Ruling Burns Leaf Farmers

Source from:  By KRISTIN COLLINS, Staff Writer 12/27/2004

North Carolina farmers say cigarette makers have turned a banner year for tobacco country into a disaster by denying them about $160 million in expected payments. Late Wednesday, an N.C. Business Court judge agreed with the companies that they don't have to make the annual payment, which farmers have been getting as part of the 1998 settlement of states' lawsuits against cigarette makers. The tobacco quota buyout, passed by Congress in October, will end those payments. But tobacco farmers in 14 states were expecting a total of $430 million in one final installment this year before the buyout begins next year. Judge Ben Tennille, however, ruled that Congress' action ended those payments immediately. About 75,000 North Carolina farmers and quota holders, those who own federal permits to grow tobacco, usually get the payment. Most get about $400 per acre of tobacco. "I hope Judge Tennille has a merry Christmas, because he sure didn't give tobacco farmers and quota holders a very merry Christmas," said Larry Wooten, president of the N.C. Farm Bureau. The 14 states in which farmers get payments are appealing the ruling, but appeals probably won't be settled for months. They argue that the companies' obligation to make the payments doesn't end until they start funding the quota buyout next year. Farmers -- fresh from rejoicing over the buyout, which will force tobacco companies to pay farmers and quota holders $10.1 billion over the next decade -- say they are back in desperate financial straits. "Long-term in the tobacco business is one year, and we've got to survive this year," said Larry Sampson, a Robeson County tobacco farmer. "This could put some farmers out of business." Tobacco farmers and quota holders get checks every January as part of the 1998 settlement. The payments were intended to compensate farmers and quota holders for their losses as cigarette consumption declines. No final check Now that a quota buyout has passed, farmers won't get settlement payments. But most figured they would get one last check this January, because quota buyout checks aren't likely to arrive until at least next summer. Tobacco companies disagreed. The three major companies -- Philip Morris, Reynolds American and Lorillard -- argued that they were exempt from making the settlement payments as soon as a buyout passed. They want a refund of $300 million they have already paid this year into funds that make the settlement payments. And they refused to make a Dec. 15 deposit of about $130 million. The companies put money into the funds throughout the year, but farmers get the money all at once. By Thursday morning, word of the ruling had spread through North Carolina's tobacco growing communities. Farm advocates said they were handling dozens of calls from upset farmers. Officials at Reynolds American and Philip Morris did not return calls seeking comment. Wooten of the Farm Bureau said the payments are a minuscule amount for the multinational cigarette companies, which soon will make extra profits because the price of U.S. tobacco is declining. The buyout dismantles the federal price support program that has kept U.S. tobacco prices high. From now on, cigarette companies probably will pay from 15 percent to 30 percent less for American tobacco. But for farmers, Wooten said, the settlement payments have been a large chunk of yearly income that many use to pay debts or to plant the next spring's crop. Most budget the January check into the previous year's expenses. Talmadge Burgess Sr., 72, said he and his son use their settlement checks to put a new crop in the ground each spring. They grow about 70 acres of tobacco in Vance County. "I'm not sure what we'll do now," Burgess said. "We'll just have to go back and use the money that we set aside for other things." Farmers say that, without the settlement money, growing tobacco was a losing proposition. They cite the reduced demand, which cut their acreage in half over the past seven years, and the increased cost of renting land. The buyout will help, but not until late next year. "This money is the only thing that allowed us to keep going," said Keith Parrish, a Harnett County tobacco farmer and head of the National Tobacco Growers Association. "Now, the money didn't show up. The buyout ain't coming until August or September. So what do you go and tell your banker when you go in the hole this year?" Enditem