Historic Tobacco Buyout Passage Praised

Source from:  By GARY D. ROBERTSON Associated Press Writer 10/13/2004

North Carolina lawmakers and farmers praised final congressional passage of a tobacco buyout deal that was years in the making and will pay $3.9 billion to the state's growers and quota holders over the next decade. The $10.1 billion buyout deal was part of a $136 billion corporate tax package approved 69-17 in the Senate on Monday and now headed to President Bush to be signed into law. With about 76,000 tobacco farmers and allotment holders, North Carolina should receive the largest portion of the buyout. About $500 million of the money will be used to buy all tobacco left in reserve from the quota system. Jimmy Lee, a Johnston County quota holder worried that the buyout comes too late to save the state's tobacco industry. "It would have been a lot better if we had gotten it three or four years ago," he said. The buyout is poised to end decades of leaf production under a Depression-era quota system that kept prices artificially high and critics said put U.S. growers at a disadvantage. Under the quota system, a person has had to hold a quota to be able to grow a specific number of pounds of tobacco. Overall U.S. production has been limited to what domestic cigarette makers intended to buy, with unsold tobacco going into reserve. Over the years, high prices and declining domestic demand for tobacco have caused U.S. cigarette makers to look to foreign growers for cheaper tobacco. The amount of tobacco that can be grown under a quota has tumbled nearly 60 percent since 1997, and tobacco growers worried the quota would fall even further in 2005. With Bush's signature, the government will pay $10 for each pound of quota. In cases where quota holders rent their allotments to other people to farm, $7 will go to the person who holds the quota and $3 to the farmer who rents it. Payments, to be made over 10 years and funded by a fee on tobacco manufacturers, will be based on 2002 production levels. Those who quit farming before 2002 will receive nothing. Farmers have said that with a buyout, those who want to get out of growing tobacco will be able to leave the business with dignity; those who remain will be able to pay off debts and buy equipment to better compete in the free market. Enditem