Kentucky: Tobacco Farmers Prepare for New era Without Tobacco Program

Source from:  LOUISVILLE, Ky. (AP)  10/08/2004

Tobacco farmers on Wednesday prepared for a new era without government price and production controls as a tobacco quota buyout moved closer to passing Congress. The buyout, sought by growers for years, would pump billions of dollars into tobacco-belt communities. It is expected to weed out many growers and concentrate leaf production on larger farms in fewer areas. The proposal was part of a larger corporate tax bill that was approved by a House-Senate conference committee on Wednesday. "We're on the verge of a historic event," said U.S. Sen. Mitch McConnell, a Kentucky Republican who has championed the buyout. A University of Kentucky tobacco economist said a buyout would "change the landscape of the Kentucky tobacco economy forever." "The tobacco quota buyout is probably the most significant ag policy event that has happened in our state since the development of the tobacco program in the 1930s," said Will Snell, the economist. The buyout carries a $10.14 billion price tag that would be paid for by a fee on tobacco manufacturers. The proposal did not include a provision sought by health advocates to give the government broad new powers to regulate the cigarette industry. It would distribute $9.6 billion over 10 years to growers and quota holders to give up the Depression-era tobacco program. Quota holders would receive $7 per pound, based on the 2002 quota levels, and growers would get $3 per pound. Quota holders who grow their own leaf would get the combined $10 per pound. Farmers would give up their government-issued tobacco allotments, or quota, limiting how much they can sell each year. Another half-billion dollars in the proposal would go to buy out surplus tobacco stocks. In Kentucky, the nation's leading burley tobacco producer, more than 100,000 people would share about $2.5 billion, Snell said. Health advocates were angered that the buyout did not give the Food and Drug Administration regulatory power over the cigarette industry. Matthew Myers, president of the Campaign for Tobacco-Free Kids, said congressional negotiators turned down a proposal that included FDA oversight and would have added $2 billion to the buyout. "Tobacco farmers will pay a high price for these lawmakers' votes against a more generous buyout, and the whole country will pay a high price in more kids addicted and more lives lost because of their opposition to FDA authority over tobacco," Myers said. Sen. Jim Bunning, R-Ky., among the conferees, said the outcome was "the best of both worlds" because it included a buyout for tobacco farmers without FDA oversight. Meanwhile, growers began planning in earnest for life without the tobacco program. Farmers have been clamoring for a buyout in recent years after experiencing steep cuts in the amount of tobacco they can sell under the federal tobacco system. The cuts have been due to increasing imports of cheaper, foreign tobacco and a decline in cigarette sales. For William Fritz, the buyout would signal a new life direction. The 64-year-old Harrison County farmer said he would quit growing leaf after 50 years and would concentrate on his cattle operation. Fritz said he would keep farming "until I'm not able to climb up on that tractor." But he said his buyout checks would give him some financial cushion for his golden years. "I can take my tobacco buyout check, along with my Social Security and the cattle, and it should be comfortable," he said. Randy Wade, another Harrison County farmer, said his buyout payments wouldn't be enough to put his twin daughters through college. "I think the money is decent, and it will help some go on and do other things on the farm," he said. The Senate-passed version offered more generous payments to farmers. Dean Wallace, executive director of the Council for Burley Tobacco, said the buyout would be a big boost in areas reeling from quota cuts. "You always want more, that's just human nature," Wallace said. "We'd like to have seen it a little bit higher. But you've got to be realistic, too, on what is fair and what will go through Congress." McConnell said growers were close to "getting nothing at all. This is a legislative miracle to achieve any buyout at all." If the buyout becomes law, growers and quota holders would forfeit Phase II payments from tobacco companies that compensate them for reduced income from lower domestic tobacco consumption. Kentucky was in line to receive over $700 million in Phase II payments over the next six years, Snell said. The buyout written by conferees does not include any provisions to guarantee that production remains in traditional leaf-growing areas. Snell said tobacco would still be grown statewide in Kentucky after a buyout, but predicted production would shift to flatter land in the western part of the state. He also estimated that half to three-quarters of growers would get out of the business. Without a safety net, farmers have said they expect tobacco prices to fall in a free-market system. But growers also would no longer have to pay to lease quota from others. Shelby County grower Paul Hornback said tobacco companies would have to make it profitable for growers to stay in the business. Henry West, president of the Burley Tobacco Growers Cooperative, said the buyout would finally end the uncertainty hanging over growers. "We need closure," he said. "We've got farmers who have been in this holding pattern for about three years and they haven't been making decisions waiting for a buyout. We've got to move on." Enditem