A Year of Transition for Tobacco Growers

Source from:  Delhi (ON) News-Record 02/23/2010

It's been a year of change for tobacco growers. In fact, it's safe to say 2009 saw the largest changes since the Ontario Flue-Cured Tobacco Growers' Marketing Board was formed more than 50 years ago. The move to a contracting system for growers was the largest of the changes. Since the tobacco auction closed in February 2009, change has come at a rapid pace. A federal quota buyout saw all previous growers cease growing. Their infrastructure didn't go to waste as family members, or other parties, typically leased the facilities and started a new generation of growers. In most cases those growers made an up front investment in large bale technology as they moved from an auction system to direct contracting. Changes also saw the tobacco board downsize from 11 members to five, sell its head office and put the auction exchange on the market. One fear of many growers was they wouldn't be able to make money at the lower prices offered through direct contracting. "It's a little tough for me to be accurate with that. Because we aren't operating an auction, we can't capture stats like we used to," said board chairman Fred Neukamm. "Most of the people we've talked to seemed to be satisfied." He said there would be some cost savings at the farm level and growers get their money a lot sooner than they did with the auction system. Expanding on the latter point, he explained with the last auction ending in February, tobacco was still being sold then. It could easily be February or March when growers got paid. Now, with contracting, all tobacco is delivered and paid for by November or December. Neukamm said he has heard that with the new grading and pricing matrix, some of prices came out higher than what people anticipated. Moving to the big bale system resulted in reduced handling and sorting. With contracting, most growers are producing to, or near, the capacity of their operations. In comparison, the last couple of years of the quota system saw historically low levels of quota use, and thereby small crops. "There was a great deal of inefficiency at the farm level," he said. "Under this system, farmers can grow to their maximum level or close to it." Last year saw 118 licensees grow just over 22 million pounds of tobacco. Licenses to grow in 2010 are open until the end of February. "It does appear demand in 2010 from the buying side is more than last year," Neukamm said. "We were told by the buying side last year that all their demands weren't met." It's also been a hectic year for Neukamm and the other four appointed members of the board. The board office was sold last year to the Long Point Region Conservation Authority. Part of the deal was a lease agreement that saw the tobacco board offices stay in a portion of the building. Board staff were cut from 16 full-time a year ago to two full-time and two part-time. The number of board meetings has been cut and the chairman's compensation has changed from the salary system. "If I am not in attendance at the board office or specifically conducting board business off site, I'm not compensated," Neukamm said. "We've changed it to a daily per diem similar to what other directors are receiving." The board's mandate has also changed. Its main directives now are licensing and licensing compliance. Whereas lobbying was a major part of the board's function previously, it is now more minor. The board is not at liberty to spend money on professional lobbyists. Still, lobbying on labour issues will continue through FARMS, as well as speaking up for tobacco farmers on production insurance, with lending institutions and through farm organizations. The board is continuing its involvement in the class action lawsuit against the tobacco manufacturers for an alleged role in smuggling. One of the immediate challenges with the new structure is finding a funding mechanism for the Canadian Tobacco Research Foundation. In the past, funding was negotiated through the crop agreement, with both manufacturers and growers contributing. Last year, the foundation's tobacco research work was funded by money left from previous years. Neukamm said that pot has run dry and they are currently in discussions with manufacturers to provide 2010 funding. Another immediate challenge is completing the sale of the auction exchange in Delhi. An offer From Naturally Norfolk didn't close and the building is again on the market. The board itself is appointed until the end of this year. Neukamm is unsure of what will happen after that. "What happens then is at the discretion of the commission," he said. And just because there was a buyout doesn't mean growers walked away free and clear. Not all were able to pay the debt from their farming operations since the province didn't contribute to the buyout as has been the traditional practice. Neukamm said the board can't continue to advocate for the province to pay growers 69￠ per pound for quota, but the government would listen to other ideas. "We were told a number of times if we had transitional proposals that were good for the greater public they could be on the table," he said, adding green energy and biomass proposals are still being looked at. As for the future of growing tobacco in Ontario, Neukamm said it will depend on profitability, government regulation, taxation contraband levels and how manufacturers respond to the environment. "Those are the things that will dictate how successful the growing sector will be in the future," he said. Enditem