Ontario's Tobacco Crop Shrinking

Source from:  HANK DANISZEWSKI, Free Press Reporter 05/28/2004

Ontario's beleaguered tobacco industry will shrink again this year with a record- low crop of 87.9 million pounds. With tobacco producers already starting to plant, a crop size agreement was finally reached over the weekend between cigarette makers and the Tillsonburg-based Ontario Flue-Cured Tobacco Growers Marketing Board after months of negotiation. Ontario's tobacco crop has been dropping due to declining consumption, increasing imports and growers leaving the industry. Last year's crop of 94.1 million pounds had been the lowest in the board's history and this year's crop represents another a 6 1/2 per cent drop. The shrinking crop makes the industry less viable every year, tobacco board chairperson Fred Neukamm said yesterday. "It was never our intention to see this crop size reduced and it's obvious we will have to work to recapture volume lost to imports," he said. The federal government recently promised a $71-million program to compensate growers quitting the industry. But the province failed to come through with a similar package in its recent budget. There has been no final deal on prices, but Neukamm expects the target average price will be about $2.23 a pound, similar to last year. There was no progress in resolving a threat by Imperial Tobacco to stop paying a "top-up" premium price for tobacco used in the domestic market, he said. Imperial, the dominant domestic manufacturer, said it no longer can afford the domestic premium price and has threatened to use more imported tobacco, beginning next year. "We are very disappointed with the way things turned out. We did everything we could, but Imperial was not giving anything back to farmers," Neukamm said. Neukamm said the growers will have to deal with Imperial's demand next year. He said other smaller manufacturers accepted a compromise deal from the board to pay lower prices in return for maintaining their level of Ontario tobacco purchases. "They will get a bit of a price break because of their full level of support to the Ontario grower." Neukamm, who farms near Alymer, said producers are having trouble finishing this year's planting because fields are soaked with recent rains. Enditem