Buyout to Alter Tobacco Farming

Source from:  Observer Washington Bureau WASHINGTON 10/13/2004

Federal plan may push prices down, production up Look for fewer tobacco farmers, but bigger tobacco farms. Expect tobacco prices to go down, but the amount of tobacco grown to go up. And with billions of buyout dollars flowing into North Carolina in the next 10 years, count on thousands of tobacco farmers to retire, but hundreds of others -- 243, in fact -- to pocket $1 million or more. That's the picture of the future that emerged Monday, after a $10.1 billion tobacco quota buyout got final congressional approval. By ending the 66-year-old federal tobacco price-support program in exchange for the buyout, Congress effectively deregulated the growing of the crop that built North Carolina. And that will change a state whose long ties to tobacco can be seen in the very names of some of its cities (Winston-Salem), universities (Duke) and ball teams (Durham Bulls). "It's going to be a different playing field," said Peter Daniel, assistant to the president of the N.C. Farm Bureau. "Anybody will be allowed to grow tobacco, but with no guaranteed price anymore, you'll have to be much more astute to make it. The risk will be greater." Change was already happening. This will speed it along. But with an average payout of $21,982, growers who had seen the value of their quota drop by half in recent years will now have the money to make the transition a smoother one. "An awful lot of (tobacco) growers are near retirement age. Now they'll go ahead and retire and transition out," said Blake Brown, an agricultural economist at N.C. State University. "And some of your smaller farmers will go to different crops; some others will look for employment off the farm." That exodus, he and others said, will leave tobacco farming in North Carolina to the larger farms, which can gobble up more land to better compete with growers in places like Brazil -- where many cigarette companies go for flue-cured leaf these days. "Tobacco is very expensive to grow -- very capital-intensive," said Daniel. "It involves equipment you can't use for anything else. (With the end of the federal price program), the price paid for (U.S.) tobacco will drop, which means farmers will have to become more efficient. The large farms will compete; smaller farmers will do something else." Still, in two or three years, Brown predicted, North Carolina will be growing more tobacco than it is today. That sounds bullish, but the cultural costs of the decline of the small farm in North Carolina must also be pondered, said Tom Lambeth, a senior fellow at the Z. Smith Reynolds Foundation -- a philanthropy created by its founders' wealth from tobacco. "The state benefited for a long time from small, independent farms in small rural communities," said Lambeth, a member of the Rural Prosperity Task Force. "But the changing pattern has been that those people who'd like to stay in rural areas have found that that's not economically viable. So they move to the city." Some of the buyout's biggest supporters have cast it as an economic development bonanza for rural areas. Monday, on the floor of the U.S. Senate, Sen. Elizabeth Dole, R-N.C., made that case. "This tobacco buyout will help not only the farmers and their families, but their hard-pressed communities," she said. "It is the retailers, equipment dealers, chemical and fertilizer dealers and a whole array of small local businesses that will also benefit from the tobacco buyout." According to a county-by-county breakdown of where the payments will go, the ripple effect may be more like a splash in Eastern North Carolina farming counties such as Pitt ($262 million), Sampson ($141 million), Nash ($172 million) and Harnett ($100 million). But along with the larger farmers who will become instant millionaires, the state's urban counties will also get a nice payday. That's thanks to being the home of quota holders -- farm family heirs, farm widows, retired farmers -- who have long since rented out their land. Payments totaling $14.3 million will go to people in Mecklenburg County. For Wake County: $228 million. Overall, North Carolina's 90,000-plus tobacco farmers and quota holders will get about $3.8 billion dollars over the next 10 years. In South Carolina, 17,000-plus people will get almost $800 million. Fifty-five of them will make $1 million or more. Democrat Erskine Bowles and Republican Richard Burr -- N.C.'s two U.S. Senate candidates who stood to lose face and possibly votes if the buyout failed -- quickly moved to cash in politically on the buyout. Both had pressured their national parties to pass the measure or face losing N.C.'s Senate seat to the other party. Enditem