Kentucky: Farmers ponder life after buyout

Source from:  By Janet Patton and Bill Estep HERALD-LEADER STAFF WRITERS 10/18/2004

Gratitude mixes with uncertainty Kentucky tobacco farmers have exchanged one cloud of uncertainty for another as they search for post-buyout answers. Consider Clinton Mullins. He grows tobacco on the same farm at Bee Lick in Pulaski County where his father and grandfather did but, at 66, Mullins thinks the risks and requirements of selling burley without the federal support program will be too great. Like all Kentucky tobacco growers, Mullins has been growing and selling leaf under the Depression-era quota system that has provided tobacco farmers with the safety net of a guaranteed high price in exchange for limits on production. The buyout sent to President Bush on Monday ends that system, leaving tobacco growers to negotiate with tobacco companies and the open market. Mullins thinks the new world of tobacco farming under company rules "will be more than I want to be bothered with." And the talk this week at the S&M Market in northern Pulaski County where he eats breakfast was that a lot of farmers feel the same. "The majority of 'em say they'll quit," Mullins said. He doubts there'll be room anymore for people like him, a small grower with 4,000 pounds of tobacco. "I think that's history," he said. Instead, he'll focus on his corn and soybeans, hoping to add 100 acres to the 550 he already grows. No quitters here An irony about the buyout is that, while some farmers welcome it as a way to make more money growing tobacco, others see it as a way to get out of tobacco farming. Up to 75 percent of those who participated in the federal price support program are expected to ultimately get out of tobacco altogether. Looking around at the monthly Burley Tobacco Cooperative board meeting Wednesday, the first since Congress passed the buyout, vice president Paul Tucker said, "There aren't any quitters in this group." But nobody in that room or on the farm has any illusions that the future will be simple. Guy McRoberts, a co-op director from Ohio, summed up the sentiment of many: "I don't like what we got, but thank God we got it." The bare bones of the settlement: $9.6 billion over 10 years to wipe out all tobacco quota; $2.5 billion for Kentucky; $7 a pound for quota owners and $3 a pound for growers. Those who both own quota and grow tobacco will get $10 a pound. As a result of the buyout, Kentucky farmers will also lose more than $700 million in payments from cigarette manufacturers that were part of a separate settlement, called Phase II. Beyond that, a lot of the details are murky. Much of the future of tobacco in Kentucky will depend on the very cigarette makers that tobacco farmers are now wary of. Cigarette companies have largely abandoned the auction warehouse system to contract directly with growers. So far, the tobacco companies have given farmers no indications of how much burley they will be looking to buy, or how much they are willing to pay. Bill Phelps, a spokesman for Philip Morris, the largest cigarette maker and the largest buyer of Kentucky burley, said on Thursday that his company is still looking for growers to contract with them. "I can't speculate on how small farmers are going to be affected," Phelps said. "If they can produce quality tobacco efficiently, they can compete." He also wouldn't comment on prices: "That's something between us and the growers." Fear and falling prices Burley prices have averaged about $1.99 a pound, but the U.S. grows only 6 percent of total world tobacco production and tobacco grown elsewhere in the world is much cheaper. Will Snell, University of Kentucky tobacco economist, said this week that he estimates that cigarette makers will have to offer between $1.50 and $1.70 a pound at first to keep most growers interested. "However, as they discover the low-cost growers and give them time to invest in their operations to expand the scale of production, I look for prices to fall below $1.50. Multiyear contracts will be vital to growers and especially their creditors," Snell said. Carter Muse, 71, of western Pulaski County, said he wants to keep growing tobacco as long as he is able, in part to keep his workers employed. He's glad he won't have to pay lease prices anymore, but with costs up on everything needed to grow burley, if the companies don't pay at least $1.60 a pound, it won't be worth it for him to keep raising leaf, he said. Bennie A. Thurman, 73, of Pulaski County, said farmers and quota owners have mixed emotions about the buyout. Although many are glad they'll get some money, others are upset about losing the Phase II money, or about using the low quota from 2002 in figuring the payments, or about the length of the payout. "Over 10 years a man won't realize he got much out of it," said Thurman, who is growing his 58th crop of burley this year -- 4,700 pounds he's contracted to sell to Philip Morris. Some older farmers on fixed incomes will have to keep trying to grow tobacco to make ends meet, he said. Noel Stevenson, 49, who farms in western Pulaski County and has 81/2 acres of burley this year, said he would have gotten out of tobacco if the buyout money had come over five years or less, meaning larger annual sums. But with the 10-year payout, he'll probably have to keep growing tobacco to meet his financial obligations. Stevenson said he has to look at what he will get from the buyout, and then figure out what to do. "It doesn't sound to me like it's going to help the farmer a great deal," he said of the buyout. 'Better than nothing' There are so many unanswered questions about the buyout and the future that most farmers are still weighing their options. Tenant farmers, who may have leased quota and land in a variety of arrangements, are in a particularly precarious situation. Because of the shared risk, they will have to share the buyout payments. Tenants rely on tobacco for their livelihood and do the hard work of actually growing it, but there's little in the buyout for them, said Eddie Reynolds, a large tobacco producer in northern Pulaski County. "I think it's terrible for the poor working man," said Reyn-olds. Still, for many farmers, the buyout is the answer to a lot of problems. Bert Rogers, 72, has been involved in tobacco all his life, but won't be any more. "A buyout is best all the way around because they just keep cutting the quota down," said Rogers, who has a farm west of Somerset. The last several years Rogers has leased his own quota out to other farmers. He has some concerns, though, about younger farmers who want to stay in tobacco. Many need to keep growing tobacco for the income, he said, but the cigarette companies could squeeze them on price. Glenn Gentry, 61, farms a 1,600-pound base and rents another 1,200 in northern Pulaski County, as well as working full-time as a security guard at Ephraim McDowell Hospital in Danville. He figures he'll get $20,000 from the buyout, at a time when he was planning on getting out anyway. He won't get a lot of money, he said, but, "It's better than nothing." Enditem