Title Page
 Table of Contents
 Background of the flue-cured tobacco...
 Industry modifications and firm...
 Producers' opinions of the flue-cured...
 Cost and revenue relationships...

Title: The income implications of acreage control for flue-cured tobacco producers
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00026907/00001
 Material Information
Title: The income implications of acreage control for flue-cured tobacco producers
Alternate Title: Bulletin 643 ; Florida Agricultural Experiment Station
Physical Description: Book
Language: English
Creator: Powell, Levi A. Jr.
Murphree, Clyde E.
Covey, Charles D.
Publisher: University of Florida Agricultural Experiment Station
Place of Publication: Gainesville, Fla.
Publication Date: February, 1962
Copyright Date: 1962
 Record Information
Bibliographic ID: UF00026907
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aen9789 - LTUF
18343387 - OCLC
000929025 - AlephBibNum

Table of Contents
    Title Page
        Page 1
    Table of Contents
        Page 2
        Page 3
        Page 4
    Background of the flue-cured tobacco industry
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
    Industry modifications and firm adjustments under the tobacco control program
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
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        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
    Producers' opinions of the flue-cured tobacco acreage control and price support program
        Page 39
        Page 40
        Page 41
        Page 42
    Cost and revenue relationships under the tobacco control program
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
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Full Text




Bulletin 643 j. R. BECKENBACH, Director February 1962

INTRODUCTION ..... ..3............ .. ....... .......... .. 3
Purpose ........- ---- --- --...... .... ............ .......---- -.......---- -.........-------............-- 3
Scope and Procedure ........------................. .......... ....... ................---- 3
BACKGROUND OF THE FLUE-CURED TOBACCO INDUSTRY ................................--------- 5
An Element of Agriculture .-......-- ................ ....... ...-......---- --............. 5
Inception and Developm ent .............................. ............ .......---- ............. 7
Prelude to the Control Idea ..........................................------------ 7
Legislative Enablement to Supply Restriction .................................... 11
TOBACCO CONTROL PROGRAM ............................................ ....... ........ 17
Modifying Features of the Control Program ......................-............... 17
Allotm ent Size Adjustm ents ....................-..... .... .........-- .............. 19
New Grower Allotments .....................---.....--- ..... .......... ----........ ... 20
Reserve for Relationship Adjustments ................... ----............ ...... 22
"Penalty" Tobacco ................................... .. .. ............................. 23
Counteracting Influence of Economic Forces ...................................... 25
Rentals and Purchases of Allotments ......................--..--......-- ..... 25
Allotment Splits and Combinations ................... .......... ....---........ 28
Number and Size of Farms ....---...............-----.................. ..------... 28
N onland Inputs ..................................-.......... ..... .......---....--- ...--- 32
Entrepreneurial Capacity or Managerial Ability ............................... 32
Age of Operator .................--- ...-..............---.........---........ ......... ...... 34
Gross Adaptions in the Income-Resource Complex ............................... 34
CONTROL AND PRICE SUPPORT PROGRAM -....-...........................-- ..- ... 39
Rules of the G am e ...................... ...... ..... ........... ... .... ... ......... .... 39
Achievem ent of Ends ............. ............... --....... .......................-- . -----41
Selected Economic and Technical Aspects of Tobacco Production ...... 44
Fertilizer .-...................... ..- ........-- ....... ............. ...---.............- ... 44
Curing Fuel ..--..................... ---------- --- ... ......--- ..---- 45
Harvesting Labor ...........--....---..--.......----- ...--- ....- ..-- .. ...... -- 46
Empirical Cost Analysis ..........-......- .............. ...----- ........ ..---- ...... 46
The Estimating Function ................ ...... ... ............... ...--- ...-- 47
Income Possibilities ..... --------.............................----------....--. .--. .... -- --- 49
Net Revenue Estim ates ......------....... .............. ----- ........... .......... --49
Incom e Transfers --............. ............. ... ..... ... .--....--- ....----- ----.. ---...... .... 50
Allotment Returns -----..... --....-.. --....-- ...--....................-- ..-- --- .-- 52
A Note on Efficiency .........................-----. -....... ................. --.... -- -------54
The Distribution Problem ........................ --.. ........ .......... ..- ... .-- ..---. ..- 55
Proportional Allotments and Constant Yields .....................-........... 56
Proportional Allotments and Varying Yields ........-........................ 67
Empirical Estimates of Changes in Benefits ................................. 72
SUM MARY ............----- -..................--...... .. ...... .... ..... ..-....--- 75
APPENDIX I-THE POPULATION AND THE SAMPLE ............-.....- ................ 77
APPENDIX II- EMPIRICAL COST DATA ..................-............. .....---. -----. ..-- 79
ON PRODUCER DEMAND CURVES ....................--- ....--- ........---- .....---....... 81
Yield Changes and Price Flexibilities .......--........- ...-.........--- .....-- ... 84

Clyde E. Murphree is an associate agricultural economist with the
Florida Agricultural Experiment Stations. Levi A. Powell, Sr., is a former
FAES assistant agricultural economist and Charles D. Covey is a former
FAES interim assistant agricultural economist.



The economic welfare of agriculture has been a matter of
growing public concern over the last several decades. Wide-
spread public interest has resulted in awareness of the farm
problem even by those well removed from any economic associ-
ation with agriculture. The plight of agriculture does not per-
sist because of a lack of public attention.
Although numerous definitions and interpretations of the
farm problem are in circulation, at bottom, most identify or as-
sociate it with "unfair" or socially unacceptable farm income.
Even the arguments of confirmed agricultural fundamentalists
and rationalizations of those with extremely sensitive social con-
sciences merge into this common point of agreement. Proposed
solutions to the agricultural income problem, however, enjoy
less unanimity.
Direct acreage control for certain crops is one of the many
policy proposals to improve farm income with sufficient support
to be transformed into an action program through the political
process. Despite the fact that this policy tool has been employed
to some extent for nearly 3 decades, its usefulness remains high-
ly controversial.
This study will be concerned solely with appraising the pro-
ficiency of acreage controls-in conjunction with existing price
supports-as means of effecting income transfers to farmers par-
ticipating in such programs-to the exclusion of social costs,
restrictions of personal freedom and other such side relations
and effects. Net income realized by the group and by individual
members of the group will be regarded as the criterion of achive-
Because time and resources imposed a very real limitation,
it became necessary to restrict the scope of the study to opera-

1Subject to the notion of an income transfer defined on page 50.

4 Florida Agricultural Experiment Stations

tion of an acreage control program in relation to a single com-
modity. Continuity of the flue-cured tobacco control program
and accessibility of a specialized flue-cured production area
prompted the choice of the tobacco control program as the most
suitable for empirical analysis.
Since available aggregative data relating to a multi-producer
industry may be consistent with numerous sets of possibilities
internal to the industry, such data are not sufficient for a con-
clusive assessment of economic status at the firm level. Seem-
ingly, a more fruitful approach would include a close-up examina-
tion of the actions of firms comprising the industry. Obviously,
however, an industry-wide study of tobacco producers would be
completely outside the realm of feasibility. Consequently, the
study was further limited to the sampling approach. A well
delineated flue-cured producing area of North Florida provided
a convenient population of producers from which the sample
could be drawn.
In January and February, 1958, 176 tobacco producers were
personally interviewed to obtain the primary data utilized in this
study. These data related not only to cost and income condi-
tions confronting individual producers, but also to their attitudes
toward the function and performance of the acreage control pro-
gram.2 Secondary data, that will be documented as the need
arises, were taken from customary sources.
The study pursued the following lines of attack:
(1) A review of the background of the flue-cured tobacco
industry to trace the acceptance of the control idea
and legislative enablement to supply restriction;
(2) An exploration of industry conditions to assay pos-
sible internal modifications traceable to provisions of
the tobacco control program;
(3) A comparison over time of the agricultural economic
status of a tobacco and an adjacent nontobacco farm-
ing area to detect possible income and resource
changes attributable to the flue-cured tobacco pro-
(4) An examination of the beliefs and rationalization of
program participants to ascertain if their reactions
2 For a copy of the questionnaire and description of sample see Charles
Dean Covey, "Some Considerations Affecting Producer Equity in the Flor-
ida Flue-Cured Tobacco Program" (unpublished master's thesis, University
of Florida, June 1959).

Acreage Control for Flue-Cured Tobacco Producers 5

implied the realization of income benefits from the
(5) An analysis of the net income possibilities confront-
ing various program participants to determine if
their conclusions were justified, i.e., whether income
benefits were or were not realized;
(6) A look at industry income and the distribution of
income among elements of the industry to gain some
insight into equity implications of the program.


The longevity of tobacco as an important commercial crop
dates from the beginning of American agriculture. This native
American crop figured prominently in colonial trade and con-
tinues as a significant item in the agricultural economy of the
nation. Although the quantity of cropland devoted to tobacco
production is quite small, this enterprise is the source of almost
9 percent of cash income from crops (Table 1). As an agricul-
tural export, tobacco registers far more impressively. In 1955,
the value of exported unmanufactured tobacco exceeded $356
million. Only wheat and cotton accounted for larger shares of
the export market.3


Farms Reporting Percent Cash Income
Tobacco Percent of from Tobacco is of:
Year Cropland Cash Total
Percent of Harvested Income Cash
Number all Farms in Tobacco from Farm
__ Crops* Income*
1919 ........ 448,572 7.0 0.5 6.5 3.4
1924 ........ 396,352 6.2 .4 4.8 2.5
1929 ........ 432,975 6.9 .5 5.4 2.5
1934 ....... 422,166 6.2 .4 7.9 3.7
1939 ........ 498,348 8.2 .6 8.2 3.5
1944 ........ 490,585 8.4 .5 7.6 3.4
1949 ....... 531,922 9.9 .4 7.2 3.2
1954 ........ 513,346 10.7 .5 8.6 3.8

Does not include governmental payments. Estimates of the U. S. Department of Agri-
Source: U. S. Bureau of the Census, United States Census of Agricul-
ture: 1954, Special Reports, Vol. III, Part 9, p. 9.
U. S. Bureau of the Census, United States Census of Agriculture: 1954,
Special Reports, Vol. III, Part 9, p. 14.

6 Florida Agricultural Experiment Stations

In accompaniment to growth and changes in demand, modern
tobacco production encompasses several important classes and
types of the product. However, because of the large amount of
flue-cured tobacco used in the manufacture of cigarettes, this
class now accounts for about three-fifths of the tobacco produced
in the United States.4
Since climate and soil strongly influence the properties of the
leaf, the production of different classes of tobacco tends to be
highly localized. Except for a small quantity grown in Alabama,
all flue-cured tobacco grown in the United States is produced in
Virginia, North Carolina, South Carolina, Georgia and Florida.
Production of distinct types of flue-cured tobacco is further re-
stricted to certain locations within this geographic area. The
production of Type 11, Old Belt flue-cured, is confined largely to
the Piedmont sections of Virginia and North Carolina; Type 12,
eastern North Carolina flue-cured, to the coastal sections of North
Carolina; Type 13, South Carolina flue-cured, to the coastal sec-
tions of South Carolina and the southeastern counties of North
Carolina; and Type 14, Georgia and Florida flue-cured to southern
Georgia and northern Florida.5
In 1954, flue-cured tobacco was grown on over two-fifths of
the farms reporting tobacco as a crop.6 In contrast to the large
number of farms reporting the production of flue-cured tobacco,
the acreage grown per farm was small. A preponderance of
farms reported harvesting less than 10 acres.7 Nonetheless, be-
cause of high cash value per acre, tobacco is the major income
producing enterprise on most farms.
The Georgia-Florida flue-cured tobacco producing area is the
latest major addition to the tobacco industry. The exodus of Sea
Island cotton from this vicinity, occasioned by the onslaught of
the boll weevil, created an agricultural vacuum that was par-
tially vitiated by the introduction of flue-cured tobacco. Total
flue-cured acreage in this locality rose from about 11,000 acres
in 1919 to more than 125,000 acres in 1954. In the latter year,
farms reporting flue-cured tobacco production in Florida alone
approached 6,000 in number.8
SIbid, p. 9.
USDA, AMS, Annual Report on Tobacco Statistics: 1957, Statistical
Bulletin 222, p. 5.
" U. S. Bureau of the Census, United States Census of Agriculture: 1954,
Special Reports, Vol. III, Part 9, p. 9.
7 Ibid.
8 Ibid., p. 11.

Acreage Control for Flue-Cured Tobacco Producers 7

Although Florida is only a minor element in the national flue-
cured tobacco picture, acreage and output for the state have
risen markedly during the last 30 years, particularly since the
advent of the tobacco control program in the early thirties
(Table 2).


Percent of National Percent of National
Year Production Acreage

1923-25 ....................................... 0.31 0.30
1926-30 .................. ..........- ......... 0.60 0.58
1931-35 .......... ....... ................ 0.59 0.60
1936-40 ........................ ... .......... 1.63 1.74
1941-45 ...................................... [ 1.45 1.71
1946-50 .......... ............... ... ..- ..... i 1.59 1.88
1951-55 ........... ...................... ......1 1.93 2.07
1956-57 -.....-.......................... ..... 1.54 1.89

Source: Tobaccos of the United States, USDA, BAE, July 1948.
Source: Annual Report on Tobacco Statistics, USDA, Production and
Marketing Administration, 1948.
Source: Annual Report on Tobacco Statistics, USDA, AMS, 1954, Sta-
tistical Bulletin 157.
Source: Annual Report on Tobacco Statistics, USDA, AMS, 1958, Sta-
tistical Bulletin 257.

Under the control program, average acreage allotted Florida
producers since 1940 has been considerably smaller than for
other areas. However, fluctuation in the average allotted acre-
age in Florida from year to year closely parallels the changing
allotment pattern in other producing areas (Figure 1).

Prelude to the Control Idea.-Movements dedicated to cham-
pioning the cause of agriculture predate the depression of the
thirties by a considerable measure. Prior to World War I, to-
bacco producer organizations were directing their efforts vig-
orously toward "trust" breaking and obtaining equitable ware-
house charges. More equitable adjustments in warehouse
charges in Virginia and North Carolina, prior to the turn of the
century, were manifestations of early achievements of the
Grange and Farmers' Alliance in the field of cooperative ware-
housing. The long standing struggle by farm organizations
against the American Tobacco Company, also known as the


S_ / \North Carolina

5 United States

Florida a


1 Z.

1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957
Figure 1.-Average size flue-cured tobacco allotment, Florida, Georgia, North Carolina, and United States, 1940-57.

Acreage Control for Flue-Cured Tobacco Producers 9

"Trust", ended with the dissolution of this company under pro-
visions of the SherMw4 Anti-Trust Act in 1911.9
Agitation in the flue-cured tobacco areas of Virginia and
North Carolina following World War I enhanced the attractive-
ness of the increasingly popular "cooperative" idea. Disas-
trously low prices for the 1920 tobacco crop touched off a clam-
orous support for some form of cooperative marketing program.
Producer dissatisfaction with marketing conditions resulted in
formation of the Tri-State Tobacco Growers Cooperative Associ-
ation in 1922. This association represented the most important
effort to market cooperatively ever attempted in the flue-cured
tobacco area. After a 5-year running battle with auction ware-
house interests and tobacco manufacturers, the association was
dissolved in 1927.
Although agriculture in general was depressed during the
1920's, a more severe disparity existed between prices paid and
prices received by farmers for major export products including
tobacco, cotton, wheat and rice.10 While at the same time pro-
viding ammunition for the cooperative movement, conditions of
the times, particularly in relation to agricultural exports, were
extremely compatible to the emergence of more venturesome
ideas. Some leaders were bold enough to suggest tampering with
price and strongly advocated the adoption of a 2-price system,
1 price for the domestic and 1 for the foreign market. Political
approval of this plan was sought through the so-called McNary-
Haugen bills; however, these bills were never enacted into law.
Passage of the Agricultural Marketing Act of 1929 revived
some interest in cooperative marketing of tobacco in the flue-
cured area.11 At the time the bill was passed, only 2 cooperative
organizations were marketing tobacco, but neither of these was
in the flue-cured belt.12
In brief, the Agricultural Marketing Act of 1929 constituted
an attempt to solve the farm problem through governmental
sponsorship of farmer controlled marketing associations. Under
provisions of the Act, the Federal Farm Board was created to
promote effective merchandising of agricultural products by
"N. M. Tilley, The Bright-Tobacco Industry, 1860-1929, (Chapel Hill:
University of North Carolina Press, 1948), Chapter 10.
"10 Mordecai Ezekiel and Louis H. Bean, Economic Basis for the Agricul-
tural Act, USDA, 1933, p. 7.
"11 First Annual Report of the Federal Farm Board, December 1930, pp.
21-22; Joseph G. Knapp, A Cooperative Marketing Manual, North Carolina
Agricultural Experiment Station, Bulletin 276, December 1930.
Ibid., p. 21.

10 Florida Agricultural Experiment Stations

making loans to cooperatives and to establish stabilization corpo-
rations to handle year-to-year surpluses. The Board was pro-
vided with a revolving fund of $500 million to finance its activi-
ties. Operations of the Farm Board proved to be totally inade-
quate to cope with the conditions which prevailed following the
1929 panic."
While activities of the Federal Farm Board did encourage
formation of a number of cooperative marketing organizations
in the flue-cured tobacco area, these organizations were of rela-
tively minor importance and controlled only a small portion of
the crop. In 1929 cooperative marketing organizations handled
only 2 percent of the total tobacco production. In 1930 the
amount handled by cooperatives increased to 4 percent and in
1931 to 6 percent.14 No breakdown by type of tobacco is given
in the annual reports of the Federal Farm Board, but in all like-
lihood, the volume of flue-cured tobacco was insignificant.
Difficulties encountered in organizing tobacco marketing co-
operatives is expressed in the Boards' reports:
Because of conditions surrounding the marketing of tobacco, co-
operative marketing of this commodity has made small permanent
progress and the future appears doubtful.16
The growers market for tobacco is confined to a relatively small
number of manufacturers, and, consequently, the outlets for tobacco
open to cooperative associations are limited. This condition greatly
increases the difficulties of cooperative marketing organizations."
Efforts to market flue-cured tobacco through cooperative or-
ganizations repeatedly met with opposition from handlers and
manufacturers. The South Carolina Tobacco Growers Market-
ing Association received 17 million pounds of the 1930 flue-cured
crop. Because of a buyer boycott, the Association had 75 per-
cent of this 17 million pounds on hand at the beginning of the
1931 crop season.17
The tobacco price situation graphically illustrates the futility
of the Farm Board's efforts to bolster prices. The rapid decline
in price of flue-cured tobacco during the latter 1920's culminated
in an average price of 8.4 cents per pound in 1931. The 1931

Murray R. Benedict, Farm Policies of the United States, 1790-1950
(New York: Twentieth Century Fund, 1953), pp. 181-199.
Third Annual Report of the Federal Farm Board, June 1932, p. 32.
"1 Second Annual Report of the Federal Farm Board, December 1931,
p. 17.
"1 Federal Farm Board, Cooperative Marketing Makes Steady Growth,
Bulletin 8, April 1932, p. 55.
"17 Second Annual Report of the Federal Farm Board, December 1931,
p. 17.

Acreage Control for Flue-Cured Tobacco Producers 11

price accompanied a production of 669.5 million pounds; whereas,
a price of 20.5 cents per pound was realized for the 1927 produc-
tion of 718.8 million pounds.18 In 1932, the purchasing power
index of flue-cured tobacco was only 51.1 relative to the 1919-29
base period.19
Despite the growing restlessness in agriculture prior to the
thirties, none of the remedial economic proposals advocated a
serious departure from the "classical" point of view. The pow-
erful influence of laissez-faireism was ill-disguised in most sug-
gestions. The prevailing impression seemed to be that competi-
tive agriculture functioned in a hostile and imperfect economic
environment, i.e., difficulties suffered by agriculture were im-
posed by external conditions. If monopolies could be destroyed,
malpractices in the marketing system eliminated and other re-
lated wrongs righted, all would be well.
Although sentiment favored the notion that agriculture was
entitled to a "fair" share of the national income, none were
ready to admit openly that improvement in agricultural income
might require public interference with affairs internal to agri-
culture and agricultural firms. Except for mild restrictions on
individual action imposed by membership requirements of farm
organizations and an abortive attempt to restrict voluntarily
the supply of tobacco in the "Black Patch" area of Kentucky and
Tennessee following the turn of the century,20 the possibility of
"controls" apparently was not recognized (or the idea relished)
by elements of the tobacco industry. Acceptance of supply con-
trol as the inevitable solution came only after the crushing im-
pact of the depression had been suffered for 2 years.
Legislative Enablement to Supply Restriction.-Three major
agricultural acts have determined the direction of governmental
efforts to improve agricultural prices and income through pro-
duction restrictions. The Agricultural Adjustment Act of 1933
was an emergency measure to improve prices of agricultural
products, and was the first Congressional act in which mention
was made of the now well-known parity concept. Methods used
to obtain the objectives of the 1933 act were declared unconstitu-

18 Tobaccos of the United States, USDA, BAE, July 1948.
Computed by dividing the 1932 index of total farm value of the type
by the index of prices paid during the base period 1919-29. Harold B. Rowe,
Tobacco Under the AAA (Washington, D. C.: The Brookings Institution,
1935), p. 55.
"20 Jerome E. Brooks, The Mighty Leaf (Boston: Little, Brown and Com-
pany, 1952), p. 256.

12 Florida Agricultural Experiment Stations

tional in 1936; and a second major act, the Soil Conservation and
Domestic Allotment Act of 1936, was hurriedly passed to over-
come Supreme Court objections. This act attempted to do es-
sentially what the 1933 act was designed to do, but adopted the
soil conservation approach as a means of reducing production.
The 1936 act was hastily conceived and did not meet the needs of
agriculture.21 Subsequent to the passage of the 1936 act, Con-
gress began making long-range plans for a more permanent
type of agricultural program. This planning resulted in the pass-
age of the Agricultural Adjustment Act of 1938 which has re-
mained the fundamental legislation for agricultural income im-
provement since that time.
The Agricultural Adjustment Act of 1933 was the first at-
tempt by Congress to improve the farm price situation by re-
stricting agricultural output. The act, in addition to defining
"fair exchange value" (now known as parity), provided several
methods for achieving an equitable purchasing power for agri-
cultural commodities. As provided in the 1933 act, the Agricul-
tural Adjustment Administration, commonly known as the AAA,
was established in the Department of Agriculture. In carrying
out the objectives of the act, the Secretary of Agriculture was
given rather wide latitude in the use of several methods included
therein. The Secretary was empowered to enter into marketing
agreements with processors, associations of producers, and others
engaged in the handling of agricultural commodities. He could
require licensing on the part of processors and handlers of agri-
cultural products and, more important, could enter into agree-
ments with producers to reduce acreage, reduce production, or
As set forth in Section 2 of the 1933 Agricultural Adjustment
Act, the policy of Congress was:

(1) To establish and maintain such balance between the production
and consumption of agricultural commodities, and such marketing
conditions therefore, as will re-establish prices to farmers at a level
that will give agricultural commodities a purchasing power with re-
spect to articles that farmers buy, equivalent to the purchasing power
of agricultural commodities in the base period... ;
(2) To approach such equality of purchasing power by gradual
correction of the present inequalities therein at as rapid a rate as
is deemed feasible in view of the current consumptive demand in do-
mestic and foreign markets;
(3) To protect the consumer's interest by readjusting farm produc-
tion at such level as will not increase the percentage of the con-
sumer's retail expenditures for agricultural commodities, or products
1 Benedict, op. cit., p. 352.

Acreage Control for Flue-Cured Tobacco Producers 13

derived therefrom, which is returned to the farmer, above the per-
centage which was returned to the farmer in the prewar period, Au-
gust 1909-July 1914.22
Within a few months following passage of the Adjustment
Act, it became apparent that a rapid rise in agricultural prices
and income would not be accomplished by the acreage and pro-
duction controls provided in the act. It was felt that the agri-
cultural economy needed an immediate supply of ready cash.
To meet this need, the Commodity Credit Corporation was es-
tablished by executive order in the fall of 1933 to make non-
recourse loans to farmers on commodities already produced.
The new adjustment law did not provide a specific program
for any farm product, but left the determination of specific pro-
grams and policies to the Secretary of Agriculture. A base acre-
age was established for flue-cured tobacco producers and the
farmer was provided with several alternative methods of deter-
mining his acreage and production.23 In order to reduce pro-
duction, cooperating flue-cured tobacco farmers rented 30 per-
cent of their base acreage to the Secretary for $17.50 per acre.
In addition, the cooperating farmer received an adjustment pay-
ment of 121/2 percent of the net sale price of his 1934 tobacco,
provided the payment did not exceed 21 cents per pound. Provi-
sions were made for increased adjustment payments to cooperat-
ing producers who had less than 4 acres. To those growers who
did not produce their allotment because of crop failure, a pay-
ment of 2 cents per pound was made for the difference between
the quantity of tobacco produced and the production allotment.
The Agricultural Adjustment Act of 1933 was not passed in
time to include the 1933 flue-cured tobacco crop. However, the
Agricultural Adjustment Administration did enter into contracts
with buyers to purchase that part of the 1933 crop sold after
September 25, 1933, at an established minimum price. This con-
tract was not signed until the middle of October 1933, well after
the Georgia-Florida flue-cured crop had been sold.24 To offset

"22 U. S. Congress, Agricultural Adjustment and Relief Act of 1933, Public
Law 10, 73rd Cong., 1933, Title I, Sec. 2.
"23 The Contract provided that the grower could choose, as his base acre-
age and production one of the following:
(a) The average of the years 1931, 1932 and 1933.
(b) Eighty-five percent of the average of any 2 years in the period
1931 to 1933, inclusive.
(c) Eighty percent of the year 1933.
(d) Seventy percent of the year 1931 or 1932.
"2" The buyers did not do this willingly and refused to negotiate on a sim-
ilar contract for the 1934 crop.

14 Florida Agricultural Experiment Stations

the disadvantage to those flue-cured producers who had sold their
1933 crop prior to this contract, the 1934 contracts to growers
provided for a "price equalizing payment" of 20 percent of the
net proceeds from the 1933 crop sold prior to closing of the mar-
kets.26 These contracts also provided for a payment of 10 per-
cent of the proceeds from the net sale of the 1933 crop which
was sold between the date the markets opened, September 25,
1933, and the date when it was judged that the price reflected
full benefits of the program.26
The necessary revenue to carry out the rental and benefit
provisions of the act was obtained by a processing tax, proceeds
of which were made available to the Secretary of Agriculture to
carry out the objectives of the law. In addition to making rental
and benefit payments to farmers, the Secretary was permitted
also to use these funds to expand markets and remove surplus
agricultural commodities.
Soon it became apparent that noncooperating producers would
benefit equally as well in any general increase in the price of flue-
cured tobacco as would those who had agreed to reduce acreage.
For this reason the Kerr Tobacco Act was passed in 1934. This
act provided for a tax of 25 to 331/3 percent of the sale price of
tobacco on the 1934 and 1935 crops. The tax was to be assessed
on all tobacco, but cooperating producers would be issued war-
rants which would be acceptable in payment of the tax. Non-
cooperators would be required to pay the tax in cash, thus re-
moving any advantage they might gain by not participating in
the acreage reduction program. For the 1934 and 1935 crops
this tax was mandatory. In subsequent years, assessment of
this tax for a particular year was to be determined by a vote of
the owners of two-thirds of the flue-cured tobacco acreage.
The Kerr Tobacco Act and sections of the Agricultural Ad-
justment Act of 1933 were declared unconstitutional by the Su-
preme Court in the Hoosac Mills case on January 6, 1936. The
power to enter into acreage reduction agreements with farmers
and the power to levy processing taxes were the 2 sections of
the Agricultural Adjustment Act of 1933 which were declared
With this blow dealt to the administration's plans for agri-

"25 The North Carolina flue-cured markets were closed by order of the
Governor on September 1, 1933. The Governor of South Carolina, following
the lead of North Carolina, closed all markets in South Carolina at the same
Rowe, op. cit., p. 148.

Acreage Control for Flue-Cured Tobacco Producers 15

cultural recovery, legislators and farmers turned to different
objectives and methods to restore prosperity to agriculture.
Within a few weeks following the Supreme Court's decision, leg-
islators passed the Soil Conservation and Domestic Allotment
Act of 1936 which was designed to avoid the objections raised
by the Court.
Basic aims of the 1936 act were much the same as those in
the 1933 act. However, different methods were used to circum-
vent objections of the Supreme Court. The new act emphasized
soil conservation and contained provisions for direct payments
to farmers for carrying out certain soil-conserving practices.
Crops were divided into soil-conserving and soil-depleting catego-
ries. Tobacco, wheat, cotton and sugar beets were among the
crops classified in the latter category. Farmers were paid for
reducing the number of acres of soil-depleting crops. Funds for
these payments were no longer collected by a processing tax, but
instead were appropriated by Congress.
The Agricultural Adjustment Act of 1938 was comprehensive
in scope and dealt with a number of other phases of the agricul-
tural program in addition to production controls. The act re-
tained the acreage allotment features of the Soil Conservation
and Domestic Allotment Act. The definition of parity appearing
in the 1936 act was also included relatively intact in the act of
1938, with the exception that net income of individuals on farms
was defined as income derived from farming operations only.
In the computation of the parity ratio, this new provision ex-
cluded many persons who lived on farms but derived their in-
come from off-farm sources. For the purpose of determining
yearly marketing quotas, the 1938 act defined tobacco marketing,
marketing year, normal supply, normal year's domestic consump-
tion, normal year's exports and the reserve supply level. The
act authorized parity payments to producers of agricultural com-
modities equal to the difference between actual and parity prices.
Enforcement of farm marketing quotas was provided by pay-
ment of a penalty on production in excess of the allotment quota
of the higher of either (a) 50 percent of the market price or (b)
3 cents per pound.27 In 1939 Congress redefined marketing
quotas to that amount of the product which was produced on

"27 The penalty was changed to 10 cents per pound in 1939. In 1946 Con-
gress again changed the penalty to 40 percent of the average market price
for the previous year. For flue-cured tobacco this became effective on May
1, 1947. As of January 1, 1957, the penalty stood at 75 percent of the aver-
age marketing price for the preceding year.

16 Florida Agricultural Experiment Stations

the acreage allotment. Since then, except for 1939 when pro-
ducers did not approve tobacco marketing quotas, tobacco farm-
ers in effect have had an acreage control program rather than
a production control program.
Operation of the acreage control program at present is ba-
sically the same as it has been since 1938. Congress has, from
time to time, made minor changes in the law, most of which
have had to do with varying the level of support prices. Other
changes have been made in the base period for flue-cured tobacco,
in. the penalty rate for excess production and in the limits within
which the Secretary was permitted to vary marketing quotas.
In 1948 Congress revised the method of computing parity price
to include the influence of the last 10 years and at the same time
provided for a transitional parity price which would facilitate the
change from "old parity" to "new parity." A year later in the
Agricultural Act of 1949, Congress provided for the inclusion of
wages paid hired farm labor in the computation of the parity
In 1956 Congress passed the Agricultural Act of 1956, part
of which is referred to as the Soil Bank Act. This act was con-
ceived to alleviate the problem of accumulating supplies of sup-
ported commodities. Activities authorized by the Soil Bank Act
were to be supplementary to acreage control programs author-
ized by the Agricultural Adjustment Act of 1938. Together
these 2 programs were intended to constitute an over-all plan to
prevent excessive quantities of agricultural products from bur-
dening domestic and foreign markets.
The act provided for 2 types of payments to farmers, 1 re-
ferred to as Acreage Reserve payments and the other as Con-
servation Reserve payments. Acreage Reserve payments were
based on yearly contracts with farmers to remove their allot-
ments from the production of controlled crops. Conservation
Reserve payments were based on contracts with farmers for
removing other cropland from production. Although basic leg-
islation authorized a contract for 15 years, program regulations
limited the maximum to 11 years. Under the Conservation Re-
serve plan, farmers were to receive an annual payment for com-
plying with terms of the agreement, 1 of which was to establish
and maintain a vegetative cover on the land removed from crop
production. The Acreage Reserve Alternative was open to farm-
ers during 1956, 1957 and 1958 crop years only.

28 Glenn L. Johnson, Burley Tobacco Control Programs, Kentucky Agri-
cultural Experiment Station Bulletin 580, February 1952, p. 103.

Acreage Control for Flue-Cured Tobacco Producers 17


Without specifically describing what the structure of the
tobacco industry and the economic status of tobacco producers
would be in the absence of controls, critics of the control pro-
gram commonly claim industry divergences from the free-enter-
prise model as sufficient justification for opposition to the pro-
gram. Sideline proponents, on the other hand, as readily avow
the advantageousness of these "control" induced features in de-
fense of the program. However, beliefs, philosophies and ques-
tionable assumptions, rather than realistic circumstances, are
frequently relied upon to distinguish between the relative desir-
ability of what "is" and what "might be" in store for the tobacco
industry. Actually, the assumed inhibitive influence of the con-
trol program may be at considerable variance with reality.

At the outset of the tobacco program, the principle of "right
by precedent" was followed in dispensing program privileges to
tobacco producers (see page 13). In recognition of the possi-
bility of producer dissatisfaction, the program periodically al-
lowed them the option of endorsement or disapproval. With the
exception of 1939, tobacco farmers have approved marketing
quotas every year since 1935.29 Following 1939, marketing quo-
tas, when in effect, have always been converted into acreage al-
lotments based on the average production per acre for particular
flue-cured producing states over the immediately preceding 5
years.s0 From tobacco producers' point of view, tobacco market-
ing controls have really amounted to acreage controls rather
than production or poundage quotas.
Subsequent to 1939, changes in the aggregate tobacco acre-
age in Florida and throughout the flue-cured producing area can
be largely accounted for by decisions on the part of the Secretary
of Agriculture to increase or decrease output. Administratively,

"F For crop years 1938, 1939 and 1940 voting was on a yearly basis. For
crop years 1941 through 1958 voting has been for 3-year periods. In 1935
producers voted overwhelmingly to continue the tobacco production adjust-
ment program under the Agricultural Adjustment Act of 1933. Contracts
made on the basis of this vote were terminated by the Hoosac Mills decision
of the Supreme Court on January 6, 1936.
"30 United States Department of Agriculture, Commodity Stabilization
Service, Price Division, Acreage Allotment and Marketing Quota Summary,
September 1955, p. 26.

18 Florida Agricultural Experiment Stations

changes in tobacco allotment sizes are accomplished by the ap-
plication of a common percentage adjustment factor to all allot-
Under provisions of the tobacco program, the variability of
acreage allocations to producers has been appreciable over time.
The changing allotment picture for the Florida tobacco industry
is partially summarized in Tables 3 and 4.

BY ALLOTMENT SIZE, FLORIDA, 1947, 1952, 1957.

Size of Allotment 1947 1952 1957

Acres Number Percent Number Percent Number 1 Percent

than 1.09 .......... 196 2.8 854 11.7 1543 22.6
1.10 2.09.......... 590 8.4 1928 26.6 2886 42.3
2.10 3.09......... 3179 45.0 1779 24.6 1115 16.4
3.10 4.09 ....... 1188 16.8 1087 15.0 538 7.9
4.10 5.09 .......... 750 10.6 562 7.8 271 4.0
5.10 7.59 .......... 736 10.4 606 8.4 254 3.7
7.60 10.09......... 205 2.9 226 3.1 113 1.7
10.10 15.09 .......... 146 2.1 135 1.9 69 1.0
Over 15.09 .......... 71 1.0 70 0.9 28 0.4

TOTAL ............ 7061 100.0 7247 100.0 6817 100.0

Source: Compiled from the records of the Agricultural Stabilization
and Conservation Committee, State Office, Gainesville, Florida.

ALLOTMENT SIZE, FLORIDA, 1947, 1952, 1957.
Size of
Allotment 1947 1952 1957

Acres Acres Percent Acres IPercent Acres Percent

Less '
than 1.09 117.0 0.5 461.6 2.0 914.81 6.1
1.10 2.09 912.9 3.5 3374.8 14.2 4292.77 28.4
2.10 3.09 7515.4 29.2 4473.9 18.9 2812.34 18.6
3.10 4.09 4113.3 16.0 3928.5 16.6 1880.81 12.4
4.10 5.09 3357.3 13.0 2576.1 10.9 1228.35 8.1
5.10 7.59 4456.1 17.3 3729.7 15.7 1539.76 10.2
7.60 10.09 1771.4 6.9 1924.3 8.1 975.36 6.4
10.10 15.09 1738.4 6.8 1617.7 6.8 844.33 5.6
Over 15.09 1742.4 6.8 1613.9 6.8 618.66 4.2

TOTAL .... 25724.2 100.0 23700.5 100.0 15107.19 100.0

Source: Compiled from the records of the Agricultural Stabilization
and Conservation Committee, State Office, Gainesville, Florida.

Acreage Control for Flue-Cured Tobacco Producers 19

Allotment Size Adjustments.-Year-to-year administrative
adjustments in allotment sizes, 1 of which was an abnormally
large reduction of 27.52 percent, are traced in Table 5. Pro-
vided additional acreage was not obtained from other sources,
an individual's tobacco allotment in 1957 would have been 45.9
percent less than in 1947.81


Year Factor* Percentage Increase Hypothetical Allotments
or Decrease (Acres)
1947 ........... 10.00 5.00
1948 ......-.... 0.7248 -27.52 7.25 3.62
1949 ..-......... 1.0508 5.08 7.62 3.81
1950 .......-- .... 1.0030 0.30 7.64 3.82
1951 .....-..... 1.1474 14.74 8.77 4.38
1952 .......-.... 0.9997 0.03 8.76 4.38
1953 .-...-..... 0.9200 8.00 8.06 4.03
1954 ............ 1.0017 0.17 8.08 4.04
1955 ........... 0.9499 5.01 7.67 3.84
1956 ..........- 0.8811 -11.89 6.76 3.38
1957 ..--....-.... 0.8001 -19.99 5.41 2.70

The annual adjustment constant common to all existing allotments.
Source: Records of the Agricultural Stabilization and Conservation
Committee, State Office, Gainesville, Florida.

Upon announcing a 20 percent reduction in flue-cured acre-
age for 1957, Secretary of Agriculture Benson partially spelled
out why the action was necessary in the following comment:
I regret the need for reducing flue-cured tobacco acreage allotments
in 1957 for the third successive year. . Under the law, however,
I have no alternative. ...
The simple fact is that our farmers' own efficiency in recent years
has boosted yields per acre to a record high, which results in a small-
er acreage allotment. . Flue-cured tobacco yields reachedAo \-
time high in 1956, now estimated at 1,573 pounds per acre. Nat-
urally, with such high yields per acre, fewer acres are needed to
produce a given amount of tobacco.32
Although less readily apparent than required changes in the
size of existing allotments, other forces serve to modify the in-
ternal structure of the tobacco industry. Some of these forces
originate in additional provisions of the tobacco program, where-
as some are products of the economic and social environment.
Besides the provision for adjustment of existing allotments,

"1 The size of allotments in 1958 and 1959 remained the same as in 1957.
"3 USDA, Florida Agricultural Stabilization and Conservation Commit-
tee, 1957, Tobacco Letter No. 3, November 28, 1956.

20 Florida Agricultural Experiment Stations

the program also provides for creation of new grower allotments,
establishment of an acreage reserve for relationship adjustments
and, for some time, permitted grower acquisition of allotments
through production of penalty tobacco.33
New Grower Allotments.-Section 313 (c) of the Agricultural
Adjustment Act of 1938, as amended, directs that the Secretary
shall not use more than 5 percent of the national quota to allot
to new growers and to increase allotments on small farms. In
recent years, the amount allotted new growers has been less
than 1 percent (Table 6).


National Reserve Set Aside Reserve as
Year Allotment** for New Growers Percentage of
National Allotment
S(Thousand Acres) (Acres) (Percent)
1951 ...... 1,122.3 5,614 0.50
1952 ...... 1,130.6 5,645 0.50
1953 ...... 1,048.2 5,243 0.50
1954 ...... 1,057.0 5,283 0.50
1955 ...... 1,011.1 5,056 0.50
1956 ...... 889.5 2,224 0.25
1957 ...... 712.4 1,781 0.25

A national acreage allotment is not established for tobacco. The national quota is pro-
claimed in pounds of tobacco and pounds are allocated to each state according to law. Each
state quota is then converted to acres.
** Sum of acreages allotted to states.
Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

Prior to 1956, regulations of the Commodity Stabilization
Service limited new grower allotments to the smaller of (a)
15 percent of the cropland in the farm or (b) 75 percent of the
final allotment established for similar farms.34 In 1956 these
regulations were changed to provide that a new grower allot-
ment shall not exceed 50 percent of the allotments for the old
tobacco farms which are similar to the new farm.36 During
1957, the Florida Agricultural Stabilization and Conservation
Committee adopted a policy of limiting new grower allotments

"88 The feature of the program allowing growers to acquire allotted acre-
age by producing penalty tobacco was discontinued after 1957.
"3 USDA, Florida Agricultural Stabilization and Conservation Committee,
1955 Tobacco Letter No. 2, September 28, 1954.
USDA, Commodity Stabilization Service, Tobacco Marketing Quota
Regulations, 1957-58 Marketing Year, Part 725, approved September 5,

Acreage Control for Flue-Cured Tobacco Producers 21

to a maximum of 1 acre for the 1957 crop.36 The following an-
nouncement was made in connection with this policy:

The State Committee, acting under authority delegated in section
725.827 of the regulations, limited the recommended allotment for
any eligible new farm for 1957 to a maximum of 1 acre. In view of
the fact that approximately 63 percent of the old tobacco farms in
the State have allotments of less than 2.00 acres (approximately 20
percent with 1.00 acre or less), it was felt that this action was neces-
sary in order to make the relationship between old and new farm al-
lotments somewhat more reasonable and equitable."

Data contained in Table 7 suggest that, in recent years, the
size of new grower allotments approved by the state and local
committees has remained well below the maximums established
by law. Since 1954, the number of new grower allotments as
well as the average size of new grower allotments has declined
considerably (Tables 7 and 8). The small amount of acreage
made available for new growers and the increasing rigidity of
new grower qualifications probably account for the decline in
number of new allotments.88


Average Size of New Grower Allotment
Average Size New Grower as Percentage of
Year Allotment Allotment Average Allotment
Acres Acres Percent

1953 ........... 3.08 1.68 55
1954 ........... 3.20 1.70 53
1955 ........... 3.16 1.42 45
1956 .......... 2.85 1.05 37
1957 ........... 2.22 0.95 43

Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

This limitation was extended to the 1958 crop.
"3 USDA, Florida Agricultural Stabilization and Conservation Commit-
tee, 1957 Tobacco Letter No. 5, Supplement 1, March 15, 1957.
"8 In order to qualify, a new grower must meet the following require-
a. Within the past 5 years he must have had 2 years' experience in
flue-cured tobacco as a sharecropper, tenant or farm operator
(experience as a wage-hand or day laborer is ineligible).
b. He must live on and obtain 50 percent or more of his livelihood
from the applicable farm.
c. He cannot have a tobacco allotment on another farm.
d. The farm must be operated by the owner.
e. No tobacco has been harvested on the farm for 5 years.
In addition, most county committees in the past have been reluctant to
approve a new grower allotment on a farm without a tobacco barn.

22 Florida Agricultural Experiment Stations

SIZE, FLORIDA, 1953-57.


Allotment Size |
1953 1954 1955 1956 1957

Acres Number

0 -0.4 .......... --. 1 1 1
0.5 0.9 ................ 8 4 5 13 2
1.0 1.4 .........----......... | 12 12 21 13 19*
1.5 1.9 ....-- .......... 31 19 23 7
2.0 -2.4 ........... 23 49 15 1
2.5 2.9 ............. 11 2 3

TOTAL ..-........... 86 87 68 34 21

All 19 allotments were acre.
Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

Reserve for Relationship Adjustments.-The "Reserve for
Relationship Adjustments" is a specified tobacco acreage, based
on the state allotment the previous year, made available annually
to program administrators for the purpose of reducing inequi-
ties among existing allotment holders. Prior to 1956, the Rela-
tionship Reserve could not exceed one-half of 1 percent of the
total acreage allotted to all tobacco farms in the state. Allow-
able acreage for the Relationship Reserve was revised downward
in 1956 to one-tenth of 1 percent of the total tobacco acreage
allotted to the state.

Reserve for Relationship Reserve
State Relationship as Percentage of
Year Quota Adjustments State Quota
Acres Acres Percent

1951 .............. 23,353 95.50 0.41
1952 ........-...... 23,700 111.10 0.47
1953 ................ 22,000 103.00 0.47
1954 --.........-.... 22,275 104.90 0.47
1955 ................ 21,351 112.00 0.52
1956 .............. 18,847 21.31 0.11
1957 ............ 15,107 18.82 0.12

Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

Acreage Control for Flue-Cured Tobacco Producers 23

Since 1951, the amount of tobacco acreage that each county
committee has had at its disposal has been so small, relative to
the total wants of tobacco producers, that a number of commit-
teemen are of the opinion that the program would function more
smoothly without the Reserve (Tables 9 and 10). Complaints
that committeemen must necessarily entertain probably were
responsible for this personal attitude.

IDA, 1951-57.

County 1951 1952 1953 1954 1955 1956 1957

Alachua ........ 12.5 14.0 13.2 18.3 13.3 2.73 2.40
Baker ............ 1.5 1.9 1.9 2.6 1.9 0.36 0.32
Columbia ..... 10.3 12.0 11.0 15.3 11.1 2.32 2.05
Gilchrist ...... I 2.5 2.9 2.8 3.9 2.9 0.55 0.49
Hamilton ...... 12.4 14.0 13.0 18.0 13.1 2.71 2.39
Lafayette ..-. 6.9 8.5 8.1 11.2 8.2 1.57 1.39
Madison ...... 12.6 14.0 13.3 18.4 13.5 2.77 2.44
Suwannee .... 23.6 27.5 24.0 33.3 25.0 5.20 4.58
Union ........ 2.7 3.4 3.2 4.4 3.3 0.63 0.56

TOTAL ........ 85.0 98.2 90.5 125.4 92.3 18.84 16.62

Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

"Penalty" Tobacco.-Because of a paucity of detailed infor-
mation, the influence of allotted acreage acquired by the produc-
tion of "penalty" tobacco upon the internal structure of the to-
bacco industry cannot be readily ascertained. According to pro-
gram officials, from 1947 through 1957, a grower planting "pen-
alty" tobacco in a particular year was eligible for an allotment
the following year equivalent to about 20 percent of the "penalty"
acreage. Seventy-five percent of the current support price was
exacted as a penalty for the production of flue-cured tobacco on
nonallotted acreage. Because price support was withdrawn and
the penalty was prorated over the total acreage grown by an
allotment holder operating both an allotted and a nonallotted
acreage, usually only new growers sought to acquire an allot-
ment by this procedure. Available data for recent years show
that production of "penalty" tobacco in Florida has been negligi-
ble (Table 11).

24 Florida Agricultural Experiment Stations


Year Acres Number of Farms Acres per Farm

1954 ................. 53.00 32 1.66
1955 .....- ...- ...I 58.48 42 1.39
1956 .............. 19.35 5 3.87

Source: USDA, Florida Agricultural Stabilization and Conservation
Committee, Annual Summaries.

Particularly in recent years, new grower allotments, Relation-
ship Reserve acreage and "penalty" acreage appear to have had
little to do with changing the pattern of the flue-cured tobacco
industry i North Florida. Changes in the geographic concen-
tration of reduction in the 9-county sample area since the mid-
thirties, however, suggest that these provisions may have been
more important during earlier phases of the program. In gen-
eral, counties with less impressive acreages in 1936 and with
currently smaller average sized allotments have shown a rela-
tive increase in total acreage in contrast to major producing
counties that have experienced a relative loss of acreage (Tables
12 and 13). In a study of the Burley Program, Thompson con-
cluded that legislation since 1933 has directly increased or main-

FLORIDA, 1936, 1956.

Percentage of State Harvested Acreage
County _
1936* 1956** (Percent)

Alachua ................. 12.8 12.5 -0.3
Hamilton .--.......... 19.2 13.3 -5.9
Lafayette ...... ... 10.0 7.4 -2.6
Suwannee .............. 28.2 25.3 -2.9
Baker ................ ..... 0.4 1.6 1.2
Columbia ........... 10.7 10.9 0.2
Gilchrist .................. 0.9 2.5 1.6
Madison ................... 7.6 12.8 5.2
Union ........................ 1.0 2.9 1.9

Source: Agricultural Statistics of Florida, Florida State Department of Agriculture,
21st Census, 1036-87.
** Source: Compiled from records of the Agricultural Stabilization and Conservation
Committee, State Office, Gainesville, Florida.

Acreage Control for Flue-Cured Tobacco Producers 25

trained small allotments and indirectly redistributed acreage to
outlying areas where allotments have been predominantly
small."9 He lists 3 aspects of tobacco legislation contributing to
the dispersion and preservation of small allotments: (1) min-
imum allotment sizes, (2) limits on reduction of small allotments,
and (3) extra acreage or poundage quotas for distribution to
small allotment holders. The first 2 of these reasons are not
applicable to flue-cured tobacco. The recent influence of the
third, as discussed previously, apparently has been insignificant.

Average Size Increasing Average Size
Decreasing Allotment County Allotment
County Acres Acres
Alachua ................-... 3.53 Baker .................. 1.58
Hamilton ............... 5.04 Columbia ............ 2.40
Lafayette ---............ 3.11 Gilchrist ............. 1.65
Suwannee ................ 2.92 Madison ................ 2.24
Union ........-- ..... .. .. 2.68

Area Average ....... 3.40 I 2.22

Source: Florida Agricultural Stabilization and Conservation Commit-
tee, 1956 Annual Summary, p. 9.

Despite the industry governing aspects of the flue-cured to-
bacco program, provisions of the program have fallen far short
of completely insulating the industry against the impact of
usual economic forces. Manifestations of the operation of these
forces are reflected by developments within the industry.
Rentals and Purchases of Allotments.-Since the tobacco
program does not enforce an allotment holder-producer identity,
economic conditions have contributed to the development of an
industry composed of fewer tobacco producing firms than allot-
ment holders. This is superimposed upon a situation character-
ized by the existence of fewer allotment holders than allotments.
The latter situation arises because some individuals own more
than 1 farm with an accompanying tobacco allotment. The

"M James F. Thompson, Inter-Farm and Inter-Area Shifts in Burley To-
bacco Acreage Under Government Control Programs, 1933-50, Bulletin 590,
Kentucky Agricultural Experiment Station, June 1952, p. 66.

26 Florida Agricultural Experiment Stations

former exists because individuals who rent tobacco acreage
usually, but not always, own an allotment also.40
Ordinarily the purchase of a tobacco allotment by a person
already possessing an allotment results in a combination of the
2 allotments into a single unit. However, if the purchaser is
not primarily interested in the tobacco allotment or if it is not
adjacent to his existing farm, he may not desire to combine
the 2 farms into a single unit. The allotments may be worked
separately or as 1 unit; but if worked as a single unit without
notification to the Agricultural Stabilization and Conservation
Committee, records of the committee will not reflect what essen-
tially amounts to a combination, but will maintain the identity
of the separate allotments.
Freedom to buy and sell farms with tobacco allotments con-
stitutes an important avenue of entry into the tobacco industry
and allows producers to make use of an effective reorganizational
mechanism. Almost 60 percent of the producers interviewed in
the 1958 survey indicated they had purchased land with an at-
tached tobacco allotment (Table 14). Considering the length
of time that the program has been in operation, this response
was not unusual, because, eventually, virtually all allotment
holders will have acquired their allotments by either purchase
or inheritance. Nonetheless, it is an interesting sidelight to
note that acquisition of tobacco acreage by purchase figured
more prominently among individuals operating larger acreage.
The rental market for tobacco allotments also injects organ-
izational flexibility into the tobacco industry.4 About one-
third of the producers interviewed were renting tobacco acreage
in 1957. All except 4 of the renters reported owning a tobacco
allotment. For those owning allotments the rented acreage
averaged about 2.70 acres, while their own averaged 3.81 acres.

"* This observation assumes that share-renters do not satisfy the defini-
tion of a firm operator, since, customarily, such arrangements do not re-
quire the full relinquishment of decision-making prerogatives by the allot-
ment owner.
"1 In general, the greatest restrairtto renting is associated with the legal
aspects of marketing. If the renter wishes to sell the tobacco in his name,
a marketing card must be acquired. To do this, however, evidence must be
furnished the local ASC Committee that the rented property, including the
tobacco allotment, meets, in principle at least, the definition of a farm pre-
scribed in the marketing order. That is, the tobacco allotment alone can-
not be rented and a card obtained. However, no problem arises if the mar-
keting card remains in the name of the renter (allotment owner). Rules
regarding allotment divisions also act as a deterrent to long range rental

Acreage Control for Flue-Cured Tobacco Producers 27


Number of Harvested Acres

Method / Total
0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10-
I 1.59 3.09 4.59 6.09 7.59 9.09 15.09


By appli-
cation .... 11 14 13 8 12 8 12 78
By pur-
chase .... 8 9 12 14 18 18 15 94
By plant-
ing pen-
alty to-
bacco .... 2 5 2 1 1 1 1 13
By inheri- |
tance .... I 1 1 1 2 2 7
Other ........ 2 1 1 1 1 6
Not ascer-
tained .... 1 1 2

TOTAL .... 24 29 29 24 34 28 32 200*

Some producers acquired tobacco acreage by more than one method. All responses are
included in the table.


Harvested Acres

Responses I I Total
1 0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10-
1.59 3.09 4.59 6.09 7.59 9.09 15.09


Yes ............ 5 12 16 11 18 15 14 91
No .......... 18 15 11 10 8 8 13 83
Not ascer-
tained .... 1" 1a 2

TOTAL .... 23 28 27 21 26 23 28 176

X2 = 14.40, significant at the 95 percent level.

aNot included in chi-square test.

28 Florida Agricultural Experiment Stations

The importance of the practice of renting allotments within
the tobacco industry is further emphasized by the fact that 91
of the interviewed producers maintained they had rented to-
bacco acreage at 1 time or another (Table 15). As with those
who had purchased allotments, large producers were more prone
to rent tobacco acreage than small producers.
Participation in the Soil Bank Program provides further in-
sight into the potential effect of the rental market for tobacco
allotments (Table 16). Since the 1958 survey was intended to
deal only with producers actively engaged in the production of
tobacco, a deliberate effort was made to exclude Soil Bank partici-
pants from the sample.42 If the Soil Bank had not been in op-
eration, more acreage would have been rented than the sample
Allotment Splits and Combinations.-Internal fluidity of the
tobacco industry is partially reflected by the occurrence of com-
binations and divisions of existing tobacco allotments over time.
Although Agricultural Stabilization and Conservation Committee
records may not reflect all actual allotment splits and combina-
tions, evidence regarding this manifestation of factor market
influence is convincing. From 1948 through 1956, both the
number of allotments and the acres involved in combinations
were greater than the number of allotments and acres involved
in allotment splits (Table 17).
The radical change which took place in 1957 presumably re-
sulted from the Soil Bank Program. Apparently, the substan-
tial increase in number of splits and the decrease in combinations
were mostly caused by owners' removing their allotments from
rental arrangements and placing them in the Soil Bank. In
1957, 1,768 or 25.9 percent of the tobacco allotments in Florida
were placed, in whole or in part, in the Soil Bank.
Number and Size of Farms.-Judging from changes in num-
ber and size of farms in the 9-county sample area, the stereotypic
influence of the tobacco control program has probably been over-
emphasized (Tables 18 and 19). The decrease in number of
farms and the increase in average size of farms occurred in con-
junction with an increase in amount of land in farms from 1.2
million acres in 193:I to 1.8 million acres in 1954. Since tobacco
allotments are ti-d to the land, the combination and enlarge-
ment of farms in the area would be consistent with a similar
tendency with I-spect to size of tobacco allotments.

One interviewed producer had placed some tobacco acreage in the Soil


Allotment Size (Acres)*

0- 1.10- 2.10- 3.10- 4.10- 5.10- 6.10- 7.10- 8.10- 9.10- Over
County 1.09 2.09 3.09 3.09 5.09 6.09 7.09 8.09 9.09 10.09 10.09 TOTAL
_ ___ _-- ___ ---_-------------------------- ----------------0


Alachua -..... 32 80 61 21 13 8 1 1 1 218
Baker .--..--..-- -19 32 2 1 1 55
Columbia ...... 42 117 29 14 4 2 2 210
Gilchrist ........ 14 35 6 2 57
Hamilton ...... 21 31 24 10 6 1 1 1 1 96 8
Lafayette ..... 15 33 14 3 3 1 1 70 F
Madison ........ 67 140 42 26 9 2 3 289
Suwannee ..... 41 99 72 19 8 | 1 1 2 243
Union .........--. 25 31 12 2 1 2 1 2 1 77

TOTAL ....- 276 598 262 98 45 16 3 5 5 2 5 1,315
----------- ------------------------------------
Only that part of the allotment placed in the Acreage Reserve shown.
Source: Compiled from records of the Agricultural Stabilization and Conservation Committee, State Office, Gainesville,



Splits Combinations

Year f Number of I Number of Number of Number of
Allotments Allotments Acres Allotments Allotments Acres
Prior to Following Involved Prior to Following Involved
Split Split Combination Combination "

1948 ............-..............-.. 199 414 930.60 852 407 2,175.90
1949 ..........-- ..........-........- 266 564 1,337.10 830 402 2,148.40
1950 --......-.. --............. ...... 217 447 1,251.10 732 352 1,978.90
1951 ....---------. -------...... 275 574 1,685.80 873 412 2,764.90
1952 ......................-...-.. 265 555 1,520.30 874 412 2,773.30
1953 ------.....-..---- -- 301 623 1,807.80 909 436 2,805.50
1954 .-........-.........- --....... 269 562 1,590.10 1,044 492 3,451.80
1955 .......------.................. 298 622 1,821.80 1,049 491 3,712.70
1956 ..-................----......... 388 820 2,137.57 1,037 482 3,356.14
1957 ......----..................... 475 1,009 4,301.83 637 291 1,615.63

TOTAL ....-........---..... 2,953 6,190 18,384.00 8,837 4,177 26,783.17

Source: Compiled from records of the Agricultural Stabilization and Conservation Committee, State Office, Gaines-
ville, Florida.

Acreage Control for Flue-Cured Tobacco Producers 31



1930 1935 1940 1945 1950 1954


Alachua .................. 2,264 2,155 2,108 1,901 1,804 1,610
Baker ........................ 461 447 434 362 431 390
Columbia .................. 1,193 1,448 1,383 1,082 1,131 987
Gilchrist ................. 476 525 529 431 426 369
Hamilton .................. 794 856 928 865 734 747
Lafayette .-..........-- 460 440 548 530 439 483
Madison .................... 1,428 1,305 1,499 1,406 1,213 1,104
Suwannee ................ 1,774 1,810 1,877 1,905 2,009 1,705
Union ........................ 607 567 547 406 403 385

TOTAL ... -.............. 9,457 9,553 9,853 8,888 8,590 7,780

Source: 1930-1954 Censuses of Agriculture, U. S. Bureau of the Census.



1930 1935 1940 1945 1950 1954


Alachua ....-.........-..... 106 106 123 181 199 246
Baker ........................ 80 74 82 101 162 262
Columbia ................. 150 117 127 148 269 266
Gilchist .................... 148 127 159 228 267 293
Hamilton ................. 177 130 148 172 201 237
Lafayette ................ 151 138 138 153 205 219
Madison .................... 120 114 134 155 182 215
Suwannee ..---.......- 126 139 136 149 159 185
Union .............- ........ 113 137 140 201 216 260

TOTAL ................. 130 120 132 163 199 232

Source: 1930-1954 Censuses of Agriculture, U. S. Bureau of the Census.

32 Florida Agricultural Experiment Stations

Nonland Inputs.-Although the tobacco program imposes cer-
tain restrictions on use of land, producers may vary the use of
other productive agents at will. Average tobacco yields in Flor-
ida rose from 1,039 pounds in 1947 to 1,362 pounds per acre in
1957.a4 While part of the increased production per acre may be
attributable to improved varieties of tobacco, no doubt most of
it resulted from the intensification of production techniques.
Entrepreneurial Capacity or Managerial Ability.-The en-
vironment in which the tobacco program operates is not charac-
terized by homogeneous enterpreneurship. Therefore, even if
the program is responsible for allocation of a given acreage of
tobacco to the confines of a particular geographic area, differ-
ences in natures and abilities of enterprising individuals at-
tracted to tobacco production can strongly influence the utiliza-
tional pattern of the aggregate acreage.


Harvested Acres
Level of _
Manage- I
ment 0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10- Total
Ability. 1.59 3.09 4.59 6.09 7.59 9.09 15.09


1 ............ 1 1
2 ........... 1 2 1 3
3 ........... 3 1 1 1 6
4 .....-.-- ... 1 3 1 5
5 .....-...... 6 3 4 3 1 17
6 2.....- 2 7 2 3 3 1 1 19
7 ........ 5 11 3 6 4 39
8 ........... 2 9 1 6 5 5 10 38
9 .........-.. 2 2 4 9 11 8 11 47
Not ascer-
tained .-- Ib 1

TOTAL .... 23 28 27 21 26 23 28 176

X = 76.89, significant at the 99 percent level. See Footnote 44.
Number 1 indicates the lowest level of management ability and
number 9 indicates the highest level.
bNot included in chi-square test.

USDA, Florida Agricultural Stabilization and Conservation Commit-
tee, Annual Summaries, Gainesville, Florida.

Acreage Control for Flue-Cured Tobacco Producers 33

For the sample of producers interviewed, there was a tenden-
cy for harvested acreage to be positively correlated with man-
agerial ratings 44 (Table 20).
Likewise, producers with higher managerial ratings were
more prone to rent tobacco acreage (Tables 21 and 22).


Level of Management
Yes No Not Ascertained


1 ..........-........... ................ -1
2 ....-..........- ....... .......-............ 3
3 ............................................ 6
4 ........... ----------................... ...... 1 3 1
5 ..............-- -........................ 4 13
6-----------------7 11 1
6 ......................... ................. 7 11 1
7 ------------------------......................................... 13 26
8 ........................................... 14 23 1
9 .................. ......................... 17 29 1
Not ascertained ........................ 1

TOTAL ........... ------------................. 56 116 4

Number 1 indicates the lowest level of management ability and number 9 indicates the
highest level.

The ability to accumulate acreage was also more predomi-
nant among higher management levels. In the sample of 176 to-
bacco producers, all of those producers who had acquired addi-
tional tobacco acreage by purchase in the preceding 5 years
were in the top 5 management levels, with the 2 uppermost man-

Part IV of the questionnaire was designed to measure the relative man-
agement ability of those tobacco producers interviewed. Questions were
included to test the producer's familiarity with recommended tobacco pro-
duction practices and other accepted general farming methods. The ques-
tions were then scored, using the latest Experiment Station recommenda-
tions, and a score was assigned to each operator. The validity of this test
is not known. Intuitively, one would expect to obtain the type of distribu-
tion appearing in Table 20. A chi-square test of this table which combined
management levels 1, 2 and 3 indicated a highly significant difference be-
tween the various size harvested acres and levels of management. At best,
this test is only a rough approximation of the producer's management abil-
ity. However, it is felt that this is a better measure of a tobacco farmer's
ability to operate a farm than the usual survey technique of asking the
farmer what grade he completed in school.

34 Florida Agricultural Experiment Stations

agement levels accounting for 68.6 percent of this group (Table

Level of Management
Yes No Not Ascertained


1 .................. ........................ 1
2 ............................................. 3
3 .............................................. 1 4 1
4 .............................................. 3 2
5 ............................................. 6 11
6 ................- .......................... 12 7
7 .......... ................................ 22 17
8 .............................................. 19 18 1
9 ............................................. 28 19
Not ascertained .......................... 1

TOTAL ......................................... 91 83 2

Number 1 indicates the lowest level of management ability and number 9 indicates the
highest level.
Age of Operator.-Although not an economic matter in a
precise sense, the age of operator and size of allotment pattern
are suggestive of the internal flexibility of the tobacco industry.
Within broad limits, there was no significant relation between
the age of operator and the acreage operated by the tobacco
producers (Table 24). This suggests that younger operators
do not encounter a completely closed system in attempting to
acquire desirable acreages.

Since the introduction of flue-cured tobacco in North Florida,
other agricultural enterprises have importantly co-existed even
in the heart of the flue-cured producing area. Because, for the
most part, these enterprises do not obtain independently, seem-
ingly, the influence of the tobacco acreage control program would
not be confined to the tobacco industry alone but would spill over
into the subagricultural economy of the area in total. More-
over, room would be created for argument regarding the direc-
tion of the influence of the program; in particular, whether it


Level of Management Ability*
Reason Not
I I Ascertained Total
1 2 3 4 5 6 7 8 9


Applied for and received additional acreage ...... 1 2 3

Bought land with tobacco acreage on it ......... 3 3 5 12 12 35

Routine yearly changes only ..................................1 6 5 14 15 28 25 32 1 130

Bought, sold and applied for additional acreage.. 1 1 2

Not applicable .............................. .... ........ 3 1 2 6

TOTAL ........ ............. .. ................ 1 3 6 5 17 19 39 38 47 1 176 -
TOTA L ------------------------------------------ ---- --------- 1 6 5 1 7 1 9 9 38 4 __ -
Number 1 indicates the lowest level of management ability and number 9 indicates the highest level.


36 Florida Agricultural Experiment Stations

has been accomodative or detrimental to the economic health of
the local agricultural economy.


Harvested Acres

Age of I
Operator 0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10- Total
1.59 3.09 4.59 6.09 7.59 9.09 15.09


Over 65 1 1 2 1 2 2 3 12
56-65.. 9 6 2 2 3 1 6 29
46-55 .. 7 7 9 6 9 8 8 54
36-45 .. 6 10 8 9 10 9 9 61
Under 36.. 4 6 3 2 2 2 19
Not ascer-
tained .... 1 1

TOTAL ... 23 28 27 21 26 23 28 176

X2 = 22.96, not significant at 90 percent level.

Since the question posed is centered in economic activity
across the broad front, an interarea comparison appeared to pre-
sent the most plausible line of attack. Accordingly, 2 general
farming areas of North Florida, with the most noticeable (but,
perhaps superficial) claim to distinction arising from the fact
that tobacco is produced in 1 and not the other, were selected
for comparison. This approach relied upon the vulnerable as-
sumption that divergent adaptations in the aggregate income-
resource complexes of the 2 areas, since the end of the precontrol
era, would be indicative of the exogenous influence of the tobacco
program upon the applicable local agricultural economy.
Two readily obvious difficulties arose in connection with the
analysis. First, at 1 time or another, 2 other programs have
been operative in the North Florida area. The cotton and peanut
acreage control programs, when in effect, were common to both
the tobacco and nontobacco producing areas chosen for compari-
son. This difficulty was dismissed by assuming that the "off
again-on again" character of peanut and cotton programs viti-
ated the lasting effects of these programs upon the agriculture

Acreage Control for Flue-Cured Tobacco Producers 37

of the 2 areas.45 But allowing some influence, since the cotton
and peanut programs were common to both areas, the compara-
tive inferences regarding the tobacco program would still hold.
Secondly, it might be held that, in terms of enterprise alterna-
tives, the capacity to produce tobacco confers economic superi-
ority upon the tobacco area. Granting the admissibility of this
contention, it nonetheless is somewhat open to question. The
monopolistic connotation of the argument requires the presenta-
tion of evidence that the flue-cured tobacco industry is seriously
pressing against natural and economic production limitations.
From evidence developed in subsequent phases of the study, it
is more reasonable to assume that the lustre of flue-cured tobacco
as an enterprise would fade considerably without the benefit of
restricted production.
The years 1929 and 1954 were chosen for points of compari-
son over time because the 1930 census contained data descrip-
tive of situations in the 2 study areas immediately preceding
the program provoking conditions of the thirties and because
the 1954 census provided the latest comprehensive source of in-
Important resource aggregates and the cash income picture
for the 2 study areas at the 2 points in time are given in Table
Considerable change in the income-resource picture is evid-
dent for both areas. Both the number of farms and agricultural
employment were down impressively in 1954, as compared with
1930, in each area. In contrast, cash farm expenses and cash
farm sales were up noticeably (even in terms of constant dol-
lars). Cropland harvested reflected an interarea switchover in
resource use-decreasing in the nontobacco area and increasing
in the tobacco area.
Because the numerical identifications of the resource and in-
income elements appearing in Table 25 defy the type of com-
parability required to epitomize the income-resource complex as
a whole, these data were transformed into the more interpretable
representations appearing in Table 26. The numerical values
indicate how the total amount of each item for both areas was
shared between the 2 areas in the different years. Dismissing
tractors as trivial in 1929, it can be seen by vertically scanning

"6 From 1938 through 1954, marketing quotas and acreage allotments
under the AAA of 1938 were effective in only 7 years for cotton and 8
years for peanuts. USDA, Commodity Stabilization Service, Price Division,
Acreage Allotment and Marketing Quota Summary, September 1955, p. 39.

38 Florida Agricultural Experiment Stations


1929 1954

Nontobacco Tobacco Nontobacco Tobacco
Area* Area** Area* Area**


Farms (number)t ........ 8.2 5.6 7.3 5.1
Tractors (number) t ..... .1 .1 3.0 3.5
Agricultural employ-
ment (persons) .... 16.2 12.4 9.35 9.0:
Cropland har-
vested (acres)t ...... 296.7 206.4 257.3 252.8
pasture (acres)t .... tt ft 43.1 46.3
Cash farm expenses
(dollars)t, $ .......... 917.3 616.5 3,512.0 3,560.5
Cash farm
sales (dollars)t .... 4,187.5 3,507.8 13,344.7 16,710.6

Comprised of Calhoun, Holmes, Jackson, Walton and Washington Counties.
** Comprised of Columbia, Hamilton, Lafayette, Madison and Suwannee Counties.
t Source: 1930 and 1954 Censuses of Agriculture, U. S. Bureau of the Census.
$ Source: 1930 and 1950 Censuses of Population, U. S. Bureau of the Census.
ft Not available.
$$ Includes hired labor.


1930 1954

SNontobacco Tobacco Nontobacco Tobacco
Area Area Area Area


Farms ......... .... ........... ....... 59 41 59 41

Tractors .......................... 48 52 46 54
Agricultural employment 57 43 51 49
Cropland harvested ........ 59 41 50 50

Improved pastures ......... ** ** 48 52
Cash farm expenses ...... 60 40 50 50

Cash farm sales ................ 55 45 44 56
Calculated from unrounded data underlying Table 25.
** Not available.

Acreage Control for Flue-Cured Tobacco Producers 39

the first 2 columns of percentages that, in 1929, the tobacco area
with 41 percent of the farms, utilizing roughly a like proportion
of resources, realized about 45 percent of the total cash income
produced by both areas.
More significantly, however, in 1954, with the same propor-
tion of farms, the tobacco area employed approximately 50 per-
cent of the resources and realized 56 percent of the cash income.
It would be presumptious indeed to claim that the tobacco
program was exclusively responsible for the relative improve-
ment in the agricultural economy of the tobacco area; but to
condemn the tobacco program, without reservation, for alleged
ill effects upon income and resource adjustments within local
agricultural communities, would be even more foolish.

Since the tobacco program is a politically and socially sanc-
tioned device for altering the distribution of income in favor of
farmers, seemingly the acid test of the program centers in its
proficiency in effecting income transfers and its acceptability to
directly affected parties, namely, tobacco producers-unless it
can be denied that they know what they are doing. However,
what then could be said about the rationality of producers' ac-
tions in the presence or absence of a program?
In conjunction with the acquisition of technical data relative
to the production of tobacco, information was sought from grow-
ers which would reveal individual opinions of and reactions to
selected aspects of the program. Because participants are per-
mitted a choice at regular intervals, the existence of the program
implies grower approval. Nevertheless, with choice limited en-
tirely to either blanket acceptance or rejection, the basic rea-
sons for supporting the program are not revealed.

The type of group conformity characteristic of the tobacco
control program requires a certain degree of encroachment upon
individual action. The continued existence of such a program

A more complete presentation of the data obtained from flue-cured
tobacco producers on this subject is contained in C. D. Covey's, Producers'
Opinions of the Flue-Cured Tobacco Acreage Control and Price Support
Program, Florida Agricultural Experiment Station, Agricultural Economics
Mimeo Report No. 59-11 (Gainesville, June 1959).

40 Florida Agricultural Experiment Stations

in a democratic society implies that affected individuals have
made certain judgments regarding the tolerability of so-called
imposed restraints. A superficial examination of these judg-
ments was undertaken as a means of getting at the plausibility
of predilections, apparently so freely held, concerning how af-
fected parties feel (or ought to feel) about the deprivation of
certain rights by the program. To avoid bias originating in di-
rection and overparticularization and to promote a casual atmos-
phere, producers were queried in very general terms. The gen-
eral line of inquiry and a condensation of the responses are sum-
marized in Tables 27 through 33.


Response Number

Recent acreage reductions --.......--- ... ---. .. ...... ..... ....... 107
Ownership of allotments by those
who don't depend on them for a living ....----........-.....--------- 9
Florida hasn't fair share of tobacco acreage ......................................--- 6
Restriction on freedom :....................... .......... ...........-- ............... 6
Accumulating tobacco acreage by purchase ...............................----- 3
Allotments not based on cultivated acreage ..----..------... ... .....-- 3
Nonsupport of undesirable varieties .-...-........- ...........---....... .--- 2
Support price not high enough ......--.........------ --- --... ..-....-.. 1
Other m miscellaneous .......- .... ................. ...... .... ........... I 28
N ot ascertained ............-- ................... ...............------.. .... 11

TOTAL -..........-----. .......... ......... . .............. .......- -. 176

"*Response unsuggested.



Prices Price Like
Received Stability Program Other Not Total
for Tobacco of Program in General Ascertained

Number of Producers

153 3 7 2 11 176

Response unsuggested.

Acreage Control for Flue-Cured Tobacco Producers 41

Had the inquiry proceeded no further than the first question
(Table 27) it could have been easily concluded that the program
was on the verge of collapse for lack of grower support. Further
questioning, however, revealed the implausibility of such an in-
terpretation. Presumably, the distaste for acreage reductions
reflected individual preferences for something that would be
"nice" if achievable within the framework of controls; not a
condemnation of acreage controls per se (Table 30). Notice the
less important status of the suggestion to increase acres (con-
verse of distasteful reductions) among responses to a question
concerning possible program improvements (Table 29).

Response Number

Redistribute acreage not tended by owners ......................-----... 33
Increase the number of acres .....---......---.........--..----. ..-....--- ....-. 14
Establish minimum size allotments ......-........-........................-......... 8
Allot acreage on the basis of cultivated land .--......---................-- ..---- 8
Raise the support price .-.............--- ..-...........-.... ......----- .--.-- 5
A dopt poundage control .--........................ ...... .---...-- ..--- ................ 3
Distribute tobacco acreage on the basis of need ............------.............. 3
Early measurement of tobacco -------......-----....... ---.................------ 2
Provide recourse from administrative mistakes .............................. 2
Retain reverted acreage in the county ............-----.......--- .....-- .... ---.. 2
Provide for buying and selling allotments .......................................--- 1
Develop new markets for tobacco .------......-........... .... .....- ....--.... 1

TOTAL ...........------ ...... .....---..-- .... ....-- ....-.....--- 82

Response unsuggested.
** Of the total interviewed, 114 thought the program could be improved; however, only 76
growers offered positive suggestions.
t Some respondents gave more than one answer.
Actually, other of the more important answers and sugges-
tions did not imply a desire for weakening or discarding exist-
ing rules but rather a need for revising and extending the ex-
isting set of rules, particularly in the area of selectivity. For
example, many growers felt that tobacco acreage should be re-
served exclusively for growers who are willing to operate their
allotments and are dependent upon tobacco productions as a
means of livelihood (Tables 27 and 29).

Rules to govern group action would be meaningless and empty
in the absence of ends, expressed or implied. Therefore, judg-

42 Florida Agricultural Experiment Stations

ments about rules presumably are always predicted upon some
impression-correct or incorrect-of ends. Willing submission
to a set of rules because of misconceptions concerning ends must
be recognized as a possibility. The relevant question emerges.
Are the decisions and opinions of tobacco growers concerning
the operational features of the tobacco program consistent with
a reasonably accurate interpretation of intended program accom-
plishments ?


Yes No Do Not Know

Number of Producers

16 156 4 176


Yes No Not Ascertained

Number of Producers

10 157 9 176


Yes No Do Not Know

Number of Producers

6 166 4 176

Acreage Control for Flue-Cured Tobacco Producers 43

Viewed properly, the expressed dissatisfaction with current
individual allotments and the corollary desire for individual in-
creases is not alarming (see Table 31). This is the typical re-
action of individual firms in an "other things equal" context.
That is, most of the operators (the smaller in particular) indi-
vidually would like to have more acreage in the face of existing
price and income possibilities provided by the program. Nor,
are the responses summarized in Tables 31 and 33 4 contradic-
tory in a theoretical context. Clearly, the views expressed in
the latter table parallel the concept of an industry reaction. Ap-
parently, producers are cognizant of the mutuality of their in-
terests as individuals with the interest of the industry (namely
all other producers) and view the program as the mechanism by
which these mutual interests are served.


Favorable Unfavorable Do Not Know Not Ascertained

Number of Producers

20 143 6 7 176

Although individuals choosing to produce tobacco must oper-
ate within the framework of the tobacco program, no one is un-
der any mandatory compulsion to engage in this enterprise.
Historically, however, the tobacco industry presumably has not
suffered from a lack of willing participants.48 Because of the
dubious popularity of tobacco production as a delightful and
entertaining hobby, evidently it holds forth some degree of eco-

"4 A favorite reply to the question raised in Table 33 was, "Why should
I produce more and get less (implicitly income) for it?"
"4 The fact that allotment underplantings have occurred may imply
allotment market imperfections, originating in the program and otherwise,
rather than the nonexistence of willing renters or buyers. For example,
allotment immobility arising from the attachment of allotments to particu-
lar farms may largely explain why the tobacco acreage quota is not always
fully utilized.

44 Florida Agricultural Experiment Stations

nomic attraction. The basic inquiry of interest is revealed. Are
economic benefits attributed to the program by producers real
or chimerical?

The production of flue-cured tobacco is characterized by a
relatively large number of technical operations. The exact num-
ber varies among producers but an estimate of 25 different steps
or stages would seem conservative. Harrington lists 35 different
operations normally required in the production of bright to-
bacco in the Lower Coastal Plain of Georgia.49
Not only is the production process relatively complicated
but the cost structure is also characterized by a large number
of input items. Cost itemization will obviously vary depending
upon whether particular costs refer to input items or to the uses
of inputs. Pierce and Pugh cite 25 separate items of cost in-
curred by flue-cured tobacco producers in North Carolina.50
Approximately 25 different cost items reported by Florida flue-
cured tobacco producers were recorded in this study. However,
rather than indulge in lengthy mention of each item, potential
production diseconomies will be explored by examining the cost-
determining role of a few of the more important. Assuming
factor homogeneity, constant factor prices and equivalent tech-
nical know-how among producers, cost diseconomies allegedly
associated with the operation of small tobacco allotments con-
ceptually should be traceable to factor indivisibility and unadapt-
Fertilizer.-Types of fertilizer used in tobacco production
were remarkably similar among producers. A nitrogen-phos-
phorus-potassium analysis of 3-9-9 was used by 56 percent of
the operators while 16 percent used 3-8-8 and 15 percent used
3-9-12. Choices of the remaining 13 percent were scattered
over a miscellaneous assortment of analyses. Although the rate
of fertilizer application varied considerably among producers,
the average view regarding the technical use of this input seemed

B. J. Harrington, Tobacco Production Practices and Costs, Lower
Coastal Plain, Georgia, Mimeo Series 17, Georgia Experiment Station,
Experiment, Georgia, pp. 10-12.
"1o Walter H. Pierce and Charles R. Pugh, Cost of Produc'iri Farm Prod-
ucts in North Carolina, A. E. Information Series 52, Department of Agricul-
tural Economics, North Carolina State College, Raleigh, North Carolina,
December 1956, p. 20.

Acreage Control for Flue-Cured Tobacco Producers 45

to be commonly shared by operators in all harvested acreage
categories (Table 34).


Average Rate of Fertilizer Applied
Harvested Acres per Acre

0- 1.59 1,763
1.60- 3.09 1,703
3.10- 4.59 1,693
4.60- 6.09 1,890
6.10- 7.59 1,868
7.60- 9.09 1,946
9.10-15.09 1,803

Because fertilizer is completely divisible within the range
of practicality, smaller producers are at liberty to choose the
same land-fertilizer combinations, in relation to available land,
as large producers without suffering any cost disadvantage.
This, apparently, is precisely what they have sensibly done.
Curing Fuel.-Some input items are not readily adaptable
to the optimum technical requirements of a changing tobacco
acreage. This is particularly true of curing fuel. The structural
characteristics of a tobacco barn are such that a partial utiliza-
tion of capacity will not obviate the necessity of heating the en-
tire barn; therefore, curing fuel outlays assume some of the
characteristics of a fixed cost in the curing operation. Since
tobacco is normally harvested for curing once each week and
each harvest must be cured independently, partial utilization of
barn space does present a problem to small allotment holders un-
less the curing operation can be shared with neighboring pro-
ducers. Larger operators with more than 1 barn, however,
enjoy more operational flexibility because more alternatives for
curing a given amount of tobacco are open to the firm.
In North Florida, most tobacco barns are generally considered
to accommodate optimally about 3 acres of tobacco. This implies
that, hypothetically, optimum fuel outlays should linearly recur
at intervals of approximately 3 acres, provided the correct barn-
acreage combination is preserved. At other acreages, curing
fuel costs per pound of tobacco should be higher.

46 Florida Agricultural Experiment Stations

Harvesting Labor.-Tobacco production is an extremely la-
bor-intensive enterprise; therefore, a wide latitude in cost differ-
ences exists among producers depending upon the technical use
of this factor. The harvesting operation, in particular, is char-
acterized by several rather specialized labor functions performed
by different individuals collectively referred to as the harvesting
crew. It is a generally held opinion among tobacco producers
that a harvesting crew consisting of 4 primers, 1 sled driver, 2
stringers and 4 handers is functionally organized to the best
Inflexibilities in the use of labor are traceable not only to
specialization but also to institutions in the labor market. Or-
dinarily, if harvesting laborers work any time past the noon
hour they are paid wages for a full day. Because these condi-
tions prevail, it is not surprising to discover producers having
different acreages and outputs incurring approximately identical
total labor outlays. Recognition of a grain of truth in the argu-
ment that acreage control is conducive to inefficiency emerges as
a corollary discovery.

To postulate a generalized cost function is one thing; to
specify a particular cost function theoretically complete and
analytically manageable is another. The complex nature of the
tobacco production process, alluded to previously, was most
effective in dampening ambitious notions concerning a cost an-
alysis for tobacco. Aside from problems of measurement, the
maze of inputs and input uses discouraged any attempt to specify
the functional role of each input item in the production process.
Although reduction of the number of variables in the system by
combining certain classes of inputs into input categories has cer-
tain appeal,62 changing factor relationships, as defined by the
concepts of substitutability and complementarity, from phase to
phase of the production process led to the dismissal of this ap-

"1 Primers detach the ripened leaf from the stalk in the field; sled drivers
handle the transportation of the tobacco from the field to the barn or
stringing shed; handers arrange leaves, usually in groups of 3, for the
stringers who "tie" a number of these "hands" of tobacco to sticks prepara-
tory to hanging in the barn for curing.
"52 Glenn L. Johnson, "Classification and Accounting Problems in Fitting
Production Functions to Farm Record and Survey Data," Resource Pro-
ductivity Returns to Scale, and Farm Size, ed., Earl O. Heady, Glenn L.
Johnson, Lowell S. Hardin, (The Iowa State College Press, 1956), Chap. 9,
pp. 90-96.

Acreage Control for Flue-Cured Tobacco Producers 47

proach as conjectural procedure. Instead of attempting to de-
velop subclassifications of related inputs, in the sense of inter-
changeability, a broader and more sweeping combinative ap-
proach was followed.
The Estimating Function.-Cost per pound of producing to-
bacco was regarded as a function of the number of acres op-
erated and the yield per acre achieved. This allowed sliding
over the problem of input itemization by letting yield serve as
an indirect measure (in a cost sense) of all productive agents
other than land. If acreage operated were to be viewed in the
.context of plant size, long-run cost per unit of producing tobacco
would be both a function of acres and yield but short-run costs
(i.e., acreage fixed) would be reflected by changes in the level
of yield. Despite its undeniable crudity, the following functional
form was adopted to summarize production cost relationships
for tobacco:
c b + bo x + b2X2 + bay + b4y2
where c = average cost per pound
x = acres harvested per farm
y = yield per acre
Observations on average cost were determined by dividing
total cost by total output in pounds. Total cost included all cash
outlays reported by individual operators, imputed unpaid family
labor expense in line with wage rates for comparable duties and
nominal, but arbitrary and, therefore, debatable, cost allow-
ances for barn and tobacco equipment.
The equation obtained by fitting the above function to the
sample cost data was as follows: 5;
Cost per pound
.8126 .0361x + .00197x2 .000362y + .00000008237y2
(.00783)*** (.00056)*** (.000115)** (.000000037)*.
A family of cost curves derived from this equation is graphically
depicted in Figure 2.
For lack of any other recourse, it was presumed that the
sampling process would excusably gloss over such troublesome
matters as differences in managerial ability, land quality and

"6 Because a firm provides only 1 observation, the least squares fitted
function summarizes interfirm rather than intrafirm average costs. Figures
in parentheses are standard errors of the coefficients with the indicated
level of significance, (*) 5 percent level, (**) 1 percent level, (***) .1 per-
cent level.

Per Pound
.52 (Dollars)
2 acres 4 acres 6 acres 8 acres 10 acres 12 acres
I I Support Price

.44 8.

S36 Cost at estimated maximum

.32 I A
Super acre.



.20 -j
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45

Output (Thousand Pounds)
Figure 2.-Production Cost Relationships for Various Size Flue-Cured Tobacco Allotments, Florida, 1957.

Acreage Control for Flue-Cured Tobacco Producers 49

yield variability arising from natural phenomena. Assuming
that provisional disregard for these complications is allowable,
the derived average cost curve (Curve A, Figure 2) may be
viewed as a quasi-long-run average cost curve summarizing cost
changes associated with changes in acres harvested (size of
firm).54 It will be noted that the derived function satisfies the
tangency requirement between the short-run cost curves and
the long-run acreage adjustment curve. According to the esti-
mating function, lowest production cost per pound occurred at
an acreage-yield combination of 9.16 acres and 2,197 pounds
yield.55 Perhaps farmers are not much in error in regarding 3
acres of tobacco and a barn as a fairly efficient technical unit.
If the cost function is approximately accurate, economies of scale
would vanish after the acquisition of 3 technical units. How-
ever, for large acreages, the cost function, in all likelihood, up-
wardly exaggerates costs because of possibilities open to large
allotment holders to break allotments up into subunits that can
be operated by competent farmers.56
Because the tobacco program assigns allotments with little
respect for ordinary standards of efficiency and, yet, continues
to be enthusiastically endorsed by producers both small and
large, there is room for misgivings about whether or not grow-
ers recognize their best interests. The acceptance of small allot-
ments by producers in preference to uncontrolled acreage gen-
erates some skepticism. As has been seen, however, affected
producers, in the main, obviously disagree with this sentiment.
And, it must be admitted, whether or not their conclusions are
correct, their economic rationale seems logical enough. The
income picture under the tobacco program should be helpful in
exploring the apparent paradox.
Net Revenue Estimates.-Per acre cost estimates at the aver-
age sample yield of 1,382 pounds calculated via the estimating
function are summarized by Curve A in Figure 3. Accepting
for the moment the validity of these estimates, per acre returns
indicated by Curve B in the figure are seen to exceed per acre
Possibly, it would be preferable to view these estimates as approxi-
mations of normally expected cost optima, because of the nature of least-
squares estimates.
The cost function locates absolute minimum cost for any acreage at
2,197 pounds yield.
"s Cost observations were confined to operations within the 0-15 acreage

50 Florida Agricultural Experiment Stations

costs even for small acreages. Hence, barring crop failure, pres-
ent price support levels for tobacco apparently guarantee some
net cash income to most producers. This was one feature of the
program to which interviewed producers attached so much im-

B Returns per acre



480- A Estimated cost per acre


1 3 5 7 9 11 13 15
X (Acres Harvested)
Figure 3.-Estimated cost and returns per acre of flue-cured tobacco
for an average yield of 1,382 pounds. (176 tobacco farms, Florida 1957).

Income Transfers.-As subjectively involved as the concept
may be, the notion of an income transfer is more meaningful
than net income (in an everyday sense) as a measure of the
degree of achievement of the tobacco program with respect to
income improvement. From the producer's point of view, it
must be shown that the tobacco program results in an income
increment net of other possible 67 and acceptable enterprise al-
ternatives before a pecuniary benefit can be attributed to the
To show that the idea of a transfer is not as elusive as it
might appear, it will be asserted, before proceeding further, that
abnormal rents paid for tobacco allotments in relation to rental
rates for other land in the tobacco area are evidence of the
existence of income transfers to allotment holders. Although
a rent of $5.00 or $6.00 per acre would be considered liberal for

"7 In this context, changes in the tobacco program that an individual may
desire cannot be regarded as a possibility.

Acreage Control for Flue-Cured Tobacco Producers 51

average cropland, a rental payment of $125 per acre for a to-
bacco allotment is not exceptional. Averaged rental payments
by specified acreage categories reported by producers interviewed
in the 1957 survey are shown in Figure 4. Incidentally, it may

Rent per acre





0-1.0 1.0-2.0 2.0-3.0 3.0-4.0 4.0-5.0 5.0-14.0
Acres Rented
Figure 4.-Averaged cash rent per acre paid for tobacco allotments sur-
veying of 176 tobacco producers, Florida, 1957.

be noted that this rough representation of rental values tends to
be consistent with cost conditions suggested by Figure 3, i.e.,
higher costs are consistent with lower rents for small allotments.
While rental payments are evidence of income transfers,
it will be seen (if the definition of an income transfer to be sug-
gested is agreeable) that an equivalence relation need not neces-
sarily hold between an income transfer and rent. First, sup-
pose that provisions of the tobacco program were such that the
practice of renting allotments was not allowable. Given this
situation, define an income transfer as the difference between the
lowest returns at which an operator would be willing to produce
tobacco on an assigned acreage allotment and the returns realized
at the market or support price, which ever was applicable. As-
suming production certainty and familiarity with cost condi-
tion, a producer need never accept anything less than a zero
income transfer provided the prerogative of not planting the
allotments was allowed.56 That is, allotment holders producing
tobacco would receive income transfers equal to or greater than

"5 This also requires correct knowledge concerning other income alterna-

52 Florida Agricultural Experiment Stations

zero.59 Now, suppose the condition preventing allotment rent-
ing were relaxed. Then, the development of an active rental
market among allotment holders would imply that for those
renting out allotments the income transfers that could be real-
ized in the absence of rental possibilities would be equal to or
less than rent received but equal to or greater than rental paid
for those renting in allotments. This suggests that for those in-
dividuals renting out allotments, rent received is equal to (aside
from minor rent to land for other uses) actual income transfer
realized from the tobacco program. However, for those renting
in allotments, going rents tend to underestimate realized trans-
fers. A further interesting conclusion develops; if the object
of the program is to transfer income to allotment holders, a
larger income transfer would be effected by a system which per-
mitted unrestricted renting than one which tended to prohibit
the practice.60
Allotment Returns.-It will be recalled that the cost estimat-
ing function (see page 47) made no provision for the cost of
land. However, since all other costs were presumably covered,

The advantage of defining an income transfer in this fashion becomes
apparent once it is recognized that the tobacco program is a particular
system, out of many possible systems, of distributing income. That is, it
is a partially administered method of distributing income to a particular
sub-group of individuals. The admission that such a system can affect in-
comes (implicitly effect income transfers) of various members of the group
implies the existence of a zero element internal to the system, i.e., a situa-
tion(s) within the particular system at which no transfer is realized.
Hence, from this point of view, it would be incorrect to attempt to define
income transfers in terms of the difference between the price received under
controls vs. the competitive price (or difference in the respective incomes).
The competitive system is another distribution system possessing distinc-
tively different properties. However, analogous definitions of income trans-
fers (originating in concepts of free choice and utility) can be devised for
both systems. Notice the parallel to the perfect knowledge, competitive
equilibrium case. Given homogeneous producership, perfect knowledge and
perfect competition, no income transfers (so-called pure profits) would be
realized. However, because of market imperfections, fortuitous and mis-
fortunate circumstances and subjective differences among producers, the
real world situation may result in both positive and negative income trans-
fers. Negative income transfers, i.e., transfers from producers to the bal-
ance of society, would occur for producers who realized less income than
they would otherwise have accepted for performing production services.
Given production certainty, the support price and lack of a compulsory pro-
duction requirement eliminate negative income transfers in the control
program case.
"6O Although tempting to do so, it cannot be further concluded that rent-
ing would necessarily bring about a migration of all allotments into the
hands of the most technically efficient producers. The renting out of an
allotment may be a sign of superior alternatives rather than technical in-
efficiency. A bank president may be more efficient at janitorial duties than
the bank janitor; however, the converse would be most unlikely under full

Acreage Control for Flue-Cured Tobacco Producers 53

returns to land (and producership) can be estimated by deduct-
ing cost estimates derived from the function from gross revenue
estimates for allotments with specified yields and acreages. Use
of this information can be extended to estimate the average and
incremental earnings of land, bearing in mind that returns to
land and producership are inseparable.61 Derived estimates of
average and incremental returns to land at the sample average
yield of 1,382 pounds per acre are graphically depicted in Fig-
ure 5. The highest point on the curve denoting average returns
450-. ------

100- MVP


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Harvested Acres of Tobacco
Figure 5.-Estimated marginal value product and average value product
of an acre of land for various harvested acreages of tobacco at the average
yield of 1,382 pounds per acre, 176 flue-cured tobacco farms, Florida, 1957.

to land illustrates in another manner that the size of allotment
estimated to be most efficient in a cost sense (not necessarily
the most profitable) is slightly more than 9 acres.
Although the function defining average returns to land does
not provide for a distinction between returns to land and returns
to producership, a rough idea of returns to producership can be

"1 The average price received for tobacco was $0.5678 per pound. There-
fore for an allotment with (x) acres and (y) yield, various revenue rela-
tions would be defined by:
a. Gross revenue (in dollars) = 0.5678xy
b. Net revenue (returns to land and producership)
= .2448xy + .0361x2y .001qx'y + .000362xy2 .00000008237xyS
c. Average value product of land (including returns to producership)
S- .2448y + .0361xy .00197x2y + .000362y2 .00000008237y8
d. Marginal value product of land
= .2448y + .0722xy .00591x"y + .000362y2 .00000008237y'

54 Florida Agricultural Experiment Stations

obtained by subtracting cash rental estimates (see Figure 4,
page 51) from estimated returns to land. For example, from
Figure 4, rents in the 2-3 acreage range are seen to average
around $125 to $130 per acre, but returns to land (Figure 5) are
estimated to be about $225 and $260 for a 2 and 3 acre allotment,
respectively. For allotments falling within this acreage range,
returns to producership per acre (i.e., average per acre returns
minus rent) would amount to $100 per acre or more.62 63
A Note on Efficiency.-As mentioned previously, allotment
rentals are evidence that the restrictive provisions of the con-
trol program have been effective in bestowing income payments
upon allotment holders. But, since allotments are specified in
terms of land units, part (or all in some cases) of such payments
are viewed as the price for the use of this factor. Because land
that may be used for tobacco production has become costly (earn-
ing capacity increased because of the program), there is an in-
centive for producers to substitute other factors for land. Yield
per acre is the most obvious manifestation that such substitu-
tions have been made. Estimates based on the empirical cost
function illustrate the effect that changes in yield have upon
the incremental earning capacity of land (Figure 6).
Indications are that restrictions on land use and insurance
of some income security by the tobacco program have fostered
the exploration and expansion of production techniques. Not all
techniques adopted under the program can be condemned as
inefficient, using the most strict definition of efficiency. The cost
function, which abstracted from the cost of land, suggests that
a yield far in excess of the present average of 1,382 pounds per
acre would be more efficient even if the price of land were zero.
Some producers, operating within the framework of stability
provided by the program, have discovered these efficient levels
of yield. Doubtless, the trend in this direction will continue as
more producers discover the efficiency that may be realized from
expanding yields.
Returning to the family of cost curves depicted in Figure 2,
page 48, it can be seen that small allotments (2 or 3 acres) can
be inefficient in a long-run adjustment sense; however, in the
short-run context (in terms of firm size) the program provides
considerable incentive for the achievement of increased efficiency.
"62 This in no way denies that income transfers are included in returns
to producership.
o3 These estimates are consistent only with the average yield, average
price of tobacco and factor prices prevailing in 1957.

Acreage Control for Flue-Cured Tobacco Producers 55

As a matter of fact, one may loosely view the tobacco program
as a means of imposing a set of short-run situations (in terms
of firm size) on the tobacco industry. But who can argue that
firms in the short-run can ignore efficiency considerations? If
it can be held that the tobacco program has been instrumental
to the intensification of production, it follows, as a plausible
corollary, that the program has assisted in bringing efficiency
considerations more sharply into focus.

900 Per acre yields 1000-2500 Ibs.

800- ,,

650 1800
600-Ha 1700
550 160oo
500, F 191

350 -


1 2 3 4 5 6 7 8 9 10 11 12 13 14
Harvested Acres of Tobacco

Figure 6.-Estimated marginal value product of an acre of land for
various harvested acreages of tobacco and yields, 176 flue-cured tobacco
farms, Florida, 1957.


The tobacco program is a manifestation of a decision by the
government (and implicitly by society in general) to do some-
thing to improve the income status of tobacco growers. The
knotty problem of distribution necessarily accompanied this de-
cision, that is, the problem of choosing some basis for distrib-
uting intended program benefits within the industry was created.
Because the program employs a system of distribution involving
a parcelization of production rights among a particular group of

56 Florida Agricultural Experiment Stations

individuals, an appraisal of the relative benefits realized by mem-
bers of the group requires an examination of cost conditions at
the firm level.64 Herein lies the real significance of efficiency,
since differential production efficiencies associated with different
allotment sizes could materially affect benefits realized by allot-
ment owners.65
Further elaboration will verify the necessity of considering
conditions at the firm level. The distribution of rights to pro-
duce (in this case the sanctioned ownership of acreage allot-
ments) along with the preservation of a support price does not
allow an explicit specification of distributed benefits. That is,
the distribution of rights to produce is not accompanied by a
well defined corresponding distribution of realized benefits. Nor,
to mention the self-evident, is the gap between the 2 definite.
Thus the origin of much controversy surrounding the program is
exposed, particularly, the basis for disagreement relating to
whether the program is helpflNI or harmful income-wise to af-
fected individuals. With clarification more than solution of the
problem in mind, the distributive potentials of the program ma-
chinery will be explored by resorting to a few over-simplifying
Proportional Allotments and Constant Yields.-Currently,
aside from minor exceptions, total allotted flue-cured tobacco
acreage is varied by increasing or decreasing the acreage al-
lotted individuals by a common percentage. Suppose that, in
addition to this condition, yields per acre were identical among
all producers and that all producers were faced with the same
conditions appropriately summarized by the conventional u-
shaped cost curve expressed, say, by the equation,66
Ca = bo' b'x + b2'x2
where Ca = cost per acre for a specified yield (y)
x = allotment size in acres bl' = bly
bo' = boy + b3y2 + b4y3 b2' = by.

Although net income and income transfer are not synonymous, in this
section they will be treated as identical as a matter of convenience.
"8 Efficiency considerations as related to social welfare in toto are rel-
evant to the choice of a course of action, i.e.,' the choice of a particular means
such as the tobacco program, only in an ex ante sense. From an ex post
point of view, efficiency assumes importance as a possible functional modi-
fier of realized program results.
"* The cost function, cost per pound = .8126 .0361x + .00197x' -
.000362y + .00000008237y2 shown on page 47 reduces to the above form if
yield (y) is fixed and the resulting cost per pound is multiplied by yield.

Acreage Control for Flue-Cured Tobacco Producers 57

For this function, ordinary minimizing techniques place the
minimum cost allotment at 1 or at 9.16 acres, to be in
agreement with the derived cost equation shown on page 47.
Getting at the problem of income benefits, however, requires
more than a knowledge of cost conditions alone. A specification
of demand conditions is also needed.
Because a demand analysis was not intended as a portion of
this study, a hypothetical demand situation must suffice. With
yield the same for all producers, as previously assumed, and to-
bacco quality homogeneous, it would be a matter of indifference
whether the total amount of tobacco demanded were expressed
in terms of pounds or acres.
For simplicity it will be assumed that the demand for flue-
cured tobacco is linear. That is, it will be assumed that the de-
mand for tobacco is well defined by the equation,67
P = a-bX (P = price per acre)
(X = national allotment in acres)
Graphically, such a hypothetical demand relation would appear
as in Figure 7. Gross revenue to the industry arising from this
demand relation could be summarized by the curve in Figure 8.
Granted that the above cost and demand conditions hold,
several questions may be answered concerning revenue impli-
cations for the industry. For example, one might wish to know
(1) What allotment arrangement would result in the maximiza-
tion of net industry revenue for a given national allotment, (2)
What allotment arrangement and national allotment would re-
sult in the maximization of net industry revenue, (3) What na-
tional allotment would result in the maximization of net indus-
try revenue for different specified allotment arrangements and
(4) What would be the equity implications for allotment owners
under different specified allotment arrangements?
Actually, since gross revenue would be uniquely determined
for a given national allotment, only cost need be considered in
answering the first question. That is, net industry revenue
would be maximized by the allotment combination consistent
with the minimum total cost of producing the given national
allotment. The desired allotment combination can be determined
"7 For the purpose of the ensuing analysis, any continuous demand re-
lation for which gross revenue achieved an absolute maximum at some
positive acreage would serve.

58 Florida Agricultural Experiment Stations

Per Acre
(Dollars) (Relation between national allotment
and price per acre).

(Incremental value of an acre
of tobacco).

X (Tobacco acreage, Millions of acres)
Figure 7.-Hypothetical demand relation for flue-cured tobacco.

(Mill. of

X (Tobacco acreage, Millions of acres)
Figure 8.-Hypothetical revenue relation facing the tobacco industry.

Acreage Control for Flue-Cured Tobacco Producers 59

by minimizing procedures; however, an easier approach involves
an appeal to the intuitively obvious. This readily leads to the
conclusion that the lowest possible cost of producing a given
national allotment would be for the national allotment to be
comprised only of least-cost allotments (or the nearest approxi-
mation). The empirically estimated least-cost allotment was
seen to amount to 9.16 acres. If this estimate were valid, an
allotment arrangement requiring allotments of equal size, name-
ly, 9.16 acres, would generate the largest net industry revenue
for a specified national tobacco acreage.
Under this arrangement, however, a given national acreage
need not be consistent with the largest possible net industry rev-
enue. Although size of each allotment would remain at 9.16
acres, location of the revenue maximizing national acreage would
require changing the number of allotments. This leads to the
second question, the answer to which also requires a knowledge
of demand conditions facing the industry. The largest possible
net revenue to the industry would be achieved by a national
acreage for which marginal industry revenue was equal to mar-
ginal industry cost. This is equivalent to saying that the cost
incurred and income realized from changing industry output an
acre must be equal.
Average yield for the sample of tobacco producers inter-
viewed was 1,382 pounds per acre. For this yield and an allot-
ment of 9.16 acres, the estimating equation given on page 47
places minimum cost at $420.40 per acre. But since, by require-
ment, all acres in the national allotment must be produced in
this fashion, $420.40 would also be the additional or incremental
cost incurred by changing industry output an acre.68 69 Point
A in Figure 9 hypothetically designates the equality between
incremental cost and incremental revenue to the tobacco indus-
try, in particular, both equal $420.40 per acre. Point B locates
the allotment consistent with this condition, i.e., the size of the
national allotment that would maximize industry net revenue.
Although the first 2 questions dealt with above explore cer-
tain possibilities, both are hypothetical because under the pres-
ent tobacco program allotment sizes are not equal. The last 2
of the questions posed are much more relevant to the "real
world" situation and are therefore far more interesting.
"8 Minimizing techniques involving a constrained minimum will show
this to be true.
"B Industry expansion and contraction are assumed to have no effect
upon cost conditions facing producers.

60 Florida Agricultural Experiment Stations

Price per
acre (Relation between national allotment and
(Dollars) price per acre).

(Incremental value of an acre of

(Incremental cost of an acre
of tobacco).

420. 40

X (Tobacco acreage, Millions of acres)
Figure 9.-Hypothetical illustration of the national allotment comprised
of least-cost allotments that would maximize industry net revenue.

Fortunately, the mechanics by which the allotment distribu-
tion is manipulated under the tobacco program are amenable to
the formulation of answers pertaining to national acreage optima
for different allotment distributions and income shares arising
from such distributions. Such is the case because the program
preserves a large degree of dependency among allotment sizes.
This dependency arises from the administrative procedure of
adjusting the size of all allotments, except for rather minor
exceptions, by a common percentage thereby preserving the rel-
ative sizes of all allotments in the distribution.
Given the number of allotment holders, the above system
would allow the definition of any allotment and, in fact, all al-
lotments in relation to some particular size allotment. For ex-

ample, any allotment could be defined as px where =
and xi is a particular allotment from a distribution of allotments
with mean, 7 .70

"0 Each allotment could as well have been defined as Pi'X where

X = Ex., 0' = -- and N = number of allotments.

Acreage Control for Flue-Cured Tobacco Producers 61

Notice that for a given number of allotments, each Pi would
remain constant regardless of the change in the total tobacco
acreage. In fact any aggregate tobacco acreage (X) could be
expressed by x = Ex = x = x 1
i i i
which is nothing more than the summation of all allotments.
The importance of this representation is to show that any de-
sired relative distribution can be expressed in terms of the Bi's
without specifying the actual total acreage to be distributed.
Before the revenue maximizing total acreage for any relative
acreage distribution can be established (the answer to question
3), resort must again be made to the concepts of incremental
(marginal) industry cost and incremental (marginal) industry
revenue. Marginal industry cost turns out to be

2b'1? X 3b2'zi3X2
b _i_ + 1
0 N2 N
which is seen to be a quadratic function in X because

P12, 13 and N are known for any particular relative distri-
bution.72 This formulation summarizes precisely what was
needed, namely, the change in industry cost associated with the

Note that this also implies F6i = N, the number of allotments.
If the average cost per acre is given by (see page 56):

Ca= b bl'x+ b2'x2

then the total cost for any allotment, xi, would be given by

total allotment cost = bo'x bl'xi2 + b xi

and the total industry cost, i.e., the cost of all allotments would be
given by
total industry cost = bO 'xi bl'zx 2 + b 'xi3;

2 -21 2 3 -3 3xi
but because Zxi = xi, Zxi = xpi2, xi3 = x3i3 and x = -,
the expression for total industry cost reduces to

62 Florida Agricultural Experiment Stations

change in national tobacco acreage comprised of a particular rel-
ative distribution of allotments.
The equality between incremental (marginal) industry cost
and incremental (marginal) industry revenue and the corre-
sponding revenue maximizing national allotment are depicted by
points A and B, respectively, in Figure 10.
Price Per

(Incremental value of an acre-of tobacco).

A (Incremental cost of an acre).

(Relation between national
allotment and price per
B acre).

X (Tobacco acreage, Millions of acres)
Figure 10.-Hypothetical illustration of the national allotment comprised
of a relative distribution of allotments (all allotments not equal in size)
that would maximize industry net revenue.

A very interesting sidelight develops from the above analysis.
Given that the intent of the tobacco program is to transfer the
largest aggregate net income to a particular relative distribution
of allotment holders, it becomes meaningful to ask whether a
particular support price is too high or too low. For, if at the same
time program administrators attempted to adjust output to a
level consistent with the support price, for given demand condi-

bl'X2 ,2 b2'X3 3
total industry cost =bo'X N- 2 + N3
"N N3
For this expression, elementary differentiation shows incremental
(marginal) industry cost to be

incremental (marginal) industry cost

=b 2 i i2x 3b2' 3x2
0 N2 N3

Acreage Control for Flue-Cured Tobacco Producers 63

tions, the 2 goals may be completely incompatible. This can be
illustrated by again referring to Figure 10. If the support price
were at point C and acreage were adjusted to correspond to the
quantity demanded at this price, the tobacco industry would
realize the greatest aggregate net revenue. However, if the
national acreage were adjusted accordingly, to accommodate
support prices at either D or E, net revenue to the industry
would be diminished.73
The foregoing analysis demonstrates how the most net in-
come may be made available to allotment holders as a group;
however, it provides no indication of how the industry net in-
come would be shared by members of the group (question 4,
page 57). This involves a problem of equity which, to be mean-
ingful, must be related to some specific criteria. Before deal-
ing with certain seemingly feasible criteria, it will be helpful to
examine the role of firms in the industry.
Provided that output were synonymous with acreage op-
erated, the interdependence among firms arising from the re-
quirement that all producers in unison change their acreage
by the same relative amount allows tracing out a meaningful
demand curve for each firm.74 From the demand side, each firm
could be viewed as a miniature replica of the industry in the
sense that demand conditions confronting all other firms and
the entire industry could be predicted from the demand relation
appropriate to any one firm, and vice versa. That is, each firm
would constitute a monopolistic unit in a group of similar units
among which a specified relationship was maintained adminis-
tratively, namely, the constancy of relative allotment sizes.75
All of this adds up to saying that if the industry demand could
be expressed by, say, P = F(X) where P were price per acre
and X were the output or national acreage, demand relations
appropriate to various firms could be expressed by, say, P
fi(xi) and P= fj(xj) for which xi and xj were different firms or
allotment sizes. Equality between the industry price and the
price received by all producers would require P = F(X)
fi(xi) = fj(xi).
Although the problems differ somewhat, this also provides a hint as
to why parity price may be inconsistent with parity income under controls.
The analytical framework would allow the determination of an acreage
consistent with an aggregate parity income to the tobacco industry.
It is assumed that acreage adjustments would maintain equality be-
tween the support price and the market or demand price and that the num-
ber of firms would not change.
15 This requires every allotment to be operated.

64 Florida Agricultural Experiment Stations

Given the different demand relations for the various firms
and a cost relation G(x)76 common to all firms, the correspond-
ing net income distribution could be determined for a particular
distribution of allotments. The profit possibilities confronting
various size producers can be seen by graphically superimposing
their respective hypothetical demand curves over the per acre
cost curve assumed to be common to all producers (Figure 11).

Price and cost
(Dollars Demand Curve, firm (i)
per acre)

784.70 \A \B

I Dmand Curve, firm (j)
S, mand -

- -IC Per acre
cost curve

xi x1
Size of allotment (acres)
Figure 11.-Hypothetical demand curves and cost curves facing 2 firms
with different sized allotments.

Although producer (i) and producer (j) receive the same price,
as reflected by points A and B, per acre costs, indicated by points
C and D, associated with the operation of xi and xj acreages, re-
spectively, are quite different. Consequently, so are the net rev-
enues. Moreover, net revenue dissimilarities of this nature
would occur for other acreages.
Now certain questions relating to income equity may be an-
swered. For instance, it could be held that net income benefits
should vary directly with the size of allotment, i.e., that all pro-
"6 In particular, it was previously assumed
G(x) = Ca = bo' b'x + b/'x2 (see page 56).

Acreage Control for Flue-Cured Tobacco Producers 65

ducers should realize the same net benefits per acre regardless
of the size of allotment operated. The representation in Figure
11 strongly suggests the unlikelihood of this equity condition
being satisfied. In fact, as will be shown later, constant net re-
turns per acre would occur without exception if, and only if, per
acre costs were constant also.
Equitable treatment, from another point of view, might be
achieved if each firm were allowed to make the adjustments re-
quired to maximize net income provided each remained within
the confines of its relative position in the industry. For the
assumed cost and demand conditions, Figure 12, a and b, il-
Marginal Revenue, Firm (i) Marginal Revenue, Firm (j)
SDemand Curve, Firm (i) Demand Curve, Firm (j)
(Dollars - - - - - - - -- -
Per IP



"xi i xj 'Xj
Allotment Size (acres) Allotment Size (acres)
a b
Figure 12.-Revenue possibilities facing operators of different size allot-
ments for hypothetical demand and cost conditions.

lustrates why net income maximization could not occur simul-
taneously for the 2 hypothetical firms operating different sized
allotments. Firm (i) (Figure 12 a) would prefer to operate an
allotment of size xi' at price P2 than the larger allotment xi at
the lower price P1, because, as indicated by point A, Marginal
Cost (MC) would equal Marginal Revenue (MR) for allotment
xi', and price PZ and net revenue would be maximized. However,
Firm (j) (Figure 12 b) would be much happier operating allot-
ment xj at price P1 than the smaller allotment xj' at the higher
price P2. But, unfortunately, if relative firm sizes were main-
tained, changes desired by different producers would be incom-

66 Florida Agricultural Experiment Stations

patible. Therefore, the latter definition of equitability would
pose an impossible situation.
The validity of this contention will be further demonstrated.
Assume all firms to be faced by the same u-shaped cost function,
G(x). Although unique pairs of firms would exist for which
average cost per acre would be equal, in general G(xi) $ G(xj)

nor would the marginal cost be equal for xi J xj But if rel-
ative firm sizes were maintained for any national acreage and
the number of firms were held constant, Marginal Revenue would
be equal for all firms, as well as the prices received by each.77

"Iet the respective demand relations of firm (i) and firm (j) be
expressed by

fi(xi) P = fj(x) P = price per acre)
xi xj = allotment acreages).
Then the respective revenue functions would be

"Ri = xP = xifi(xi)

Rj xJ = xP (x)
and the marginal revenues

dx = x dx +P = X --dx- + f(xl

ji j j

But if fi(x) = P = fj(x), d[fi(xi)] = dP = d[fj(x)] also; each firm

would be confronted with the same price change, dP. Further, constancy
of relative allotment sizes implies that
x x
i. = iXJ where dxi and dx are the respective
i. ,j

changes in allotments xi and xj. If ix = xi and jx = xj, =

and -- j= P, from which -- =- But = also.
dx 3i tc xi Pi

Acreage Control for Flue-Cured Tobacco Producers 67

Thus, because the marginal revenues must be equal for all firms
but marginal costs in general would be unequal, marginal rev-
enues would never equal marginal cost (revenue be maximized)
simultaneously for all firms. In fact, the equality between mar-
ginal revenues and marginal costs could never be realized unless
marginal costs also were equal for all firms. But, then marginal
cost would equal average cost for each firm and for all firms.
Cost per acre would be the same regardless of the size of allot-
ment operated, to restate a previous conclusion. Under the lat-
ter conditions, maximization of net industry revenue would be
consistent with net revenue maximization for each firm in the
industry and income shares would be exactly proportional to
allotted acreage.
Proportional Allotments and Varying Yields.-The dimension
of the gap between the tobacco allotment distribution and the
distribution of income benefits is particularly blurred and in-
definite because of varying per acre yields. To gain an approxi-
mative insight into the distributive mechanics of the tobacco pro-
gram, it was convenient in the preceding section to provisionally
dismiss the problem of varying yields by assumption. Obviously,
if yields do vary, this assumption must be abandoned.
The family of cost curves depicted in Figure 2, page 48, pro-
vides the static classical picturization of the jumbled array of
net revenues that might be realized by a set of allotment holders
operating at different levels of yield. The u-shaped lower border
curve summarizes average cost minima associated with various
outputs. The several u-shaped curves tangent to the bordering
curve summarize average cost minima accompanying the pro-
duction of different outputs from particular fixed allotments.
The steeply sloped curves passing through the respective lower
points of these allotment cost curves depict incremental or mar-

Therefore X= or
Jx xJ x jx
dR, dR
Now, a term-by-term comparison of and j
dx, dx

dP dP
shows x + P = x + P;
1 j
that is, the marginal revenues of firm (i) and firm (j) are equal, as well
as the prices received by each. This condition would hold for all firms.

68 Florida Agricultural Experiment Stations

ginal cost changes arising from output changes for relevant al-
A number of distributional possibilities can readily be ob-
served from this schematization of costs. For example, the
hypothetical possibility of 2 different size allotments yielding
identical net revenues can be noted. The intersection of the 6-
acre and the 8-acre average cost curves indicates that about 13.5
thousand pounds of tobacco could be produced on either of the
allotments at the same cost per pound. Consequently, equal net
revenues would also prevail. However, net revenues would not
be equal for other possible levels of output individually common
to both allotments. An increase in nonland inputs to increase
output above 13.5 thousand pounds on the 6-acre allotment would
result in a higher cost per pound than for a comparable output
on the 8-acre allotment. Conversely, at lower levels of output,
inefficient yields would make tobacco production more costly on
the larger allotment. These observations would hold for other
allotment choices.
Over time, aside from differences in allotment sizes and differ-
ences in soil quality, variations in realized net incomes described
above exist because all producers do not stay equally abreast of
advances in production technology. Little more can be said here
about problems of income distribution arising from the differen-
tial application of production technology by producers-not be-
cause the generated income inequalities are not worrisomely im-
portant but because the handling of numerous individual cases
ultimately bogs down in monotonous minutiae. However, by
assuming that producers remain fairly even in technological ad-
vance, some insight can be gained into the impact of a changing
production technology upon program income benefits.
The major loophole open to individual allotment holders to
extend and improve their relative positions in the industry can
be visualized from the family of cost curves in Figure 2, page
48. At the designated support price, individual producers oper-
ating at moderate yields could, by expanding yields, improve
net revenue and invalidate the postulated quasi-demand curves
appearing in Figure 11, page 64. But a general exploitation of
this loophole by all producers would permit the reintroduction of
a set of valid quasi-demand curves differing from the former
only in structure.78 An industry-wide increase in yield would
"7 This requires a reintroduction of the assumption that any yield level
is simultaneously achieved by all producers.

Acreage Control for Flue-Cured Tobacco Producers 69

permit the establishment of a new national demand relation in
terms of acres from which new acreage quasi-demand relations
would emerge for individual producers also. With demand for
tobacco unchanged, a common change to a higher level of yield
by all producers would result in the rotation of individual pro-
ducer demand curves, in terms of acres, as suggested by Figure
13. The slope of per acre demand curves would become increas-
ingly steeper with an increase in level of yield throughout the
industry (for further discussion of this point see Appendix III).

Price per
acre (Dollars) yl Y2 Y3
y1, y2, and y3 different yields for
Shich y3 > y2 > y 1

x (Acres Harvested)
Figure 13.-Hypothetical changes in producer demand curves associated
with an industry-wide change in yield.

At first blush it might appear that the drastic changes in the
slopes of the acreage demand relations arising from changes in
yields would disturb underlying demand relationships-price
elasticity and price flexibility relations in particular.79 The in-
accuracy of this notion can readily be shown. (See Appendix
A change from allotments comprised of, say, x type acres
(low yield) to allotments comprised of, say, z type acres (high
yield), provided the same total output were satisfied by both,
would not alter possibilities of changing gross industry revenue
through the percentage manipulation of allotment sizes. For
example, if yields were suddenly doubled, total acreage and hence
the acreage in each allotment would need to be reduced by one-
Price elasticity denotes quantity changes relative to price change;
price flexibility denotes the converse.

70 Florida Agricultural Experiment Stations

half to maintain price. However, from this new position, given
percentage changes in the size of the "half size" allotments would
generate the same changes in industry revenue as would such
percentage changes in the size of allotments existing prior to
the yield change.
It can be readily seen that producers need have no fear that
a general increase in yield would have an ill effect upon gross
revenue provided acreage was kept in consistent adjustment with
demand conditions.80 sl A less optimistic assertion, however,
can be made about net revenue. If cost per pound tended to fall
with an increase in yield, higher costs arising from the operation
of smaller acreages could be partially offset by higher yields.
Obviously, a practical limit would exist for this method of cost
evasion. An expanding demand would mitigate the necessity of
reducing acreage because of increasing yields and would, there-
fore, be particularly favorable income-wise to producers.
per acre 1600- D
(Dollars) 16

Demand Relation Demand Relation
y 1000 1bs. y = 2000 lbs.

800 A

420 AC
c Mc

4 2
(x) Acres Harvested (x) Acres Harvested
a b
Figure 14.-Hypothetical demand and cost conditions facing a pro-
ducer for 2 levels of yield achieved by all producers.

"80 Producers who could not keep pace could rightfully disagree with the
"1 Changes in demand would not upset the conclusion. The "bad" effects
of a falling demand or the "good" effects of a rising demand would take
place independently of the nature of acreage and yield that determined

Acreage Control for Flue-Cured Tobacco Producers 71

The implications of some of the above statements may be vis-
ualized from Figure 14, a and b. The 2 figures hypothetically
depict how income possibilities would appear to a member of a
given set of producers operating at 2 alternate levels of yield,82
with demand for tobacco and prices of factors unchanged.
At a given level of yield for the industry, Figure 14 a, sug-
gests that an individual operating a 4-acre allotment would real-
ize a gross return of $800 (point A) per acre at a per acre cost
of $420 (point B), or a total net return of $1520. However, after
an industry-wide doubling of yield, the maintenance of price
would not allow individual operators to retain the same size
allotments. Allotment possibilities, after the yield change, open
to an individual previously operating a 4-acre allotment would
appear as in Figure 14 b. If price were maintained by applying
the same relative acreage reduction to all producers, the 4-acre
allotment would be reduced to 2 acres. From Figure 14 b, the
2-acre allotment can be seen to return a price of $1600 (point D)
per acre at a per acre cost of $720 (point E) for a total net re-
turn of $1760. In this case, because the increase in yields did not
increase per acre cost as much as per acre price (and because
of the way the demand relations were arbitrarily drawn) the
income benefit to the operator was increased by the reduction in
acreage. However, just the reverse conclusion could have been
concocted. As a side observation, it may be noted that the op-
erator of the 4-acre allotment would have been better off under
an industry-wide reduction in acreage in the first place. That
is to say, since marginal cost exceeds marginal revenue at 4
acres, the individual would have been better off operating an
allotment of about 3.7 acres (established by point C) initially,
provided the acreage operated by all other producers were re-
duced accordingly. Fortuitously, or rather by graphic coinci-
dence, after the acreage reduction, the 2-acre allotment would
allow the producer in question to maximize his share of industry
income benefits because, for this allotment, marginal costs would
equal marginal revenue (established by point F, Figure 14 b).8s
Needless to say, a rise in demand (i.e., a shift to the right of
the demand relation in Figure 14 b) would result in improved
"82 Yield values were arbitrarily set at 1000 and 2000 pounds per acre.
The appearance of the 2 demand relations before and after the doubling of
yield was established by graphics. The cost curves were determined by sub-
stituting the yield values in the empirical cost function given on page 47.
"8 Naturally, this does not mean that a maximizing position subsequent
to an acreage cut would always be superior to some previous income posi-

72 Florida Agricultural Experiment Stations

income possibilities and in expanded allotment share possibilities
for all producers.
Although interesting, the above observations are more or
less incidental in nature. The real issue centers in the compati-
bility of "program induced" yield expansion with the achieve-
ment of program objectives. The upshot of the whole matter is
that the program is not self-defeating in the sense that yield
expansion precludes the possibility of effecting income trans-
fers to the industry.84 Rather, yield expansion modifies program
achievements through a reshuffling or revision of the distribu-
tion of benefits.
Empirical Estimates of Changes in Benefits.-Changes in
salient economic features of the flue-cured tobacco industry of
North Florida between 1947 and 1957 are partially manifested
in Table 35. However, because of producer entry and exit, allot-


Average Average Average Average Parity
Year Size Yield* Cost Price Price**
Allotment* (Ibs.) per pounds Per Pound (Dollars)
(Acres) 1 (Dollars) (Dollars)

1947 3.72 1,051 .3233 .39** .444
1957 2.37 1,382 .3754 .5678* .565

Source: Annual Report on Tobacco Statistics, USDA, Production and Marketing Ad-
ministration, and Agricultural Stabilization and Conservation Committee, State Office,
Gainesville, Florida.
** Source: Annual Report on Tobacco Statistics, USDA, Agricultural Marketing Service.
t Estimated from the cost function, page 47. Under the assumption that parity prices re-
flected relative production costs for the 2 periods, 1947 costs were deflated by the ratio of the
parity price, i.e., -. Cost estimates relate to averages computed from all allotments, not
to production costs on the respective average size allotments.

ment combinations and divisions, etc., the lot of individuals con-
tinuously dependent upon particular allotments over the desig-
nated time span is not clear. Under provisions of the program,
the decrease in size of any particular allotment would have been
materially more than indicated in the Table.
A more meaningful interpretation of the well-being of allot-
ment holders over time can be gotten from Table 36.

"8 Land is judged to be an essential factor of production.


1947 1957

Acres Net Income
Net Income___ _
Acres Percent Percent
Actual (1947 equiv.) Actual is Actual (1947 equiv.)* Actual is
of Equiv. _of Equiv.

3.72 $ 246.44 2.0 1.5 133 $ 441.10 $ 310.17 142

5.00 431.25 2.7 2.3 117 676.40 542.77 125

10.00 1,132.98 5.4 4.6 118 1,762.32 1,425.97 124

"*Source: Converted to 1957 dollars by use of Consumer Price Index, 1947-49 = 100. Supplement for 1958 to Consumption of Food in the United States
1909-52, Agriculture Handbook No. 62, USDA, AMS, Washington, D. C., September 1959, P. 36.



74 Florida Agricultural Experiment Stations

Percent a
30- ,4
I '

I '. ~

I.: .

10 ..\


.59 1.09 1.59 2.09 2.59 3.09 3.59 4.09 5.09 7.59 10.09 15.00
- - Number
. . Acreage
----- Net Income

Percent b

25- A 1957
I \
20 \

I \
15 / \

10 ..

0 I I I II I I

.59 1.09 1.59 2.09 2.59 3.09 3.59 4.09 5.09 7.59 10.09 15.00
Allotment Classes (Acres)

Figure 15.-Distribution of number of tobacco producers, acreage (gross
income) and net income from tobacco by allotment classes for a 9-county
area in Florida, 1947 and 1957.'

"Allotments larger than 15 acres were divided into 15-acre and residual

Acreage Control for Flue-Cured Tobacco Producers 75

Granting the worthwhileness of these estimates, the real in-
come of allotment holders can be seen to have been more than
maintained even under severe acreage reductions.
As previously suggested, changing yields and accompanying
allotment adjustments might be expected to alter the general
distribution of program benefits. An approximate notion of
the differing acreage and income distributions occurring in 1947
and 1957 is furnished by Figure 15, a and b.86
Apparently, percentage acreage reductions, as well as other
changes, occurring between 1947 and 1957 resulted in a converg-
ence between net income distribution and gross income (acreage)
distribution. That is, income benefits in 1957 conformed more
closely to distributed acreage. Because of this development, the
bulk of allotment holders shared a larger proportion of net in-
dustry revenue.
Flue-cured tobacco production was selected for appraising
the proficiency of an acreage control and price support program
as a means of improving the income status of farmers.
The assumed inhibitive influence of the tobacco control pro-
gram may be at considerable variance with reality, since provi-
sions of the program have fallen far short of completely insu-
lating the industry against the impact of usual economic forces.
Instead of objecting to the required group conformity in their
appraisal of the program, participants implied a desire for ex-
tending the regulations of the program. Apparently, producers
view the program as the mechanism by which mutual interests
are served.
A family of cost curves derived from cost data obtained from
a sample of flue-cured tobacco producers indicated a positive net
revenue even for very small allotments. As an alternative to
net revenue, income transfers were defined and used to demon-
strate program achievements. Abnormal rents paid for tobacco
allotments in relation to rental rates for other land in the tobacco
area constituted evidence of income transfers and provided a
basis for empirical estimates.
Because the distribution of rights to produce is not accom-
panied by a well-defined corresponding distribution of realized
benefits, disagreement relative to whether the program is help-
ful or harmful to affected individuals has arisen. A framework
86 Presumably cost and demand conditions changed also.

76 Florida Agricultural Experiment Stations

for answering questions concerning industry revenue was em-
ployed for clarification. For any given national allotment, an
industry composed of least-cost allotments maximizes industry
net revenue. Although allotment sizes are not equal, the preser-
vation of a degree of dependency among allotment sizes by the
program allows the estimation of incremental industry cost,
under the existing program. Besides specifying the revenue
maximizing national allotment comprised of allotments of un-
equal size, the relationship between the level of price support and
industry net revenue was revealed by the analysis. Finally, be-
cause dependency among allotment sizes exists, distributive
shares of industry net income among allotment holders were
demonstrable. If it is held benefits should vary directly with
size of allotment, the possibility of this equity condition being
satisfied is remote. Nor, from another point of view, would
firms with different sized allotments for which costs were also
different all be able to achieve the maximum revenue possibility
for their respective shares of allotted acreage and, at the same
time, remain within the confines of their respective relative po-
sitions in the industry. Despite the equity problem, the genera-
tion of group benefits and the existing system used to distribute
benefits to members of the group are such that the program does
not suffer from a lack of grower support.
Contrary to an apparently widely held opinion, producers
need have no fear that an increase in yield per acre adversely
affects gross revenue, provided acreage is kept in consistent ad-
justment with demand conditions; however, producers unable to
keep pace with yield increases would suffer. In terms of net
revenue, yield expansion modifies program achievements through
a reshuffling of the distribution of benefits.
Empirical estimates indicate that between 1947 and 1957,
when a substantial increase in yields was accompanied by a re-
duction in allotment sizes, real income was more than preserved
under the operation of the program. Moreover, the distribution
of benefits within the group during the period was modified
through a convergence between net income distribution and acre-
age distribution. This suggests that a larger number of allot-
ment holders shared an increased portion of the industry net



Percentage of Allotments Percentage of Acreage

State Sample Area State Sample Area


0- 1.09 ....... 22.6 19.2 6.1 4.8
1.10- 2.09 ......- 42.3 41.6 28.4 26.4
2.10- 3.09 ........ 16.4 18.1 18.6 19.2
3.10- 4.09 .......... 7.9 8.7 12.4 12.8
4.10- 5.09 .......... 4.0 4.6 8.1 8.7
5.10- 7.59 .......... 3.7 4.3 10.2 10.9
7.60- 10.09 .......... 1.7 1.9 6.4 6.8
10.10- 20.09 .......... 1.2 1.4 7.4 7.8
20.10- 30.09 .......... 0.2 0.2 1.6 1.8
30.10- 40.09 ..........
40.10- 50.09 ....... ** 0.3 0.3
50.10-100.00 .......... ** 0.5 0.5

TOTAL ............ 100.0 100.0 100.0 100.0

Less than 0.05 percent.
** Less than 0.1 percent.
Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.


County Total
0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10-
1.59 3.09 4.59 6.09 7.59 9.09 15.09


Madison ................ 387 205 52 21 5 6 8 684
Lafayette .............. 105 148 50 28 5 6 6 348
Gilchrist ................ 134 45 11 190
Alachua ................ 123 127 41 37 19 11 17 375
Union .................... 58 36 20 3 2 3 3 125
Baker .................... 74 29 4 1 108
Columbia ............. 307 209 63 11 8 2 4 604
Suwannee .............. 420 481 194 64 22 17 21 1,219
Hamilton .............. 107 119 60 39 24 12 25 386

TOTAL ............ 1,715 1,399 495 203 86 57 84 4,039

Source: Compiled from records of the Agricultural Stabilization and
Conservation Committee, State Office, Gainesville, Florida.

78 Florida Agricultural Experiment Stations



County I Total
0- 1.60- 3.10- 4.60- 6.10- 7.60- 9.10-
1.59 3.09 4.59 6.09 7.59 9.09 15.09

Sampling Fraction

.02 .02 .04 .10 .26 .40 .36


Madison ........... I 8 4 2 2 1 2 3 22
Lafayette ............. 1 2 3 2 3 1 2 2 15

Gilchrist* .............. 3 1
2 4 5 4 6 30
Alachua* .............. 2 3

Union* ................ 1 1
Baker* .................. 1 1
1 3 2 2 29
Columbia* ............ 6 4 3 _

Suwannee ............. 8 10 8 6 6 7 7 52
Hamilton .............. 2 2 2 4- 6 5 9 30

TOTAL ............ 33 29 23 20 22 22 29 178

Counties grouped according to diagram because of the scarcity of allotments in certain
size strata.

Acreage Control for Flue-Cured Tobacco Producers 79



m t .- 3 3 3 oop ^30 j 't
0a 00 o<<- i 0

1 .4400 .61 1420 46 .3217 1.70 1440
2 .6915 .55 854 47 .3742 2.59 1471
3 .4149 1.04 1306 48 .2343 3.45 1454
4 .5839 1.19 1007 49 .3512 3.58 1957
5 .6816 1.48 1423 50 .2597 4.37 1089
6 .3632 .99 1022 51 .3092 3.31 1479
7 .3141 .31 1090 52 .2162 3.36 1684
8 .7297 1.07 1000 53 .3247 3.38 1381
9 .5945 1.07 1198 54 .3948 4.04 1398
10 .4908 .78 1321 55 .3967 3.52 1319
11 .5026 .33 1879 56 .2639 3.51 1494
12 .4559 1.58 1366 57 .2380 3.18 1855
13 .3984 1.17 1053 58 .3912 4.13 1337
14 .2452 .92 1626 59 .4316 3.34 1004
15 .5180 .97 703 60 .2243 3.94 1811
16 .4263 1.26 1332 61 .3119 3.35 998
17 .9168 1.10 734 62 .3395 3.11 760
18 .2766 1.13 1042 63 .4896 3.33 1107
19 .6289 1.48 954 64 .2838 3.40 1234
20 .2822 .61 1620 65 .3809 3.91 1266
21 .6282 .75 1541 66 .2065 3.51 1945
22 .3975 1.13 1965 67 .3565 3.74 1210
23 .5353 2.75 464 68 .3331 4.23 893
24 .3947 2.96 990 69 .2902 4.30 1488
25 .3276 2.58 1179 70 .4245 3.24 1575
26 .4154 2.11 1500 71 .3175 6.08 1986
27 .6076 1.85 1102 72 .3897 5.00 1366
28 .4587 2.33 1484 73 .2009 5.57 1454
29 .3735 3.09 1184 74 .3011 5.99 2055
30 .6985 1.76 1085 75 .2854 5.00 2040
31 .4630 2.54 1368 76 .3227 4.86 1645
32 .3754 2.46 1500 77 .2978 5.66 1382
33 .5410 2.96 1500 78 .3544 4.67 1080
34 .6580 2.46 1305 79 .4202 5.36 1115
35 .4852 2.59 675 80 .3342 5.92 1479
36 .3477 2.75 902 81 .3272 5.88 1121
37 .2352 2.05 1497 82 .2670 4.94 1677
38 .7233 2.50 965 83 .3960 7.61 1438
39 .2940 1.98 1630 84 .3125 8.70 1988
40 .6495 1.69 1096 85 .2695 8.17 972
41 .3466 2.96 1004 86 .2587 7.88 1496
42 .2827 1.80 1651 87 .3430 8.03 1632
43 .2779 1.98 1264 88 .4514 8.40 926
44 .4140 2.82 827 89 .3318 8.03 2032
45 .3674 2.04 2017 90 .3257 8.67 1764
1 1 1 _

80 Florida Agricultural Experiment Stations


91 .1809 9.07 1886 127 .4117 4.86 1172
92 .2606 7.68 1489 128 .4992 4.94 1198
93 .2270 8.60 1663 129 .3726 6.62 1500
94 .2907 8.46 1566 130 .2503 7.40 1932
95 .2234 9.40 1800 131 .3122 6.50 1344
96 .2933 10.83 1632 132 .2704 6.60 1785
97 .3233 14.06 1112 133 .3083 6.50 2689
98 .3107 9.66 1884 134 .3473 6.42 1876
99 .2694 11.28 1166 135 .3109 6.44 1400
100 .2526 9.31 1395 136 .3210 7.58 2085
101 .3069 13.61 1824 137 .3571 7.54 1733
102 .3617 10.50 1520 138 .2310 7.01 1616
103 .2231 14.10 1985 139 .2795 6.50 1531
104 .2551 9.16 2215 140 .1915 7.15 2521
105 .2567 12.38 1422 141 .2039 7.53 1620
106 .2788 13.32 1907 142 .3677 7.21 2259
107 .3781 10.57 1573 143 .2394 7.04 2221
108 .2236 9.87 2012 144 .2254 6.39 1459
109 .3942 10.24 1622 145 .3693 7.13 1581
110 .3097 14.06 1770 146 .2891 7.29 1917
111 .2718 14.35 2104 147 .3025 6.77 2099
112 .3647 11.37 1306 148 .4009 6.54 1036
113 .3605 9.30 1434 149 .4333 7.40 1067
114 .2347 9.94 1838 150 .2998 7.05 1835
115 .2254 11.29 2254 151 .3963 6.48 1356
116 .2631 11.14 1825 152 .3887 6.30 1500
117 .3458 9.28 1581 153 .2341 6.62 1870
118 .2618 11.30 1986 154 .4267 8.17 1362
119 .3097 9.38 1840 155 .3872 8.11 1880
120 .3491 13.01 2036 156 .3906 8.67 1670
121 .3653 5.57 1416 157 .3418 7.70 1877
122 .2774 5.00 1919 158 .3142 8.48 1210
128 .2431 6.03 1805 159 .4307 9.03 1250
124 .2555 5.54 1567 160 .2060 7.62 1431
125 .2823 4.86 1308 161 .3329 8.63 1525
126 .2254 4.81 1300

Fifteen observations not usable.

Acreage Control for Flue-Cured Tobacco Producers 81


A generalized expression of the demand for tobacco will be
of assistance in demonstrating that the relation between price
and acreage becomes steeper with an increase in yield. Suppose
that the relation between price per pound of tobacco and national
output is given by P = H(Q), i.e., price (P) bears some known
relation to quantity (Q). But for any given yield prevailing
throughout the industry, a perfectly legitimate relation would
also exist between price per pound and national acreage such

P = H(Q) FA(yI X) = F2(yjZ),86

for which P = price per unit (lb.) of tobacco,

Q = total output of tobacco in pounds,
X = national acreage with a fixed yield yi,

Z = national acreage with a fixed yield yj,

subject to Q = yi y = y J yj.

Now with demand unchanged, a price change for tobacco generated
by a change in output would be given by

dP I1 dX 2 dZ
dQ Fx dQ 5z dQ
oP- -o z- "

1 2
or dP = -5 dX = dZ-

aF1 ;F2 dZ
and = z dz ax

But, from Q = yiX = yjZ,

"86yi and yj are regarded as parameters in the 2 relations. For brevity,
possible variables other than acres are omitted.

82 Florida Agricultural Experiment Stations

;i dZ
Z = X and d I
y dX y r

aP2 a op, y,
therefore, ) = -2 = -2Z yj

Now --- is the slope of the curve relating price of tobacco (P) to

acreage (X) for yield (yi) and -s-- is the slope of the curve relating

price of tobacco (P) to acreage (Z) for yield (yj).
P)2 y y 1 6F1
Consequently for --- =

F2 )F
the slope --- is seen to be greater than the slope for values

of X and Z simultaneously satisfying the relation Q = yiX = yjZ, provided

yield (yj) is greater than yield (yi).8

"8A more general but less apparent proof may be offered. let
price (P) bear relations to quantity (Q), acreage (X) and yield (y) such
that P = H(Q) = F(X,y) subject to
Q = X.y.
Form the function G, for which
G = F(X,y) B(X-y Q).a Then for
2G )F
-; = By = 0 and

-- = -- -BX = 0 it follows

aF aF
S= By and -- = BX.

These conditions are necessary to the achievement of the unique price (P)
associated with a particular quantity (Q). Now -- = By implies that

the slope of the function relating price (P) to acres (X), i.e., -F-,
"aPaul Anthony Samuelson, Foundations of Economic Analysis, (Cambridge, Harvard
University Press, 1948), p. 60.

Acreage Control for Flue-Cured Tobacco Producers 83

Although implied by the above, it remains to be shown that the

curves summarizing the relation between price per acre and acres would

become more steeply inclined with an increase in yield.

Suppose that prices per acre for yield situations yi and yj are

respectively expressed by Px and Pz, then from

P = H(Q) = F1(yi,X) = F2(yJZ),

P = yF1(yX) and

Pz = YjF2(yjZ).

dP aF
Also, d = yi and

z 2

would become steeper with an increase in yield (y) [and decrease in
acreage (X)] for values of X and y satisfying X*y = Q, Q = a constant.
As might be expected, B = the slope of the relation between

price (P) and quantity (Q).
dP F dX 6F dy
From F(X,y); Q = _- + d

F 3F
By substitution of -- = By and = BX

dP dP dX dy
in the above relation, becomes = By + BX
dQ dQ dQ dQ

or 7Q= B _dX + ). But from Q = Xy ,

dQ = ydX + Xdy and d- = +- = 1.
dQ dQ dQ

Therefore --= B -l- + = B (1) = B. Obviously, for

dP 6F
respectable demand functions -d-, -- and all would be negative

in sign.

84 Florida Agricultural Experiment Stations

aF2 I
But .'- was previously shown to equal j I By substitution,
Y x By substitution,a

-- = YJ i z l as opposed to

dX Yi -X1

S2 2
from which z L = y -"

That is, for an increase in yield and the establishment of a new national
allotment consistent with (P) and (Q), the slope of the curve expressing
the relation between price per acre and acres would be the square of the

ratio of the new yield to the previous yield, J- times greater

than the slope of the relation existing prior to the change in yield.
From the foregoing section, P and P the prices per acre for

yield situations yi and y., respectively, could be expressed as

Px = yiF1(Yi,X) and Pz = yjF2(j,Z). Then by definition px and ep z

the respective price flexibilities for, say, low (yi) yield type acres X

and high (yj) yield type acres Z are given by

dPx X IF, x
x X 1
"X= --d P Ji P

and z Z F2 Z
dP P
z Z aE
Sand aPz = z yj -

Jyt ax Pz

Acreage Control for Flue-Cured Tobacco Producers 85

IF2 Y j IF1
. . the latter expression arising from = --i .
But Px = yiP and Pz = YP, i.e., the respective price per acre equals

the price per pound multiplied by the respective per acre yields.
Therefore, eP =Yi -- -y = -p and

z = y j Y I y Z
z FI a Y _

= Y T 1 jP

"P -- p since Z = X

It follows that ep = ep i.e., price flexibilities for values of
x z

Q = yiX = yjZ would be equal.

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