Tobacco's Future Tied to Buyout; South Carolina Farmers to Feel Impact

Source from:  The State (Columbia, S.C.) WASHINGTON  11/11/2004

Keith Allen's family has been farming tobacco in the Pee Dee for seven generations. He hopes his daughters can grow up to raise the crop, too. The answer should come in the next few weeks. A $10 billion tobacco buyout, passed by Congress last month, will send more than $700 million to South Carolinians over the next 10 years. The money will go to those who own or lease the federal quotas that have long determined who can grow how much of the golden weed. The buyout -- which will pay Allen more than $100,000 over 10 years -- ends the quota system. Now, anybody can grow tobacco. The buyout also strips away the federal price supports that have helped make tobacco farming lucrative since 1933. That leaves Allen, who cultivated 175 acres of tobacco in Dillon and Marion counties this year, wondering how much he will be paid per pound for a crop he will begin work on in January. "I want to grow tobacco. I'm set up to grow tobacco. I've got about $350,000 worth of equipment that's only good for harvesting tobacco," said Allen, who lives in Latta, northeast of Florence. "But we don't know what happens next until we get a price." The answer will come from cigarette manufacturers, including Philip Morris and R.J. Reynolds, who plan to contract with growers directly for tobacco instead of buying it at auction. What they are willing to pay -- and farmers expect to know within the next few weeks -- will determine whether tobacco begins a fast slide in the state. If the vast tobacco fields of the Pee Dee -- where most of the state's 6,000 growers plant-- are no longer profitable, South Carolina could see the demise of its fourth-most-profitable agricultural commodity. It also could lose a way of life. "Take the little town of Mullins," said Wayne Mack, the S.C. Department of Agriculture's assistant commissioner for marketing. Mullins is one Pee Dee town where growers formerly went to auction off their harvest. In towns like Mullins, restaurants, car dealers and schools -- the entire local economy -- are linked to tobacco farming. But, Mack said, "Change is coming." Despite the uncertainty over tobacco's future, most S.C. farmers pushed hard for the buyout. The cost of leasing quotas put U.S. tobacco farmers at a competitive disadvantage. Also, manufacturers increasingly have relied on cheaper foreign tobacco. The buyout, said U.S. Sen. Lindsey Graham, R-S.C., "is going to get rid of a 1930s program that has lost its relevance in the 21st century. It will allow farmers to start farming where the market is." The buyout allots $10 for each pound that quota-holding farmers had in 2002. For those who leased quotas, $7 goes to the quota holder and $3 to the farmer. S.C. growers got about $1.85 a pound this year for the flue-cured variety of tobacco grown in the state. That was the price paid by cigarette manufacturers, including the federal subsidy. Next year, the first without the subsidy, farmers expect a steep drop in that price. What the growers want to know is whether the manufacturers will pay $1.40 a pound or closer to $1.50 a pound. The higher the price, the more South Carolinians are likely to stay in the business, Mack said. But some are going to leave the business no matter what. Allen, who is 48, says he's young enough to give tobacco-growing another shot if the price is right. But 79-year-old Bussey Poston, who cultivated 96 acres of tobacco around Lake City this year, says he is past the age when he wants to struggle with the labor-intensive crop. "I'm out of it all together. It's my age. And I don't have a contract with the companies. They think you can produce it for 40, 50 cents less (per pound). I just can't do it." Enditem