Joe McDaniel by John Klee - Mary Leon[Begin Tape #1, Side #1]
KLEE: The following is an unrehearsed interview with Mr. Joe McDaniel of
Cynthiana for the Kentucky Oral History Commission. The interview is being conducted on July 19, 1985 at the offices of the Burley Tobacco Growers Cooperative Association. And the interviewer is John Klee. Mr. McDaniel, you've been working with the Cooperative for some years. Tell me a little bit about your background, where you born and raised, and . . .MCDANIEL: Well I was born in on November 22, 1910. And I've been associated with
the tobacco effort for right at thirty years, and a member of the bur-, Burley Board. And we've had to . . . our ups and downs over the years, up until 1982. We have managed to conduct the loan program in conjunction with Commodity Credit, a branch of the federal government in supporting the price of burley tobacco. And it has been of inestimatable [inestimable] value to the farmers that produce burley tobacco.KLEE: Tell me how the . . . the Burley Growers Cooperative works in conjunction
with the whole program. For example, if I'm a farmer and I have a pile of tobacco on the warehouse floor, now when does the cooperative get it?MCDANIEL: Well, when the farmer takes his tobacco to the warehouse floor, it's
graded by a government grader, and each grade has a support price, according to the quality and so forth. And if fails to bring a dollar over the support price for that particular grade, it automatically goes to the loan program. We take that tobacco and process it and put it in stripped grades. Those stripped grades are made up of some several different grades of that same quality tobacco that we're told that the manufacturers recommend it to go in that stripped grade. We have, I think, fifteen different stripped grades made up of . . . of the total grades that appear on the floor. Some will mingle with the others; some won't.KLEE: Now there's dozens of those grades on the floor, right?
MCDANIEL: Yes, there's a hundred . . . over a hundred grades.
KLEE: I see. So you kind of reduce that down to these fifteen stripped grades?
MCDANIEL: Fifteen stripped grades that the manufacturers say that they can use,
you know.KLEE: Now you . . . you more or less confer with the manufacturers . . .
MCDANIEL: That's right . . .
KLEE: . . . find out what they might want . . .
MCDANIEL: . . . they . . . they set it up and recommend that these particular
grades go into this strip plan.KLEE: Okay. Now you don't actually take possession of the tobacco. You . . .
MCDANIEL: We just act as agent for the federal government in carrying on the
support program.KLEE: The Growers Association does?
MCDANIEL: Yeah.
KLEE: The government's more or less said we're gonna let you handle this tobacco
. . .MCDANIEL: That's right. We have a contract for the . . . with Commodity Credit
of the tobacco . . . agriculture department in carrying on this activity.KLEE: Now the . . . I've heard people use the expression the government got that
tobacco; in effect, that's really not true is it?MCDANIEL: Well, it still belongs to the farmer, and if we can process and store
it, and some future date we have a buyer for it, and we can sell it at a profit or even [inaudible] out on it, why we sell it.KLEE: Sure.
MCDANIEL: Course in the meantime, we . . . the farmers co-op is carrying on the
storage costs and the interest involved.KLEE: Yes. And the processing [inaudible], all those costs add up.
MCDANIEL: Sure. Absolutely.
KLEE: Now the . . . Cooperative is . . . is actually controlled, then, by the
farmers that are involved in the program?MCDANIEL: Well, yes, to a certain extent. Course we are under the regulations of
the Department of Agriculture. And course they have the final say. If they say sell a crop, why we have to sell it.KLEE: For example, you're the president of the . . . of the Cooperative
Association. You were elected, I guess, by the board of directors.MCDANIEL: We . . . we have twenty-two different districts, made up of our board
here. And three representatives at large, which makes twenty-five. They are elected in these different districts, and they constitute the board. And the board in turn elects the officers of the Association.KLEE: And they were . . . these . . . these people out there in these . . .
district representatives were elected by the farmers?MCDANIEL: That's right.
KLEE: They're involved in the program.
MCDANIEL: That's right. Anybody that's ever delivered tobacco to the Association
is a member of the Tobacco Growers Co-op. Automatically.KLEE: Yeah, now your history goes back over . . . over half the history, I guess
of this organization, but your history even goes back farther than that. Can you tell me a little bit about the early history?MCDANIEL: Oh, I'm not too familiar with it. I know they had a terrible time. The
first co-op, you know, they didn't have any teeth in it. Any federal law. You could sign up that you'd hold your tobacco and hold it for a price, but the person that didn't sign, why he dumped his tobacco and got a better price than the ones that held it, you know. And that . . . over trial and error, well actually, there's been people killed over this thing, you know.KLEE: [chuckle] Yeah, that's true.
MCDANIEL: And tobacco beds sowed in grass seeds, and burned, and so forth. Well,
even in Cynthiana they had a killing over it.KLEE: That . . . that was that early . . . [inaudible]
MCDANIEL: Yeah.
KLEE: But then it was during the Depression, I guess, when the government got
into the . . . the AAA [Agriculture Adjustment Act] programs and . . .MCDANIEL: That . . . that's when . . . that's right.
KLEE: Got some teeth.
MCDANIEL: Of course, Barry Bingham, the editor of the [] Courier-Journal was
quite instrumental in promoting this thing.KLEE: I see.
MCDANIEL: I think he let the . . . let the . . . I guess, the cooperatives a
million dollars to set . . . help set it up. And the congress finally put teeth in it. And that's when we began to have stability on price supports, and production control.KLEE: So, you know, in your, in your tenure with this . . . with this group,
those . . . the price supports and the production control have kept the tobacco farmer in pretty good shape?MCDANIEL: Yes, we . . . we've managed. Course over the period we've come from a
very low price up to $1.88 I believe may be the top at one time. So we . . . we were experiencing inflation over that time. Then in 1982, experienced the added tax, double taxation, from eight cents a pack to sixteen cents. Federal tax. Outside of . . . of various state taxes, increasing tremendously. And even city taxes in some instances. Then we had the health problem come along on us. Then we had the situation of the high dollar in relation to foreign currency, and that slowed up exports.KLEE: Um, hmm. All this has hit at the same time.
MCDANIEL: All hit at the same time. And, well, just this past year in fact,
cigarette consumption is down rather desperate . . . drastically.KLEE: Um, hmm. Let me take you back to when you first became affiliated with the
organization. I guess it would be the mid-50's.MCDANIEL: Yes.
KLEE: You came in . . . on as a director at that time?
MCDANIEL: That's right.
KLEE: Okay. What was the . . . what was the burley situation like then, as far
as the supply and demand, those kinds of things?MCDANIEL: Well, that one year there, we had a . . . a tremendous oversupply . . .
KLEE: Oh, you did?
MCDANIEL: Along about that time, Mr. John Willie Jones was president at that
time. And Mr. John Berry was . . . was the vice president as well as legal counsel. They had a lot of . . . of top quality tip tobacco and red tobacco, and they weren't . . . the cigarette manufacturers wasn't using it at that time. And incidentally now that's the type they're primarily wanting, so . . .KLEE: You've seen a change in even what . . . so anyway, what I was fixing to
tell you, I was told that . . . I wasn't present, but . . . a fella name of Dick Travis came by, and he was a farmer, and had had experience in blending. He was a blending expert with various companies. He said, "I think I can sell this tobacco for you." So they put him on the payroll, and he actually sold this tobacco all over the world. And got them over that hump.KLEE: I see.
MCDANIEL: But it was just fortunate he came by and he . . . he did a splendid
job in relieving that situation at that time.KLEE: Now those . . . those . . . the people that the Co-op has to deal with,
the manufacturers and . . . and . . . and any kind of customer I guess you could find . . .MCDANIEL: Any customer that's certified and has got the money can buy tobacco.
KLEE: Now what . . . how do those . . . have those customers been fairly
consistent over the years? For example, staying . . . like in the 1950's?MCDANIEL: That's right. They . . . we just took really the overflow. Course the
companies knew it was available here, whatever time they saw fit to buy it, you know. And it's worked very well with them, I think. But now we've got well over five hundred million pounds.KLEE: Well back in . . . when you first went in and the . . . this . . . this
operation was working very, very smoothly . . .MCDANIEL: Very nicely.
KLEE: . . . because at that time, the farmers didn't have any extra costs to pay
for this program.MCDANIEL: That . . . that's right. Well, in 1982, as you very well know, the
government said that in order to have this program, you've got to guarantee that there won't be any loss to the taxpayers which were involved in it.KLEE: Well now, address that issue. You know, that was . . . that was a charge
that, you know, we shouldn't lose any money on this, but had the Co-op really lost very much money over the years?MCDANIEL: The Burley . . . Burley Association hasn't lost. In fact, up until
1982, we had returned to the farmers about $32 million dollars in gains over the period.KLEE: Now tell me how that would work. For example, you took the . . . the . . .
the tobacco didn't bring the . . . the price, and you bought it. And of course you had to process it and store it, pay any interest on it . . .MCDANIEL: That's right.
KLEE: . . . now where did that money come from to do all that?
MCDANIEL: That comes from the government.
KLEE: From the Commodity Credit association. Now do you . . . do you have to pay
them back with interest?MCDANIEL: Oh sure.
KLEE: I see.
MCDANIEL: Absolutely.
KLEE: So they just gave you kind of a . . . you know, they said, [inaudible] for
the loan . . .MCDANIEL: Well, the history of the program, we had been able to mark up our
product and that's to cover the cost.KLEE: I see.
MCDANIEL: Plus $32 million dollars.
KLEE: Right. And that was returned to the farmers?
MCDANIEL: Yes. Course it builds up by . . . by the month, you know.
KLEE: You mean, the cost?
MCDANIEL: The cost, yeah.
KLEE: Now those . . . when you talk about those processing costs and so forth,
who does the . . . who does the Co-op deal with? The different people throughout the state?MCDANIEL: Well, of course, we deal with . . . with the processors first, you
know. And the storage people which are generally the processors. And they agree on a carrying charge, and that's okayed by the Commodity Credit. Practically all the things we do is passed on by the department, you know.KLEE: They have to be checked on.
MCDANIEL: Yes.
KLEE: Now the Commodity Credit, is it really under . . . it's really under the
auspices of Department of Agriculture?MCDANIEL: That's right.
KLEE: I see. I see. So, are those costs fairly consistent across the state? For
example, if you're dealing with a processor in . . .MCDANIEL: Oh yes.
KLEE: . . . and a processor in Maysville . . .
MCDANIEL: We have to be.
KLEE: Have to be the same?
MCDANIEL: Because there's no one processor, no two processors, or even three can
process two or three hundred million pounds of tobacco.KLEE: Right.
MCDANIEL: And they're located in strategic places where the shipping charges,
getting the tobacco to and from the storages, you know, that has a . . . quite an impact on the cost, you know. We wouldn't wanna take tobacco for . . . in , for instance, or and take it to Maysville.KLEE: Right.
MCDANIEL: Or vice versa, you know.
KLEE: Yes sir. Now the . . . this organization is called the Burley Co-op. Does
it include more than one state, for example?MCDANIEL: Oh yes. We operate in five states: , , , , and .
KLEE: I see.
MCDANIEL: That . . . that's five?
KLEE: Yes sir. So you . . . you-all are taking under loan tobacco from all those
different . . .MCDANIEL: Yes.
KLEE: . . . [inaudible]
MCDANIEL: Now we have a . . . a comparable association in . Tennessee
Stabilization, they operate in and and . . . and the northern part of where they grow the burley.KLEE: Now they're . . . yeah, they're dealing with burley also.
MCDANIEL: Yes, same set-up, same prices. We . . . we integrate them.
KLEE: How is the . . . the cooperation between those two organizations?
MCDANIEL: Splendid. Splendid. No problem at all.
KLEE: I see.
MCDANIEL: But you know, I don't know if this is the proper place to inject it,
but really what caused the dilemma we're in at present, to be truthful . . . as I view it . . . [inaudible] but flue-cured tobacco not maintained a true supply situation.KLEE: Right. Since you brought it up, let's go ahead and talk about that now.
How . . . now the flue-cured has a similar organization like this.MCDANIEL: That's right.
KLEE: What . . . what has gone wrong there? Cause they have . . . they've had a
big oversupply in the last . . .MCDANIEL: Oh yeah, and the government is . . . prior to 1982 crop, they've got
several hundred million pounds of tobacco that the government's gonna take the loss on.KLEE: They are gonna do that?
MCDANIEL: Oh, no question. They've discount-, discounted it. Well, you can buy
tobacco there now for fourteen cents a pound.KLEE: I didn't . . . I didn't realize that.
MCDANIEL: Discounted up to ninety percent of the cost of it. And they still got it.
KLEE: Still can't sell it.
MCDANIEL: Yeah.
KLEE: Well, what's the problem? Is it . . . just too much of it or . . .
MCDANIEL: The world's full of burley tobacco. It got so . . . remunerated,
everybody wanted to get in on a tobacco program. And now we're faced . . . we've got to lower our support price, or we're out of business. We're competing with foreign tobacco producers all over the world. And we've got to meet their . . . got to be market oriented or we're not gonna sell our tobacco.KLEE: Now, have you noticed . . . course you deal with customers . . . you deal
with very many foreign customers?MCDANIEL: Oh yeah, through dealers. In fact, our . . . the original law, as I
understand it, we sell tobacco to anybody that has the proper credentials, and that . . . the law says we should go through the regular channels of trade. So we go through the Export Association.KLEE: Now have they . . . when the dollar got so strong, the supply got so big,
did you notice a . . . a drop in the feelers out from the dealers? They just weren't interested much anymore?MCDANIEL: Well, course they . . . they import it as well as export it.
KLEE: Right.
MCDANIEL: So it's a two-way street. They're in business for their directors like
we are for the farmers. So they import, and to be truthful, the big companies in this country that supported foreign-grown tobacco, they furnish the money. They know how . . . they've taken experts out of this country and sent them to foreign countries to teach them how to do it.KLEE: So those .
MCDANIEL: So that's the competition you're involved in.
KLEE: They've kind of created their own separate market, other than .
MCDANIEL: That's right. And course when the international trade commission came
along, it votes five to one that imports are not directly detrimental to our own tobacco growing industry, why you're at the mercy of tobacco all over the world.KLEE: Now you . . . were you involved in trying to fight that decision, of
trying to influence [inaudible] . . .MCDANIEL: Oh sure, sure. That . . . there's nothing else to do, you know.
KLEE: You saw that as really one of the main problems [inaudible] . . .
MCDANIEL: I think that is a . . . it made a tremendous effect.
KLEE: Going back to that flue-cured oversupply, what did they do wrong down
there? Did they just not . . .MCDANIEL: Well, I'm not . . . I just really don't know the details, but I do
know the end result.KLEE: Right. And of course, they were in such a dire situation, people that
didn't really know threw in the air-cured people with the flue-cured, so we're . . . this area's, to a certain extent, paying for some of their mistakes, you think?MCDANIEL: Well, we're gonna take . . . we're gonna take the rap along with them.
KLEE: I see.
MCDANIEL: There's no question about that, cause we're all together when we go to
congress. At least we hope we're together. I can't say that there's any unity from their standpoint, but as far as burley's concerned, we're pretty well identified.KLEE: I wanna . . . I wanna get into that issue after we trace more of the
history. In the 1960's, of course again you were still on the board at that time. What . . . that was when the health scare first came out. Did you see any changes in the business of the co-op at that time? Did it affect . . .MCDANIEL: Oh, very little. Very little. But it gained momentum as the years
passed, you know. And it . . . it has . . . well, this labeling on cigarettes, for instance, the packet. And anti-smoking places.KLEE: You believe it has . . .
MCDANIEL: Oh, I'm sure it has a definite affect.
KLEE: What about the switch from . . . you talked about there was an oversupply
in the 50's. What was the supply like in the . . . in the 60's?MCDANIEL: Oh, some years there, we took a tremendous amount of tobacco cause we
managed to store it and come out on it all right. Course it was some years over history, some years we didn't . . . we lost some money. But we, over the good years we managed. Overall, the picture has been good.KLEE: Well, the reason I'm asking that question is I think some people look at
the oversupply today and maybe think it's kind of a unique situation. But the co-op's dealt with oversupplies in the past.MCDANIEL: That's right. But we had different conditions. We didn't have a
decrease in consumption. Or increase in production. Well, the 1982 crop, we had 810 million pounds of burley tobacco, green weight. The biggest crop in history.KLEE: At the same time, you already had a . . .
MCDANIEL: Had good support on it, you know. But these things caved in and we
found ourselves in the position we're experiencing today.KLEE: Now when they switched from the acreage controls to the poundage controls
was that in a response to an oversupply?MCDANIEL: Well, yes. You know [chuckle] we've often referred to it as . . . when
they measured these fields, they used rubber tapes, you know. Stretched the . . . and that contributed to it. It really . . . we were controlling pounds and not acreage. And that helped tremendously at that time.KLEE: And then the . . . the next big change, I guess, in the actual program was
this no-net cost . . .MCDANIEL: That . . . in `82 that . . . that's what put a cap on it.
KLEE: Well, tell me how you feel about that or . . .
MCDANIEL: Well the first year, we paid a cent a pound. And we took a tremendous
amount of tobacco. Next year, it went up to nine cents. This year, eighty-five. If something's not done to lower the support price from $1.75, we're gonna take another walloping. And the no-net cost will probably be fifty cents a pound, in order to guarantee no losses.KLEE: Now that money that they take in, does . . . does the co-op deal with that
money in any way?MCDANIEL: We . . . we collect it from the warehouse. It flows through us,
through the bank, and goes directly to the Commodity Credit. And we draw interest on that, which is about . . . now, there's about $104 million dollars in that fund. And it varies as to what we pay on our interest, on our borrowing. It's somewhere about a cent and a half to two cents below that. They pay us . . . and then that goes to the cost of manipulating the thing.KLEE: Yes sir. We . . . we been talking about the Commodity Credit association.
Tobacco is considered, and has been considered historically a commodity.MCDANIEL: That's the beauteous part about it. But it . . . at the same time, it
keeps . . . well, burley does. Now flue-cured have problem with bugs, you know. They have to spray so often. It's high sugar content. But burley tobacco'll keep. We've had tobacco that's ten years old, no problem.KLEE: Is that right? Uh-huh.
MCDANIEL: And they like the quality of burley tobacco in the blended cigarette.
It seems that this area, this burley area that . . . it's much higher quality and they've got to have some of that to mix with this bland, imported tobacco. And I think it'll always be a differential in the price of it, the original price. Course they have some import duty now to pay on it.KLEE: Right. So you . . . you do believe that there's this uniqueness about the
burley grown in this area?MCDANIEL: Oh ab-, absolutely.
KLEE: There's demand by the companies over that?
MCDANIEL: That's right.
KLEE: The reason I mention that, about the commodities, none of the other
commodities that are protected have to do this same kind of thing that tobacco's doing. Do you feel like it's been singled out or . . .MCDANIEL: Well tobacco, unfortunately, is not a food. It's something that they
say is killing everybody, but I've been smoking for, oh, fifty years, and I'm still around. [chuckles] I don't . . . it may not have helped me, but I enjoy it. But . . . well, take for instance, the dairy people. They have high supports, and they don't have any production controls. And they have given away dried milk, cheese, butter, and if they don't control production, really, they'll fill with dried milk.KLEE: That's true. Well that . . . that's what unusual.
MCDANIEL: So it don't . . . really don't make sense when you get down to the
common sense of it, the way I view it.KLEE: The government is taking substantial losses on these other commodities.
MCDANIEL: Oh sure.
KLEE: But it doesn't wanna do the same thing for tobacco.
MCDANIEL: Well, wheat, corn people . . . they don't wanna have any production
controls. It's all free will. Nothing mandatory about it. And they've had, up until now, pretty good support. Now, I guess all grain bins in the is full of wheat and corn.KLEE: Yeah, a tremendous crop. I think this . . .
MCDANIEL: So you got to have a balance between supply and demand. All goes back
to supply and demand.KLEE: Now who . . . who established that over these years that you've worked at
the co-op?MCDANIEL: Well, it's based on parity.
KLEE: Explain that.
MCDANIEL: Parity of costs, parity of right. The livelihood. And of course, we've
maintained, largely through Mr. , that the farm . . . the index had the prices of feeder cattle, for instance. Or the price of a hundred thousand dollar combine went into the cost of burley tobacco. Well, that should never have been. And the cost, really, of buying the right to grow tobacco. The fellow . . . well, tobacco support $1.75, whatever you got for it, he could afford to go out here and buy some . . . buy some [inaudible] rent it. Well, that really don't go into the cost of producing burley tobacco. If I don't wanna buy it, my cost is related to fertilizer . . .KLEE: Labor.
MCDANIEL: . . . and labor and chemicals to some extent.
KLEE: So what you're saying is that the . . . this parity price has been
overblown by all these [inaudible] . . .MCDANIEL: They should never been in there. As I view it. But economists put
those in there, to our . . . maybe, detriment over the years.KLEE: You think that was politics or . . . or to try to please the farmer [inaudible]?
MCDANIEL: Well, I . . . I would hes-, hesitate to say this, but you know, this
is the age of information. We punch these commuter . . .KLEE: Computers?
MCDANIEL: . . . computers and if you punch the wrong button, why it's not gonna
be right. And if you punch the right button, you get the information, but it don't give you the wisdom to interpret those. That's the main fallacy. And you got . . . you got to be prudent in anything you do. And you got to base it on experience and some wisdom involved.KLEE: It's all these buttons pushed out a high price, but we priced ourselves .
. .MCDANIEL: We've priced ourselves out of the world market. Even the domestic
market to some extent.KLEE: When did . . . at what point . . . of course, you know, this . . . this
went on for a . . . for a long time, the . . . the co-op program did. When were . . . when did we begin to . . . to price ourselves out? Do you think it's just been the last three or four years?MCDANIEL: Oh, I think the crux of it came in `82.
KLEE: With the big oversupply and the . . . and the [inaudible].
MCDANIEL: And the . . . and the decreased consumption. And these things have
contributed to it. Taxes, high dollar . . .KLEE: Health issue.
MCDANIEL: . . . health issue, import of burley tobacco.
KLEE: Well some . . . of course I think when they . . . when they argue these
kinds of things and it's yet to be seen whether they'll take that tax off that they said was a temporary . . .MCDANIEL: It's awful hard to get a tax off after we once put it on. That's my
experience in dealing with [inaudible] tax.KLEE: People have argued that that had . . . that won't affect consumption. But
you believe the price . . .MCDANIEL: Oh, definitely. Definitely. After they put that eight cents on,
there's figures showing it dropped.KLEE: Yeah. Yeah, I've seen figures and something like that said . . .
MCDANIEL: I don't recall those figures, but I know it dropped.
KLEE: Yeah. Um, hmm. And then the health issue, as you said, is there.
MCDANIEL: Added to it.
KLEE: High dollar . . . the . . . the Department of Agriculture, through the
Secretary of Agriculture, they have something to do with establishing the quotas, don't they?MCDANIEL: Oh yes. The Secretary of Agriculture has the final say-so. He
announces . . . his department heads set the quota, you know.KLEE: But now that's limited according to the . . . I guess, the confines of the program?
MCDANIEL: Well, traditionally, the program is set up on a supply figure of about
2.6 to 2.7 year supply in loan.KLEE: I see. That's what they . . . that's . . . that's what . . .
MCDANIEL: That was the ideal situation . . .
KLEE: [inaudible]
MCDANIEL: But it got up, we got over a year's extra supply. We got over 3.5
year's supply.KLEE: Is that currently now?
MCDANIEL: Yes.
KLEE: Now even that's . . . those are averages, individual groups of tobacco, as
you said, might be in storage six or seven years.MCDANIEL: Yes.
KLEE: Eight or nine years?
MCDANIEL: Yes. But the . . . you're . . . you're thinking about the overall supply.
KLEE: Overall, that includes what's under . . .
MCDANIEL: ...under loan, government loan, the supply of the users and the exporters.
KLEE: That seems like a significant amount of tobacco to keep, you know, there'd
be two and a half years [inaudible] . . .[End Tape #1, Side #1]
[Begin Tape #1, Side #2]
MCDANIEL: When that . . . when that comes out, seems like I talk awful low. Do
you . . . do you detect that when I talk to you?KLEE: Not really. I . . . sometimes I can't tell the way these . . . these work
very good either.MCDANIEL: I get all the time. We have a recorder, you know, and I listen to it
once in a while. It comes out way low. And I . . . I don't realize I'm talking that low when I talk.KLEE: You kind of got a . . . a . . . you know, kind of a low, easy-going voice,
so maybe it picks up that way.MCDANIEL: That's . . . that's the way [inaudible].
KLEE: This is side two of a tape with Joe McDaniel. You were talking about why
you need that two and a half year supply ahead. You know, you mentioned that somebody might be conservative as far as buying . . .MCDANIEL: Yes, well they . . . it's . . . it's worked . . . worked fine and the
companies, I think, have . . . have taken advantage of it. [inaudible] like . . . like it.KLEE: Well, that's what I was gonna say. Actually, this is . . . this is a real
. . . this is a real boon to the companies, to make the . . . so they can be ensured of a constant supply.MCDANIEL: That's right. Cause they've got to have tobacco or they close their doors.
KLEE: Right. If it weren't for some . . . an organization like this, I guess
they would be forced to . . . to stock their own supplies.MCDANIEL: That's right.
KLEE: [inaudible] extra cost to them.
MCDANIEL: And that's . . . that's the advantage of having some stability and
price supports. Cause if you throw it open, one year if you have a short crop, the prices go way up and the farmers will put the whole farm in tobacco, and the next year, they wouldn't . . . would pass it up at a very . . . very low figure. Cause they didn't need it.KLEE: Well the problem with doing that for the farmers would be . . . right now,
the farmer has kind of a . . . an assurance of some kind of income each year.MCDANIEL: That's right. That's right. And well, not only farmers, but the small
town of where I . . . my hometown. The banker's involved in it. The merchants are . . . listen, you let tobacco fade out of the picture, grass will grow in the street of some of these country towns.KLEE: That's true. Yeah. Well, what . . . the criticisms, then . . . we talked
about there's an advantage to the farmers. Course then all the people surrounding the tobacco business: the warehousemen, the merchants, and so forth, have an advantage . . .MCDANIEL: Absolutely.
KLEE: . . . the warehou-, or the industry has a sure, steady supply, and it
really hasn't cost the taxpayer very much. I guess, you know, living in a tobacco state, we kind of feel a little put-, put upon, is that . . .MCDANIEL: Well, getting back to flue-cured vs. burley, when they come up with, I
don't know what the final figure is. I've seen anywhere from up to a $700 million dollar loss on prior `82 crop. When you go to congress, there . . . it's not a [inaudible] tobacco to start with, and they see that figure, and [inaudible] tremendous [inaudible] now, that if they don't support it, and it goes back to Commodity Credit, why the government is gonna be faced with upwards of three billion dollars, and if they'll have some [inaudible] in the different types of tobacco, which they haven't had up until now, principally from flue-cured, why it'll be very minimal in comparison with three billion.KLEE: So, really this . . . this plan, and I'm gonna talk to you in a few
minutes about the details of that, that's really the. . . the only to save a significant amount of money for the taxpayer?MCDANIEL: Well, yes, that's right. But we have . . . well, for instance, Senator
[Howard] Metzenbaum and others of his philosophy, that are against tobacco. He's against tobacco at all costs. He wants to do away with it. The government interference. But he's not gonna stop people from smoking, and we just as well grow it here as import it from or or or whatever.KLEE: I think that's . . . yeah, that's . . . that's a point that probably needs
to be made, that people in the co-op and others make, that just doing away with the program is not gonna do away with . . . with [inaudible] . . .MCDANIEL: That's absolutely right.
KLEE: And if . . . if we do away with the program, we're essentially . . .
particularly the small farmer . . . how . . . how does this program ensure the existence of the small farmer?MCDANIEL: Well, he's got a right to his quota, based on the history of that
farm. And we maintain that ought to go with it as a covenant as his right. And stays with that land because your tax-supported people, city governments, your educational system, are based on the assessment value of that farm. You take the support, the quota away from that farm, who's gonna buy it? What's his chance of making his taxes on it? So this thing is entwined with the income and support of . . . of a world of a lot of people.KLEE: Well, for example, in . . . in counties like yours and mine, Harrison
County and Mason County, now maybe . . . what would happen . . . right now, we have a lot of quotas with five thousand pounds or ten thousand pounds, and farmers are able to eke an existence out. If that were eliminated, might have just four or five very large tobacco farmers.MCDANIEL: I would say maybe that they would be probably the only ones that could
. . . could survive. Now I don't know, that's a supposition.KLEE: [inaudible] in a way, the tobacco program right now is ensuring a certain
lifestyle . . .MCDANIEL: That's right.
KLEE: . . . to people that . . . that could disappear.
MCDANIEL: And you go to bank . . . person that needs to borrow to put his crop
out, and if you don't have a support on it, he's gonna view that pretty . . . pretty closely 'fore he lets that money out, cause he don't know whether . . . what he's gonna have . . . the ability to repay that loan.KLEE: There's no . . . there's no way of knowing how much he's gonna take in.
MCDANIEL: Stability. Just been beautiful.
KLEE: Do you feel . . . course, you been president of this organization since .
. .MCDANIEL: Oh, I guess six or seven years. [chuckle]
KLEE: [inaudible] And of course, you came in and things were operating just fine
. . .MCDANIEL: Yes.
KLEE: . . . and so forth. And then all these other conditions come out. How . .
. how do you . . . has it been particularly hard on you, do you think? Do . . . do people understand the problems that the tobacco industry facing?MCDANIEL: Oh, I'll tell you, you can spend a lot of sleepless nights cause . . .
people are . . . well-meaning, but they really . . . the rank and file, I just don't think they have an understanding of this thing, the overall picture involved. They mean well. And this, for instance, in setting the quota for `83, after that big crop of tobacco in `82 . . . we've recommended the quota stay the same. But other interests wanted a six percent increase, which they got. And the department, through pressures, we had to conduct an excess program of thirty-three million pound, which should never have been done. We should not . . .KLEE: [inaudible] supply.
MCDANIEL: Oh . . . so it . . . well, there's thirty-three million pounds. They
increased it . . . the quota, six percent, so it balances out to sixty-six or sixty-five million pounds. That ought never have been . . . the farmer ought to take . . . took that back . . . back home and kept it off the loan. Course it sold, but it still went in the general trade, which they didn't buy from the co-op.KLEE: So the . . .
MCDANIEL: And they left us with this big supply on hand that we've been stuck with.
KLEE: A lot of times, I guess, that individual can't see past his own self-interest.
MCDANIEL: Well that's . . . that's . . . that's true. That's what it boils down to.
KLEE: Can't see the . . . the future vs. the . . .
MCDANIEL: Yeah, can't see the forest for the trees.
KLEE: I guess that's true. [chuckle] Let's move into . . . well, before I move
into the Reynolds Plan that you've been instrumental in putting together, are there some people over the years that you've dealt with, that you think are particularly significant? You mentioned Mr. , that's been with the co-op. He's the legal counsel?MCDANIEL: Yes.
KLEE: For the co-op.
MCDANIEL: He was president for a long while.
KLEE: He was?
MCDANIEL: Yeah.
KLEE: And . . .
MCDANIEL: Very able and . . .
KLEE: He worked on this plan a little bit, I think?
MCDANIEL: The Reynolds Plan? Oh yes, he sat in on it. I had him sit in on all
the negotiations.KLEE: Okay. Well, let's talk about that. You . . . this, I guess, began last year?
MCDANIEL: Yes.
KLEE: And you . . . the co-op was faced with a tremendous oversupply . . .
MCDANIEL: Yes.
KLEE: How did you proceed? What happened?
MCDANIEL: Well, it really started . . . course the flue-cured tobacco is . . .
well, their market opened about the middle of July, so they were very anxious in trying to work out something with the companies to help relieve the situation. That . . . the Reynolds came up with this plan, which I think it's . . . on our part, is a great help to . . . to us and the burley growers.KLEE: What . . . some of the individuals that you were working with, with the
Reynolds . . . with Reynolds people. Who . . . [inaudible] . . .MCDANIEL: Oh well, there's Ainsworth is one of the top fellas. We've talked with
Clements, the head leaf buyer. Julian Singer in the leaf department. And several of the top executives of the Reynolds Plan were there at various times.KLEE: Now, companies in . . . the tobacco farmer, and so forth, the . . . the
tobacco industry and tobacco business across the board hasn't always been very unified.MCDANIEL: Well, that's true. The different varieties have been . . . been at odds.
KLEE: Some people might think it would be in the self-interest of the companies
just to wait and let this thing fall apart and then they can come in and pick up the pieces.MCDANIEL: Well, I've said that, and really, that's true. If the Commodity Credit
takes it all, what are they gonna do with the tobacco? They gonna sell it for what they can get for it. And I think it's a beautiful gesture on the part of the companies to offer to take this . . . help to sell this oversupply. Course at the same time, they're getting it reduced from $1.75 or $1.78. This year it'll be down to $1.45.KLEE: And of course what they're doing over the long run, I guess, is ensuring
that . . . that steady supply?MCDANIEL: That's right. I think it shows that they . . . they are really sincere
in their belief that they want the association to exist in order to have a constant supply.KLEE: Well, you were saying that flue-cured people were very interested in doing
something about this. How did you proceed?MCDANIEL: Well, I was in on that first meeting at . In fact, the flue-cured
people had agreed to accept a floor of $1.30 a pound. Well, we felt at that time that that wouldn't satisfy the farmer, and we wanted more. And which . . . we held out and the next meeting they had, they finally raised it . . . flue-cured, to $1.35. I think I've got my figures right. Anyway, it ended up at $1.45 and $1.40.KLEE: Yes sir. Now had . . . had the cooperative employed Mr. [Larry] Forgy at
that time?MCDANIEL: We employed Mr. Forgy at . . . to the outset.
KLEE: To represent these interests.
MCDANIEL: He has good connection with the federal administration and the
campaign manager of the president, vice president, and Senator [Mitch] McConnell. And he's very able [inaudible] capable fella.KLEE: So you . . . you think, then, you've got a good person working in that?
MCDANIEL: We've got the . . . we've got Mr. Berry and Larry Forgy, two of the
outstanding attorneys in the state trying to negotiate, to have some unity, to go to congress.KLEE: So now you-all worked on this the best part of a year?
MCDANIEL: Well close to it. I think Mr. Forgy went . . . I think he went on the
payroll in November. Now, I'm not positive, but sometime . . . it took him a little while to get oriented, you know.KLEE: And . . .
MCDANIEL: But he's grasped the situation beautifully.
KLEE: Had to get the . . . the . . . the industry's okay, had to work . . .
MCDANIEL: Well, the difference . . . well, the Farm Bureaus, and the different
people that have . . . or wanna have a say-so in saving the tobacco program.KLEE: Now what . . . what's the . . . this plan, if . . . if enacted, is to go
into effect with this next buying season?MCDANIEL: Yes.
KLEE: I assume.
MCDANIEL: Yes, yes.
KLEE: Okay. So . . . course the farmer, as he looks at it, he might as well
accept the Reynolds Plan at $1.40 as to . . . as to get $1.70 and then have to pay thirty cents on the . . .MCDANIEL: Sure, it balances out practically the same. And in addition to that,
Reynolds says . . . or the company says, all but two . . . says that over a period of five years, we'll take the `82 crop at the floor price, and it's got a mark-up on it. And probably then, that'll go to the no-net cost. They'll take the `84 crop, at the end of . . . at the cost price. But they don't want the `83 crop. If they do take it, it'll be at a ninety-five percent reduction.KLEE: Well, I'm sure that `83 crop . . .
MCDANIEL: Or if the . . . if the Commodity Credit takes it, and applies a no-net
cost, the [inaudible], they will take it at ninety percent of what's left. But it's gonna be a loss in `83 crop tobacco. But we maintain if the department can see fit administratively, which our counsel says it's in the contract, that they'll take it over and give the associations some time to try to dispose of that. But we can do it, perhaps, and recover half price on it. Now that's problematical. There's no insurance. But that's what we're driving for.KLEE: That eight-, `83 crop has been a real headache for you-all.
MCDANIEL: Sure.
KLEE: It's . . .
MCDANIEL: But you know, if there was a shortage of tobacco, I don't think
there's a doubt that it wouldn't go in the channels of trade and be usable.KLEE: The . . . the . . . the . . . another big advantage of this program would
be the fact that companies would be able to buy the tobacco at $1.40 and that would . . . that would make foreign tobacco look less attractive to them.MCDANIEL: That's right. And of course, I think with them obligating themselves
on this surplus we've got to buy, well you know they're not gonna take this responsibility and import a huge amount of tobacco on top of what they got. They can't use that much tobacco. And in addition to the current crop.KLEE: Okay. What would happen then in the future with quotas and the support
price and so forth, under the plan?MCDANIEL: Well, the companies are demanding a say-so in setting the quota. In
fact, one of the provisions they are to announce privately to some unconcerned corporation their . . . their wants. And it is to be strictly confidential, and they in turn give it to the secretary. And the co-ops will have a representative, and the growers will have a representative, and the exporters will have a representative. They put them together and announce the quota. The secretary would have the power to either increased it three percent or decrease it three percent. So . . . and they're gonna help carry the no-net costs from the first pound, fifty-fifty with the . . . with the growers. Up to fifty million pounds. And if it goes over that, why there's a provision that they'll lower it back down to not over eighty million pounds. But that's . . . course that's to go through the mills of congress. We don't know what the outcome is gonna be.KLEE: Right.
MCDANIEL: But it's a gesture on their part to help us get over this hump, and
I'm thankful that they have come forth with a plan to help us survive.KLEE: Sure. Well, what happens . . .
MCDANIEL: But there's some people don't agree with that. They think, well look,
they're getting a lot of cheap tobacco. But at the same time, if we're in a world market, or in it, we're gonna have to come down so why not take advantage of their benevolence, as we might call it? [chuckle]KLEE: Yeah, it's kind of . . .
MCDANIEL: I don't know whether that's the right word or not, but it . . .
KLEE: Better get it while you can.
MCDANIEL: . . . con-, contribute . . . contributes to the . . . to the relief of
this situation we find ourselves in.KLEE: It's really not unsimilar or dissimilar to what's happening in other
segments of the economy. Earlier, for example, unions had to take cuts in pay . . .MCDANIEL: Oh sure, sure.
KLEE: . . . and so forth to compete on this . . .
MCDANIEL: There's no question about it. I think we . . . we've got to tighten
our belts. We can . . . we can [inaudible] and I still . . . I still think at that . . . that support we can survive. And I think tobacco will bring over that.KLEE: Yeah, that's . . .
MCDANIEL: Traditionally, it always has brought over this support price on it.
KLEE: Yes sir. Well, that would even . . . that would even facilitate a lot of
other things. If the price were lowered and . . . and a lot of it didn't . . . went over the support price, you'd soon get rid of your over-, oversupply.MCDANIEL: Well, that's right. And the companies . . . I think it's a nice
set-up. I see nothing wrong with it.KLEE: The . . . the cooperative's existence is really dependent upon the farmers
continually re-voting this program in.MCDANIEL: That's right.
KLEE: [inaudible] When is their next opportunity to do that?
MCDANIEL: They vote on it this coming winter. February, I think. For another
three years.KLEE: So they're kind of . . . right now, it's up in the air what they're really
. . .MCDANIEL: They don't know what to do. As well as . . . none of us know what the
outcome's gonna be.KLEE: There is more support for the program here, though, than there is in the
flue-cured market [inaudible] . . .MCDANIEL: Well, I . . . I would guess that's true.
KLEE: [inaudible] way over ninety percent or . . .
MCDANIEL: Oh yeah.
KLEE: [inaudible]
MCDANIEL: Well, it's awful hard to have your cake and eat it too. And they think
they can buck this thing without any supports, some of them do. They're demanding that they can't produce tobacco for . . . [inaudible] support is. But I know if they exist, they're gonna have to or not grow tobacco.KLEE: What about leasing? The . . . I guess it was during the last program where
they . . . they made [inaudible] organizations, schools and so forth, sell off their . . . their lease permanently. Do you think there needs to be some manipulation in that area?MCDANIEL: Well, I think primarily, before we go to fine-tune it, we've got to
have a tobacco program. And I think that can be amended over the years. I think as of now that the subdivisions shouldn't have a quota, and I think the airport shouldn't have a quota. And I see no reason where the [inaudible] should have a quota. Those type of things I think the quota should be taken away.KLEE: Who . . . who makes those kinds of decisions? That . . .
MCDANIEL: Oh, the department or the secretary.
KLEE: Now of course . . .
MCDANIEL: He's blamed with it. He has his advisors, of course.
KLEE: The . . . you have your official duties in the . . . in the cooperative as
far as, you know, running these things and making contacts with the dealers and so forth. Are those . . . is there very much work done in making new contacts, trying to set up . . .MCDANIEL: Oh, this . . . for instance, the export people, the dealers. They comb
the whole world in trying to sell tobacco. So why should we try to . . . we . . . we still maintain and contribute to the Burley and Dark Leaf Tobacco Export Association and we have a top man now, Frank Snodgrass, has been the managing director, now Ben Reeves has been aide to Congress Perkins for thirteen years, and we're expecting him to help . . . continue on in that area, as well as help us in legislative-wise cause he's a very able person.KLEE: So those kind of people, they know this tobacco's here in storage, and
they're out they trying to . . .MCDANIEL: Oh sure, sure.
KLEE: . . . trying to market it.
MCDANIEL: He's on a trip now to the .
KLEE: I heard that [inaudible] Red China.
MCDANIEL: Yeah.
KLEE: I wanna ask you, too, about . . . most of the . . . the tobacco you deal
with, I guess, is air-cured burley. Do you have any of the . . . the other types? There's . . . do you take that under loan?MCDANIEL: No. That . . . that's under loan, but under a different organization.
KLEE: I was thinking like, in the western part of the state, they have the dark.
MCDANIEL: Dark leaf and fire-cured.
KLEE: But those fall under . . .
MCDANIEL: They're . . . there are associations in their own
KLEE: I see.
MCDANIEL: That's largely chewing tobacco and snuff, you know.
KLEE: There . . . there's been some talk about tobacco, as far as alternate uses
and so forth. Is there . . . is there much possibility for that?MCDANIEL: Well, I was talking to a quite influential banker in this town last
week, and he was wondering why they didn't put more re-, research on . . . on developing protein. Well, several . . . I think first come out with this proteins product in tobacco, but the cost of getting it out was so high, it was prohibitive and I don't know whether they're pursuing it or not.KLEE: I guess one of the feelings . . . course . . .
MCDANIEL: But you know, some years ago, not to interrupt you . . .
KLEE: Go ahead.
MCDANIEL: . . . we had a little surplus tobacco and we contracted this research
institute out at . . . to find what the uses of tobacco could be. I've forgotten . . . they're called . . .KLEE: Tobacco Institute out there, I think.
MCDANIEL: No, that's over here now.
KLEE: Yes sir.
MCDANIEL: This is out at the . . . I wanna call it , but that's not it.
[chuckles] Anyway, out on the experiment station . . .KLEE: Oh, okay.
MCDANIEL: We give them ten thousand dollars. They come up with . . . said, well,
you can take the fiber and make strawberry baskets out of it, but that's about the only thing we got for our money. But they didn't go into it thoroughly, you know.KLEE: Right. It wasn't too much.
MCDANIEL: Course the nicotine is used . . . used to use nicotine to drench sheep
with, and now there's no sheep in the country practically, so we don't need that. [chuckles]KLEE: What about the . . . I guess one of the feelings is that, you know, there
has been a significant drop in consumption, but even if consumption were to drop over . . . over the next twenty years, there'd still be a lot of people and a lot of tobacco being consumed.MCDANIEL: Oh yes. Well, there's about fifty-three million people in the smoking
now. It fell considerably and I guess maybe they're smoking less than they did, even the people that smoked. So . . . who knows what the future holds in consumption. But I am hopeful that the Tobacco Research Institute over here on the campus of will come up with . . . at least come up with some kind of a formula or test where a person can know that he can smoke without risk, and a person can smoke without too much risk.KLEE: Yeah, I've interviewed Mr. . . . Mr. Davis . . . [inaudible] .
MCDANIEL: Yes, he's a splendid fella.
KLEE: Yeah, and I think that's the direction they're going. Some people are more
susceptible than others. Let's try to identify those people.MCDANIEL: But I . . . you know, I . . . I'm not a researcher by any means . . .
stretch of the imagination . . . but I can't see where I smoked and you sitting over there, it can cause you to have lung cancer.KLEE: Yeah, I . . .
MCDANIEL: I don't know, but that's one of the things.
KLEE: That seems to be the big push with the anti-smoking people, is that . . .
MCDANIEL: Not on airplanes . . .
KLEE: [inaudible] people that smoke . . .
MCDANIEL: They changed it. Well I can see [inaudible] airplane, the smoke goes
out the vent on top. That fella in front of me don't even know I'm smoking. And really, whether that's a problem, I don't know.KLEE: Yeah, but that is . . . that is . . .
MCDANIEL: That is one of the . . .
KLEE: . . . things that they would push on right now. Well, I appreciate you
talking to me today. Thank you.MCDANIEL: Okay, you're entirely welcome.
[End Tape #1, Side #2]
[End of Interview]
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