys and the $5 billion fund set price,

22 would be paid for by cigarette smokers in the form of

23 higher cigarette prices, perhaps $1.50 per pack.

24 If the tobacco companies through raising

25 cigarette prices could pay $15 billion to 500






1 lawyers, they could just as easily pay $15 billion to

2 assist the 124,000 tobacco farmers, their families,

3 and the people, support people in their communities.

4 The chief negotiator for the tobacco

5 farmers, Mr. Phil Carlton of Pinetops, North Carolina

6 said, he was floating a $5 billion suggested payout.

7 What does floating mean, a suggested trial mode first

8 offer? Was it merely a first offer as a means of

9 starting a negotiation process? No way should

10 Attorney General Easley have accepted the first

11 amount, but should have negotiated strongly for $10

12 billion or $15 billion, but he did not. He and

13 others with him, quickly moved to accept the first

14 offer from the tobacco companies.

15 The farmers of North Carolina missed the

16 opportunity of their lifetime this week, to show the

17 government officials of North Carolina that their

18 votes counted. They could have swung the vote, by

19 disapproving the performance of Mike Easley on their

20 behalf.

21 Farmers of North Carolina do not need the

22 assistance of your Commission. What they need is for

23 a top federal official to go to the tobacco companies

24 and state that the farmers of this nation have been

25 screwed in the 1998 tobacco settlement, and that if






1 they could award $15 billion to lawyers, they could

2 have awarded $15 billion to the 124,000 farmers.

3 Mr. Doug Richardson: Thank you, Mr.

4 Harris. Any questions? Did I miss anybody who

5 signed up to testify? Let me just say that you might

6 be like me, you might not like to get up in front of

7 a crowd and talk.

8 If you have access to a computer, that's

9 just as good. Get one of the fact sheets that tells

10 you how to contact the Commission. I assure you when

11 your comment comes in, we will put it out on the

12 website for everybody to see and get further

13 comments. We will be sure that the Commission will

14 get copies of these, as well as they access the

15 computers, too.

16 If computers are not your game, you have a

17 fax number also, so you can fax you comments in, and

18 we look forward to receiving those. With that, I'm

19 going to turn the meeting back over to Matt and Ron

20 for wrapping up comments that they might have. Thank

21 you.

22 Mr. Matt Meyers: Before we wrap it up,

23 I'd like to turn it over to one of the Commissioners,

24 John Seffrin, the Chief Executive Officer of the

25 American Cancer Society, to make a brief remark.








3 Mr. Seffrin: Thank you very much, Matt.

4 Just a few points. I'm sure I speak for my

5 colleagues on the Commission when I say how much I

6 appreciate the quality and thoughtfulness of the

7 testimony given here today. This is the first

8 experience for me and I'm sure many of us, in a

9 hearing of this kind, and I think the thought and

10 preparation you put into what you had to say will

11 help us, and I thank you for that.

12 Secondly, I want to say how proud I am, as

13 someone who comes from the public health community

14 and the CEO of the American Cancer Society, how proud

15 I am of the various public health organizations and

16 medical societies who have signed up, were

17 signatories to this Core Principals statement.

18 Conflict and difficulties of the world

19 often revolve around good and good, and not good and

20 evil. If we are to solve some of these problems it's

21 absolutely incumbent upon us to join together in a

22 partnership in a very rational way to discuss

23 possible solutions.

24 The final thing I'd like to say is how

25 much I appreciate and how proud I am of the staff and






1 volunteers of our organizations, who started this

2 process many years ago, and more in particular the

3 last couple of years, to get us to this point, to

4 where we have this kind of hearing at this level of a

5 Presidential Commission, that hopefully will work on

6 a very serious -- what I believe probably can't be

7 totally solved, but can be ameliorated over time.

8 Mr. Chairman, I just wanted to make that comment.

9 Mr. Rod Kuegel: I want to thank the

10 people here in Raleigh, not only the facilitating

11 community, but the ones who came and spoke and gave

12 us your opinions. We've got a huge task before us,

13 and if we are fortunate enough to forge a plan that

14 will justify your support, that's the only difference

15 that we can make. It will be up to you to convince

16 Congress or whoever else may need to act on anything

17 that this Commission comes forward with in the

18 future.

19 We appreciate your input, and look forward

20 to your continuing input into the process as we try

21 to solve some of the problems that we've heard about

22 today.

23 Mr. Matt Myers: Everyone here today can

24 be sure that what was said will be listened to and be

25 factored into very closely. We hope that we will be






1 able to be constructive in helping to find a solution

2 to move our communities forward. I'd like to thank

3 the Commission members who listened so carefully to

4 the testimony here today. With that, I think we will

5 go to Mr. Hatcher to close the proceedings.

6 Mr. Charlie Hatcher: The meeting is

7 adjourned.

8 (Whereupon, at 2:50 p.m., the Presidential

9 Commission on Tobacco was adjourned.)