90 CIRCULAR 10 0, U. S. DEPARTMENT OF AGRICULTURE 



to be so graduated that the average price paid on all the grades of 

 tobacco would equal the estimated average price which, it was 

 believed, market conditions justified. To complicate the matter 

 further, the association operated five different pools covering three 

 different classes, including five types of tobacco for which the con- 

 ditions of supply and demand were different. 



There were indications of an increasing demand for the flue-cured 

 variety of tobacco, whereas for Virginia dark-fired and sun-cured to- 

 bacco the demand had been steadily decreasing. Moreover, not all 

 grades of flue-cured tobacco were suitable for cigarette manufac- 

 ture and there was a danger that if too high minimum prices were 

 placed on these grades the association would not be able to dispose 

 of them. This is what actually happened. 



The purposes of having a tentative price set upon each grade of 

 tobacco to be received by the association were three: (1) As a 

 basis for advances to members, (2) as a basis of loans from banks, 

 and (3) as a basis for the sales price to the tobacco dealers and 

 manufacturers. 



Funds to pay the advances to the members had to be obtained 

 from the banks. As the loans from the banks were made upon the 

 delivered tobacco as collateral, an appraisal of this tobacco had to 

 be made by independent and disinterested tobacco experts. Some 

 arbitrary method had to be adopted to determine the prices of each 

 of the different grades of tobacco. For this purpose, committees of 

 independent leaf dealers known as the bankers' valuation commit- 

 tee were appointed by the loaning banks with the approval of the 

 War Finance Corporation and later of the Intermediate Credit 

 Bank of Baltimore. 



These committees, three in number (one each for the sun-cured, 

 dark-fired, and the three flue-cured pools) were usually composed 

 of three men each appointed for one year. These men were not 

 connected with nor employed by the association, but the association 

 paid their expenses. Some of the members were on more than 

 one committee at times. With one exception, there was no complete 

 change of personnel on any committee from one year to the next, 

 but there was a continual change in membership of all committees 

 except in those representing the dark-fired and sun-cured pools 

 from 1923 to 1924. Only one member of the three committees 

 served for the entire four years of operation. 



Each year, before the tobacco markets opened, the bankers' valua- 

 tion committee for each type of tobacco collected information on 

 market conditions, such as quantity and quality of tobacco, stocks of 

 leaf tobacco on hand, foreign conditions, and any other factors af- 

 fecting the demand and supply for tobacco. On the basis of this 

 information, and guided by their past experience in the auction-floor 

 sj^stem of marketing, the members of this committee decided upon 

 what they considered a reasonable and conservative average price 

 for tobacco. 



On the basis of this average price, separate schedules of prices 

 were drawn up for the different grades of tobacco in the five pools. 

 As these schedules were drawn up chiefly as the basis for loaning 

 money to the association for advances to members, the prices were 

 probably conservative. Even if the prices placed upon the different 

 grades were too high, the loaning banks were amply secured, as loans 



