[Congressional Record (Bound Edition), Volume 147 (2001), Part 5]
[Extensions of Remarks]
[Page 7149]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 7149]]


                          EXTENSIONS OF REMARKS

                H.R. 1658: THE BURLEY BUYOUT ACT OF 2001

                                 ______
                                 

                           HON. BARON P. HILL

                               of indiana

                    in the house of representatives

                         Thursday, May 3, 2001

  Mr. HILL. Mr. Speaker, I am proud to rise today to introduce H.R. 
1658, the ``Burley Buyout Act of 2001,'' a bill to buy out Burley 
tobacco farmers and end the Burley tobacco price support program and 
quota system. H.R. 1658 has been endorsed by the Indiana Tobacco 
Growers Association, which represents southern Indiana's 2,000 Burley 
tobacco farmers.
  Burley tobacco has been growing in southern Indiana for almost two 
centuries. As farmers migrated westward from Virginia to Kentucky and 
southern Indiana in the early 1800s, they brought with them their 
native state's most important crop. A typical example of an early 
Indiana tobacco farmer was Thomas Lincoln, the father of Abraham 
Lincoln, who moved from Kentucky to Spencer County, Indiana, in 1816 
and raised a small plot of tobacco on his farm.
  Over the years, tobacco has continued to be an important part of the 
economy in our rural communities, and today there are 2,000 Burley 
tobacco farmers and 8,000 owners of tobacco quota in southern Indiana.
  These farmers and quota owners are very familiar with the tobacco 
price support program, which the federal government created in the 
Agricultural Adjustment Act of 1938 to protect tobacco farmers from 
price volatility. The program guarantees a minimum price for the 
tobacco that farmers grow, so long as farmers agree to limit their 
tobacco production.
  The tobacco price support program worked well for many years, but now 
the program is no longer protecting farmers' incomes. Since the mid-
1990s, Burley tobacco quotas have been cut in half. In 1997, the 
tobacco quota was 705 million pounds. This year, the quota is 332 
million pounds. In other words, tobacco farmers can only grow 47% of 
the amount they could produce five years ago. The result is that their 
farm incomes have been cut in half over the last five years.
  To make matters worse, both U.S. and foreign tobacco companies are 
buying an increasing amount of their tobacco from foreign producers 
that are not subject to the U.S. quota and price support system. The 
percentage of imported Burley tobacco used in U.S. tobacco products has 
risen from around 20% in the early 1980s to almost 40% today. At the 
same time, the U.S. share of world burley tobacco exports is steadily 
declining.
  In addition, because so much of the tobacco quota is now owned by 
non-growers, tobacco farmers have to include significant quota rental 
expenses into their production costs. The University of Kentucky's Will 
Snell estimates that quota rental rates averaged around 40 cents a 
pound in the 1990s, which means that quota rental payments make up 
about 20-25% of a tobacco farmer's production costs.
  A consequence of declining quotas and high tobacco production costs 
has been that the government has directly subsidized tobacco growers 
over the past several years. For many years, the tobacco industry 
proudly insisted that the government tobacco program operated at ``no 
cost'' to taxpayers, since the tobacco stabilization cooperatives 
always repaid the money borrowed from the CCC with interest. In 1999 
and 2000, however, the federal government distributed almost $700 
million in Tobacco Loss Assistance Payments (TLAP). In addition, in the 
year 2000, Congress forgave $500 million in loans that cooperatives 
owed the CCC and assigned 220 million pounds of the Burley pool stocks 
to the CCC.
  The tobacco price support program is no longer offering tobacco 
growers the economic stability they used to enjoy. The statistics 
clearly show that the price support system is no longer guaranteeing 
farmers a good living. Furthermore, the tobacco program can do little 
or nothing to counter the long-term economic forces that are 
challenging tobacco growers.
  For this reason, I am proposing that the federal government buy 
Burley tobacco farmers and quota holders out of the price support 
program. Ending the tobacco program gets the government out of a costly 
agricultural production control program that is no longer working and 
allows farmers who want to stay in the tobacco business to be more 
competitive in the world market.
  My bill, H.R. 1658, the Burley Buyout Act of 2001, immediately 
terminates the tobacco program and:
  (1) Compensates all quota holders with the fair market value of the 
property right their quota represents. It would pay all quota owners a 
one-time payment of $8 per pound for the average number of quota pounds 
they have owned over the last ten years.
  (2) Provides transition payments of $1.50 per pound for the next five 
years to active tobacco producers to help them move from the price 
support program to other activities, including growing tobacco in the 
open market. These payments will be based on the average number of 
quota pounds tobacco farmers have grown over the last three years.
  (3) Provides $50 million each year in grants for the next five years 
to help communities that are heavily dependent on tobacco to adjust to 
the economic changes that might be caused by ending the price support 
program.
  As Congress prepares to write the next Farm Bill, my colleagues on 
the House Committee on Agriculture and I have an opportunity to review 
the laws and programs that affect most farmers. This opportunity only 
comes around about once every five years. For this reason, I believe 
it's appropriate for us to review the tobacco price support program 
too, and I feel strongly that it is time to make significant changes 
and end the program.
  I urge my colleagues to support and adopt H.R. 1658, the Burley 
Buyout Act of 2001.

                          ____________________