Tobacco an industry in transition

Source from:  Tillsonburg (Ont) News (ca) 01/21/2009

The next 12 months will see huge changes in the tobacco industry. The announcement of the Tobacco Transition Program on July 31, has set in motion a process that will see the end of tobacco quota, the demise of the current marketing system and a move to a new licensing setup with contract buying. The Ontario Flue-Cured Tobacco Growers' Marketing Board as it is known now will become another piece of history in coming months. Reflecting on the past year and talking about the coming one, board chair Linda Vandendriessche acknowledged the board's demise would be part of the coming changes. Although nothing is finalized, she predicted growers would be left on their own to negotiate a crop price. They will be operating without the overhead of quota. She does believe some sort of tobacco organization will exist. "I can see myself a form of grower organization or board," she said. "Any commodity is allowed to have an agency represent them." Vandendriessche said an orderly transition will be needed to any new entity and she had no concept of the time frame involved. Some of the functions she saw for such a new body would be providing agronomic advice, being a regulatory agency for issuing licenses, inspections and data and resource collection. While the board will need to have a meeting with manufacturers to discuss their future plans, the immediate focus is on getting cheques in farmers' hands through the Tobacco Transition Program and pushing for provincial buy-in. To that end, Vandendriessche said a federal government information release that came out last week provided updates on the process and plans for a meeting once all the details have been worked out. "It confirms exactly what we said," she said of information in the release. "The government has always committed to coming down and having a mass meeting and explaining the program, but it's their meeting and they'll set the time." Although she predicted in a letter to growers the meeting would be in December, Vandendriessche said the proroguing of Parliament, appointment of a new Cabinet and Christmas break have contributed to the delay. Prior to Christmas, board members reviewed the agreement for the program and returned it to Ottawa. Two conditions - the province agreeing to eliminate quota and the implementation of a new licensing system - must be met before the federal government will distribute funds. The province agreed in principle to a new licensing system. The board's proposal for a licensing system was presented to federal representatives during a meeting on Dec. 23. Vandendriessche said they understand federal and provincial representatives were to meet, or already have met, to discuss specifics relating to a licensing system. Her hope is funds will flow by March 31. And the entire crop must be sold before any exercises to eliminate quota can begin. On the provincial front, Vandendriessche said agriculture minister Leona Dombrowsky there is no money in the agriculture budget to provide the provincial 40 per cent of a quota elimination program told them. The board has approached the finance ministry about a provincial tax on a carton of cigarettes to fund a buyout. "The growers can be assured this board will leave no stone unturned to get them a complete program," Vandendriessche said. She said a provincial program would be a win-win situation for tobacco growers, their communities and the entire industry. Brant MPP Dave Levac proposed a phased-in tobacco tax increase of $2.40 per carton over the next three years. Additional revenue from the tax increase could be used to provide growers with 25￠ per pound of tobacco quota for three years as a payment for their tobacco-specific assets. But, word from Levac's office on Friday was that any levy would need to come from the federal level. "People just want to be treated fairly," Vandendriessche said. "It's about people and families. It's all about the people." As for the 2008 crop, the 23 million pounds was the smallest ever. With producers having a percentage growable of less than 10 per cent, that meant for every 10 pounds of quota they owned, they could grow less than a pound. It was well into fall before a crop deal was reached with manufacturers due to disagreements on price and pounds with manufacturers. "We struggled with that because we have a responsibility to producers to come up with the best price for our work," Vandendriessche said. She was up front in admitting it was disappointing because the terms of the deal don't address the cost of production for most growers. Despite the mental challenges of facing an industry in crisis and curves from Mother Nature, Ontario tobacco growers still produced an above-average crop. Sales at the Delhi exchange are averaging 90 per cent A Grades, which is better than most years. The high quality crop, combined with a need to move the tobacco from both the producer and manufacturer side, are resulting in extremely low no bids and rejects on the auction floor. Still, the price on the auction floor is below the average cost of production. While the chair of the board usually talks about the coming year's crop at this time, there won't be one for 2009. Or, at least not one produced under traditional circumstances. Simcoe Leaf has hosted producer meetings to discuss a 2009 crop. Few details are known yet, but general discussion in the past has been producers would be only paid world prices. "Those who choose to grow will have to think seriously on their cost of production on an individual basis and decide if they can produce a crop," she said. Enditem