Senate Agriculture Committee
Testimony by William R. Sprague, President Kentucky Farm Bureau Federation

September 18, 1997

Chairman Lugar, distinguished Senators, my name is Bill Sprague and I am here today representing over 60,000 tobacco farmers from across the Commonwealth of Kentucky. In fact, tobacco farmers represent 2 out of every 3 farmers in our commonwealth.

Following the June 20 announcement of the landmark negotiated settlement reached between state's Attorneys General and tobacco manufacturers, many perplexing questions were tossed around at the dinner table of tobacco producing families from across the nation. Specifically, what does this mean to us, our family, our rural communities, our way of life?

What was more perplexing was that the representative tobacco organizations could not begin to answer our questions. You see, we were totally left out of the discussions. Discussions that have led us to determining a potential new tobacco policy for our nation.

Today, as we speak, producers are cutting and housing this year's crop, which is valued at nearly $3 billion dollars. Already, tobacco farmers have suffered through floods, then drought, labor shortages, disease and now they must face a very uncertain future with regards to this negotiated settlement. In places like Mayslick, Kentucky, where tobacco accounts for nearly 50 percent of all farm cash receipts, it is estimated that for every dollar earned by farmers from growing tobacco, at least $4 is re-introduced into the local economy.

The same is happening all over in small rural communities in other tobacco growing states. In Kentucky, tobacco is grown in 119 of 120 counties, and is without question, the economic driving force in many communities. In fact, tobacco accounts for over 50 percent of all farm cash receipts in 32 Kentucky counties, with the remaining counties generating over 25 percent. Kentucky has 17 of the nation's 20 top tobacco producing counties. Clearly, no other crop can generate such income levels.

Over the course of the past several months Kentucky Farm Bureau, the various burley tobacco organizations and other interested parties have held a series of discussions to determine how this settlement could preserve the thousands of small, family farms that depend on tobacco production. A consensus has been reached on four key elements:

(1) Protect the tobacco growers program.

(2) Compensation to growers in the event that the negotiated settlement results in a reduction of production quotas.

(3) Compensation to growers in the event that the tobacco growers program is eliminated or phased out.

(4) Economic and Educational assistance for tobacco communities.

As the future of the settlement grows murkier, we as Kentucky farmers must put our trust in the basics of tobacco policy--the proven benefits of the tobacco program. Those benefits are clear, and they are constant. Kentucky leads the nation in the number of small farms--because of the tobacco program.

While there may be many details that are subject to debate, I can state with confidence that the most vital issue on the minds of Kentucky's tobacco producers is to preserve the tobacco growers program. And the reason is quite simple: This program has brought economic stability to these family farms.

In fact, I cannot overstate this program's importance to rural Kentucky. For many years, the tobacco growers program has maintained profitable market prices by keeping supply in line with demand. This has absolutely been the lifeblood of thousands of small family farms that do not have the land nor resources to sustain themselves with any other farm enterprise. These are farms that cannot survive with row crops, livestock or produce. When corn is marketed, there are dozens or hundreds of potential buyers and end users for that commodity. It may wind up in human food products, animal feeds, sweeteners, fuel ethanol or starch fillers, depending on which buyer prevails during the marketing process.

Tobacco, on the other hand, enjoys no such market diversity. Four companies buy the bulk of tobacco that is purchased domestically, with one of those four firms making well over 50 per cent of the purchases. Such exclusivity on the buying side leaves no marketing clout in the hands of producers. The tobacco program allows farmers a reasonable margin for their labor, all the while knowing that if prices get too far out of line internationally, their market share will suffer.

What possible benefit, Mr. Chairman, could come of ending the tobacco program. Will the federal budget be brought into balance more quickly? No. Will cigarette prices move upward as a result, forcing younger buyers out of the market? No. Will a competitive marketplace evolve in tobacco marketing? No. Will Kentucky farmers find another crop to replace their lost income? No. Will Kentucky communities suffer massive economic dislocations? Yes.

Furthermore, if the last penny of federal tobacco budget costs is eliminated, any decision Congress may make relative to eliminating the tobacco program will not be an economic decision. It will be a social one. I can't believe that Congress wants to chase 30,000 Kentucky families off their farms. I can't believe that Congress wants to inflict a major deflation in Kentucky farm real estate values. And I can't believe Congress wants to see entire communities lose their vital economic underpinning.

These consequences would surely flow from any action that would result in the loss of the tobacco program. Economic devastation, cheaper cigarettes and a King-indentured servant relationship between producer and buyer of tobacco. And, if the settlement falls apart, as it seems more and more likely to do, there would not even be the short-term attractiveness of compensation to right these wrongs. In short, Kentucky's farm economy would be whipsawed unmercifully to the benefit of tobacco manufacturers who would see their input costs decline. I would have to ask, Senator, why Congress would see such a combination of outcomes as progress?

We feel it's also important to note that the continuation of the tobacco growers program falls in line with some of the settlement's objectives. Foremost would be the desire to make tobacco products unaffordable to our youth. Without the grower's program, we no doubt would see the manufacturers turn to a flood of cheaper, foreign-grown tobacco that would allow them to maintain lower prices for their products. Even tobacco's most vocal critics have acknowledged that the growers program impacts the cost of tobacco products.

In discussing all potential aspects of this negotiated settlement, burley tobacco interests have considered the possibility of eliminating the growers program and offering transition payments to growers. We found very little enthusiasm for the idea of giving a farmer one payment to quit growing a crop. You see, for the overwhelming majority of these small family farms, tobacco production represents the past, present and future viability of the farm. Buying these hard-working families out of the tobacco business would, in effect, be tantamount to buying them off their farm.

Our growers want to continue to produce the world's finest tobaccos. Demand for U.S. tobacco will continue to be strong in the future as we enjoy a leading position in world exports, positively impacting our nation's balance of trade in excess of $5 billion annually. No matter your views on smoking, tobacco products remain legal. Our nation has been down the road of prohibition of a product considered "a human vice" and it did not work. Nor will it work today. Since it will not work, we want to remain, under the current grower's program, as a world leader in quality tobacco production.