Tobacco Farmers Consider Effect of New System

Source from:  By Kevin Eigelbach Post staff reporter 11/01/2004

When President Bush signed a $10.1 billion tobacco buyout last week, he made it even less likely that a family that relied on tobacco for much of its income would still do so. But on a big farm just west of town on Ky. 10, the Williams family plans to keep growing the crop that has supported Darrell Williams, his father and grandfather before him, and now his two sons. "We'll probably keep growing tobacco," the 54-year-old Williams said this week during a break from the work of stripping the crop and baling it for market. The Williamses represent something once common in Kentucky, but now rare: Three generations of farmers, working together with none of them working off the farm in, say, a factory job in town. Their farm has a variety of other crops. Alfalfa hay sells well to Lexington horse farmers. The Williamses also grow corn and soybeans, and they have livestock. But as on so many other Kentucky farms, tobacco's the main cash crop. Darrell's father, Gene, 85, estimated that tobacco sales contribute about 40 percent of the farm's income. The men annually raise about 300,000 pounds of burley on about 125 acres in Bracken and Mason counties. They've heard the pitch from agricultural experts, who are encouraging farmers to grow vegetables instead of tobacco, but the Williamses are skeptical. "A lot of others are trying vegetables," Darrell Williams said. "But we never did see where they make enough money. One year you do all right, then you can't sell them the next." President Bush signed the buyout into law last Friday as part of a sweeping corporate tax bill. Widely viewed as a way to ease farmers out of agricultural sector on the decline, the buyout will doubtless prove the incentive some need to move on to other crops or other work. Quite a few growers, especially the older ones have continued to grow in anticipation of the buyout, said Scott Althauser, vice president/leaf for the Burley Tobacco Growers Cooperative in Lexington. For them, the annual payments of $10 for every pound grown during the 2002 season will serve as a retirement fund. But some tobacco farmers -- especially those on larger farms -- plan to continue growing tobacco even as their buyout checks come in over the next decade, which the law permits them to do. The buyout is being paid as compensation for an end to the quota system that has protected the tobacco market since the 1930s. The system limited how much tobacco could be grown. It also paid for government graders, who set a minimum price for burley sold at auction. If no tobacco company bought the leaf, it went into a pool for later sale. After this year, growers have to sell in an unregulated free market. No minimum price, no pool. Whatever the tobacco companies are willing to pay, that's the price. It's hard to say how many growers will quit the business, because so many are waiting to see what the companies will pay, and the companies have not named their price, Althauser said. He hoped that would happen early next year, because growers will need to make decisions about how much to plant. This year, burley prices averaged nearly $1.98 per pound, a record-high price. Gene Williams said he expects that next year, the price will fall to about $1.40 or $1.50 per pound. That loss won't affect his family too badly, however, because the family won't have to pay 60 cents a pound to lease quota. The Williamses now lease, from other farmers, the right to grow about 75,000 pounds, something they won't have to do next season. It's likely that the buyout will concentrate tobacco growing in the hands of fewer farmers, with some of them increasing their production. But Gene Williams doesn't think his family can raise much more. "For one thing, we don't have the barn room, and you can't afford to build barns," he said. He expects that America will grow less burley without the quota system. For decades, burley farmers baled their crop and brought it to huge tobacco warehouses, such as the Kentucky King Tobacco Warehouse in Maysville. There, in the weeks before and after Thanksgiving, tobacco buyers "bid" for pallets of burley, an "auction" that rarely featured competitive bidding. The buyers typically offered the same price for a pallet, and the auctioneer's job was merely to make sure every buyer got his share. With no guaranteed prices and no quotas, this may be the last year that tobacco gets auctioned in a warehouse, Althauser said. For the past few years, the Williamses have sold their crop on a contract with Philip Morris USA. They bundle it up, drop it off at the warehouse and pick up their check. The contracts don't guarantee delivery of a certain amount of pounds, he said, but he expected the companies to start requiring that. When that happens, the trick for the grower will be not to promise more than he can deliver. Enditem