First Forum Testimony

Archive

1 HEARING BEFORE THE PRESIDENTIAL COMMISSION ON TOBACCO

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

13 KERR SCOTT BUILDING OF THE

14 NORTH CAROLINA STATE FAIRGROUNDS

15 RALEIGH, NORTH CAROLINA

1 C O N T E N T S

2 PAGE NO.

3 CALL TO ORDER 10

4 Larry Wooten, President,

5 North Carolina Farm Bureau Services

7 OPENING REMARKS 10

8 Jim Graham, Commissioner of Agriculture

9 State of North Carolina

11 INTRODUCTORY REMARKS 14

12 Larry Wooten, President

13 North Carolina Farm Bureau Services

15 WELCOMING REMARKS 16

16 Adam Goldstein, M.D.

17 University of North Carolina

19 REMARKS OF ROD KUEGEL 22

20 President, Burley Tobacco

21 Growers Cooperative of Kentucky

23 REMARKS OF SALLY HERNDON MALEK 22

1 C O N T E N T S

2 PAGE NO.

3 REMARKS OF MATT MYERS 27

4 President, National Center for

5 Tobacco-free Kids

7 REMARKS OF DOUG RICHARDSON 31

8 Executive Director

9 Presidential Commission on Tobacco

11 JOHN CYRUS 34

12 North Carolina State Grange

14 BETTY BAILEY 37

15 Executive Director

16 Rural Advancement Foundation International

18 TOMMY BUNN 43

19 Executive Vice President

20 Leaf Tobacco Growers Association

22 TONY DELUCIA 48

23 Board of Directors

24 American Lung Association

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

2 PAGE NO.

3 BRUCE FLYE 54

4 President, Board of Directors

5 Flue-Cured Tobacco Farmers

7 GARY HODGE 57

8 Advisor, Southern Maryland Tobacco Producers

10 S. L. ALLEN 63

11 Farmer, Pinetops, North Carolina

13 PEG O'CONNELL 67

14 North Carolina Prevention Partners

16 LARRY WOOTEN 71

17 President, North Carolina Farm Bureau Services

19 JOHN MARK HACK 79

20 Executive Director

21 Office of Agricultural Policy, State of Kentucky

23 JERRY JENKINS 84

24 Chairman, Flue-cured Tobacco Committee

25 Virginia Farm Bureau

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

2 PAGE NO.

3 BROOKS WOOD 89

4 Martin, North Carolina

6 PETE BURGESS 91

7 Chairman, Tobacco Committee

8 North Carolina Farm Bureau

10 J. T. DAVIS 94

11 Concerned Friends of Tobacco

13 ERNIE AVERETTE 103

14 Farmer and County Commissioner

16 KEITH PARRISH 106

17 Tobacco Farmer, Benson, North Carolina

19 SCOTT BALLIN 113

20 Tobacco and Health Consultant

22 AMY DELOACH 122

23 Spouse of Tobacco Farmer

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

2 PAGE NO.

3 BLAKE BROWN 127

4 Professor, North Carolina State University

6 PENDER SHARPE 133

7 Tobacco Farmer, Wilson, North Carolina

9 DON ANDERSON 139

10 Virginia Tobacco Growers Association

12 DAVID RADIN 143

13 President, CropTech

15 BOB PACIOCCO 147

16 Executive Director, Mid-East Commission

18 DIXIE REAVES 151

19 Blacksburg, Virginia

21 CHRIS BEACHAM 156

22 Research Director

23 North Carolina Economic Development Center

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

2 PAGE NO.

3 MIKE OWENS 160

4 Tobacco Farmer, Pitt County, Georgia

6 O. C. KEARNEY, JR. 164

7 Member, Board of Agriculture

8 State of North Carolina

10 FRED WETHERINGTON 169

11 Tobacco Farmer, Georgia

13 AUDREY POWELL 172

14 Tobacco Farmer, Pink Hill, North Carolina

16 RICHARD RENEGAR 174

17 Tobacco Farmer, Harmony, North Carolina

19 DEBRA BRYAN 178

20 American Lung Association

22 DAVID GRIFFIN 182

23 Tobacco Farmer, Spring Hope, North Carolina

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

2 PAGE NO.

3 SONDRA RIGGS 186

4 County Commissioner,

5 Pollocksville, North Carolina

7 ROCKY THOMPSON 189

8 Tobacco Farmer, Georgia

10 TOM DREW 191

11 Farmer and Educator

12 Goldsboro, North Carolina

14 RAY GALLOWAY 195

15 Chairman, Burley Tobacco Advisory Committee

16 South Carolina Farm Bureau

18 JOE REAMS, Tobacco Farmer 199

20 RICK THARRINGTON 202

21 North Carolina Association of

22 State and County Office Employees

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

2 PAGE NO.

3 CHUCK BRIDGER 204

4 Director of Tobacco Initiatives

5 American Cancer Society

7 SCOTT MARLOWE 206

8 Program Director

9 World Advancement Foundation International

11 JOY BECHTOLD 209

13 WILLARD HARRIS 213

15 REMARKS OF JOHN SEFFRIN 218

16 Chief Executive Officer, American Cancer Society

18 ADJOURNMENT 220

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.

10 OPENING REMARKS OF JIM GRAHAM

11 COMMISSIONER OF AGRICULTURE

12 STATE OF NORTH CAROLINA

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.

10 INTRODUCTORY REMARKS OF LARRY WOOTEN, PRESIDENT

11 NORTH CAROLINA FARM BUREAU SERVICES

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.

12 WELCOMING REMARKS OF ADAM GOLDSTEIN, M.D.

13 UNIVERSITY OF NORTH CAROLINA

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.

4 REMARKS OF ROD KUEGEL, PRESIDENT

5 BURLEY TOBACCO GROWERS COOPERATIVE OF KENTUCKY

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.

21 REMARKS OF SALLY HERNDON MALEK

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.

17 REMARKS OF MATT MYERS, PRESIDENT

18 NATIONAL CENTER FOR TOBACCO-FREE KIDS

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.

14 REMARKS OF DOUG RICHARDSON, EXECUTIVE DIRECTOR

15 PRESIDENTIAL COMMISSION ON TOBACCO

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.

23 STATEMENT OF JOHN CYRUS,

24 NORTH CAROLINA STATE GRANGE

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.

23 STATEMENT OF BETTY BAILEY, EXECUTIVE DIRECTOR

24 RURAL ADVANCEMENT FOUNDATION INTERNATIONAL

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.

11 STATEMENT OF TOMMY BUNN, EXECUTIVE VICE PRESIDENT

12 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.

18 STATEMENT OF TONY DELUCIA, REPRESENTING THE

19 BOARD OF DIRECTORS OF THE AMERICAN LUNG ASSOCIATION

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.

11 STATEMENT OF BRUCE FLYE, PRESIDENT, BOARD OF

12 DIRECTORS, FLUE-CURED TOBACCO FARMERS

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.

18 STATEMENT OF GARY HODGE, ADVISOR

19 SOUTHERN MARYLAND TOBACCO BOARD

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.

11 STATEMENT OF S. L. ALLEN

12 FARMER, PINETOPS, NORTH CAROLINA

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.

5 STATEMENT OF PEG O'CONNELL, REPRESENTING

6 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.

20 STATEMENT OF LARRY WOOTEN, PRESIDENT

21 NORTH CAROLINA FARM BUREAU SERVICES

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.

11 STATEMENT OF JOHN MARK HACK, EXECUTIVE DIRECTOR

12 OFFICE OF AGRICULTURAL POLICY, STATE OF KENTUCKY

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.

1 STATEMENT OF JERRY JENKINS, CHAIRMAN,

2 FLUE CURED TOBACCO COMMITTEE, 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.

14 STATEMENT OF BROOKS WOOD, MARTIN, NORTH CAROLINA

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