Tobacco Buyout Marks Historic Day for Farmers

Source from:  By , Senior Writer 10/13/2004

For tobacco farmers, this is the real deal - finally. After years of talking about tobacco buyout legislation or batting it back and forth between the Senate and House, Congress passed a bill Monday that should bring $3.9 billion to North Carolina's tobacco growers. Tobacco farmers would give up a guaranteed price support system in exchange for the buyout, which is based on their allotments, or pounds the government allows them to grow. Owners who farm using their own allotments would get $10 per pound of quota, or $7 per pound if they rent it to someone else. The renting farmer would get $3 per pound. Tobacco-state lawmakers hailed the move to buy the allotments as crucial to their economies. Environmental groups were happy taxpayers don't have to pay but were unhappy lawmakers rejected increasing federal control over tobacco. The industry was split over whether the buyout is fair. "I think it's as good a deal as we can get," said Steve Duckett, an agent with the Buncombe County Cooperative Extension Service who works with the county's 450 tobacco growers. "It'd be even better if this had happened in 1997 or '98 when the quota was almost double what it is now. With the dwindling quota system, it's hard to make a go with your business with a 50 percent cut in income." Tobacco is big business in the mountains - about 4,000 mountain farmers sell their crop in two Asheville auction warehouses, typically generating between $8 million and $10 million in revenue. Others contract directly with tobacco companies. In all, local growers tend about 7,000 acres of burley tobacco, which has been an economic mainstay since the late 1800s. "By buying out these quota holders, we give families the option of retiring with dignity," said Sen. Elizabeth Dole, R-N.C., who made the buyout her top legislative priority. "We give them the ability to pay off the bank for loans made against an ever shrinking collateral. ... Literally thousands of families in rural North Carolina will be saved from bankruptcy." All 13 members of the North Carolina congressional delegation voted for the bill. Some local growers worry the buyout could mean the end of tobacco growing in the mountains. It will cut production costs because growers won't have to lease allotments from quota holders, but it also means growers here will compete on the world market - without a guaranteed price. "If you get out and put out 50 or 60 acres, and then you get 55 cents or a dollar a pound, you're busted from the time you start," said Neal Woody, a Leicester farmer who grows 80 to 100 acres of tobacco a year. The guaranteed prices last year averaged out to just less than $2 a pound. Over the last 10 years, Woody's allotment - the amount the government said he could grow - declined 75 percent. But he said even with a dwindling allotment, price supports gave some certainty to tobacco growing that likely will disappear with international competition. "I think the market will be flooded from overseas," said Woody, 59, who grew up working tobacco. Asked what the buyout will do in the long-term to local growers, he answered bluntly: "Put 'em out of business. That's about the only way I see it." A buyout essentially ends the Agricultural Adjustment Act of 1938, which established the tobacco allotment and price support program. A buyout would give farmers a cash payment, but they would no longer have a baseline price to count on - the world market would determine the price. Growers would no longer have to go through the cumbersome quota system, pay other quota holders to lease or buy their quotas, or sit by as the government cuts the amount they can grow each year. The buyout payments will be based on the 2002 quota level and will be distributed over 10 years. Funding will come from manufacturers and importers of all tobacco products sold in the United States. In Buncombe County, tobacco generates about $2 million annually in revenues, Duckett said. That's nowhere near the greenhouse and nursery market, which produces about $80 million annually. Most mountain growers have fairly small operations - three to five acres. Duckett suspects the buyout will help some to retire or pay off debt, while others may use the money to try a different crop, although very few crops pay as well as tobacco. The Washington-based research organization Environmental Working Group said 437,000 people are eligible for the buyout based on Agricultural Department data. Just more than 367,000 allotment holders in the Carolinas, Kentucky, Tennessee and Virginia would receive most of that money. Some $6 billion would go to North Carolina and Kentucky alone. The money was approved as part of a massive corporate tax reduction bill. The measure, approved 69-17, now goes to the White House for President Bush to sign into law. Staff writer Raju Chebium contributed to this story. Enditem