BURLEY TOBACCO SALES

The average market price received by Kentucky burley tobacco farmers was $121.87 per hundred weight times (X) 411,305,462 pounds equals (=) $501,257,966.50 gross income.

DARK AIR CURED SALES

Based on the average market price received by the dark air cured tobacco farmers of $116.87 per hundred weight times (X) 16,574,444 pounds equals (=) $19,370,552.70 gross income.

DARK FIRE CURED SALES

Based on the average market price received by the dark fire cured tobacco farmers of $142.36 per hundred weight times (X) 19,740,244 pounds equals (=) $28,102,211.35 gross income.

Senator FORD. The next witness is William M. Kuegel, vice chairman, Governor's Council on Agriculture. I note here it says he's from Frankfort, but I know he's from Owensboro.

STATEMENT OF WILLIAM M. KUEGEL, VICE CHAIRMAN, GOVERNOR'S COUNCIL ON AGRICULTURE, OWENSBORO, KY.

Mr. KUEGEL. Senator Ford and members of the committee, I am certainly privileged that I appear here before this committee today. I am William Kuegel from Owensboro. I am a tobacco farmer and warehouseman and vice chairman of the Governor's Council on Agriculture.

As a farmer, agribusinessman and statewide spokesman for agriculture, I am violently opposed to any Federal legislation which would adversely affect the tobacco farmers in Kentucky or any of the other tobacco-producing States.

While Congressmen and others from States which do not produce tobacco can devote their time to the question of the health aspect of smoking, those of us in the States which produce tobacco must look at it from an economic standpoint.

Tobacco has been an important part of Kentucky's agricultural economy since settlement days, with settlers from Virginia bringing to the State the know-how for growing and curing the leaf. It did not take these settlers long to nearly catch up with Virginia growers and even in those early years Kentucky was the second leading producer of tobacco.

Tobacco at one time was actually used as legal tender having much more value than any money in circulation at the time.

The advent of white burley just after the Civil War even more firmly established Kentucky as a tobacco-producing State. It has for many years been the world's leading producer of burley and the second largest tobacco-producing State.

Agriculture has until recent years been the leading contributor to Kentucky's economy, providing in 1977 nearly $2 billion in gross receipts. Today agriculture is surpassed only by coal in its importance to the State's economy.

Since settlement days, tobacco has been the mainstay of Kentucky's agricultural economy. Presently, tobacco accounts for roughly 55 percent of receipts from crops and nearly one-third of total cash receipts. from farm marketings.

Tobacco is a unique commodity. It is one of the few crops which can be raised successfully on small acreage. And, because of the marketing system which has been developed over a period of many years, and the existence of the price support program, it is the only crop where growers can annually be assured of making a profit.

This feature has caused tobacco to become the one stable factor in the life of the small farmer. The average acreage per burley quota in Kentucky is 1.31 acres. For Fire-cured, the average allotment is 2.09 acres, while the average allotment for Air-cured is .74 acres. So we are really talking about a small farmer.

Figures from the University of Kentucky, based on current yields and market prices, indicate that a burley grower could expect to gross approximately $3,120 an acre for his tobacco. If he uses family labor he could expect to net $1,349 an acre on his crop.

Based on the same assumptions, a dark Air-cured tobacco grower could expect to gross $1,980 and net $1,346 for each acre of tobacco, while the dark fired tobacco grower would gross $1,980 and net $1,214 per acre.

This does not sound like a great deal of money. But what makes it significant is that this amount of money goes into the pockets of literally thousands of Kentuckians. Those who receive less than $10,000 a year in gross annual income from farming constitute 70 percent of the farming operations in the Commonwealth, and these are the people who basically have the small tobacco acreage.

They are the ones who must already rely most strongly on supplemental income from off-farm employment. They are the ones who would be hurt the worst by any major change in the growing and marketing of tobacco. Off-farm jobs in basically rural areas are not available—and they are not likely to become available-in sufficient. quantities to replace lost tobacco income.

And, it would be virtually impossible for these people to switch to the farming of other agricultural crops. About the only choices open to them on limited acreage and with Kentucky's soil conditions might be some form of processed vegetables-peppers and cucumbers. While the net income from such production could in a given year be higher, because of the absence of a sustained market there is no assurance that a profit can be made year after year.

Only producers owning 100 acres or more would be able to profitably diversify into other areas of agriculture such as dairying, grain production or beef cattle production. These producers are by far in the minority. Even farmers with large acreage and diversified farms have, over the years, relied on tobacco to offset losses in other crops.

Beyond the question of returns to the producer, there is the question of labor involved in the production of tobacco. Tobacco is agriculture's most labor intensive crop. Kentucky's tobacco production furnishes employment equivalent to about 39,000 full-time jobs per year-about one-third of which is hired labor and about two-thirds family labor.. Without tobacco, all of these people would have to find alternative employment. And, in many cases, individuals who work in tobacco are marginal employees-persons who, but for the jobs in tobacco, might be on welfare.

The economy of entire communities revolves around tobacco and has done so for 200 years. Bankers are willing to lend money based on a tobacco crop because of its stability. Merchants are willing to extend credit. Businesses are established to supply the needs of the tobacco grower; warehouses are built to sell his product. Redryers, processors and manufacturers of tobacco products have established facilities throughout the Commonwealth which would not be here if it weren't for tobacco production.

There are over 200 loose-leaf tobacco warehouses located in 30 market centers throughout the State, representing an investment of roughly $60 million. The State has 26 stemming and redrying facilities for processing tobacco for storage. These facilities employ an estimated 6,000 persons. Facilities for manufacturing cigarettes, pipe tobacco, cigars and chewing tobacco employ 20,000 people and provide $160million in wage and salary income annually.

Both the Commonwealth of Kentucky and individual counties benefit greatly from tobacco in terms of tax dollars. Kentucky collects over $22 million annually in excise taxes from the sale of tobacco products. This is in addition to sales taxes and State and local property taxes collected on the farmland itself, the warehouses, the manufacturing plants and other facilities. Tobacco allotments have been estimated to increase the value of farmland at a rate of roughly $3 per pound of burley tobacco quota.

It has been estimated that the total economic impact of tobacco on Kentucky is about $2.5 billion. And in some way it touches the lives of virtually every Kentuckian.

Although most provisions of S. 3118 died with the end of the past session of Congress, there is no doubt in the minds of many Kentuckians that the question of placing oppressive taxes on tobacco products will be raised again. If it doesn't come in the next session of Congress, it will in the following session.

While such a tax would not wipe out the industry overnight, it would begin very shortly to divert the economic interests of tobacco manufacturing firms into aereas away from tobacco-and some of this has already taken place. Employment in these facilities would be substantially reduced, broadly affecting the economy of the cities where they are located. As this tax reduced the usage of tobacco products, many of these plants could be forced to close their doors entirely-their payrolls and tax revenues lost forever to the Commonwealth.

Purchase of tobacco would decline, forcing many families into financial ruin because other sources of revenue just aren't available. Many could find themselves forced to sell their property or become welfare recipients.

On the one hand, the Federal Government has laced mich emphasis on stabilizing the economy and on jobs creation, particularly in the private sector. On the other hand, there is a growing movement in Washington to do away with an industry which has over the years played a major role in stabilizing the economy of a dozen or more States and provided jobs in 112 million businesses involved in the tobacco trade.

We hope that the economic importance of the tobacco industry, not only to Kentucky, but to the Nation, will not be lost in the debate over the health-related issues involved in smoking. We believe that the ceonomic question is the major one and that the question of usage of tobacco products should be one of personal choice, based on educated weighing of the factors involved-not a decision forced upon the American people by taxation.

Thank you.

Senator FORD. Thank you. Bill. for a very fine statement.

As vice chairman of the Governor's Council on Agriculture, do you have any statewide figures that would lend themselves to what would be lost in Kentucky if the tobacco industry was eliminated or reduced significantly?

Mr. KUEGEL. I believe I had that in the statement.

Senator FORD. I wanted to get that figure in and emphasize it again if you can.

Mr. KUEGEL. Kentucky collects over $22 million annually in excise taxes from the sale of tobacco products.