Season Turns Blue for Tobacco Farmers

Source from:  The News-Enterprise By JOHN FRIEDLEIN 12/28/2004

Manufacturers off the hook for balance of Phase II payments Hardin County farmers lost more than $1 million in expected tobacco settlement money when a North Carolina judge ruled that, because of the buyout that ended the quota system, companies no longer must make the final Phase II payment. "I'm disappointed," said Elizabethtown grower Larry Thomas. "Every tobacco farmer is, I'm sure." This news is another setback for growers and quota owners who have been coping with years of dwindling profits. "It's just another loss," Thomas said. Even the buyout approved by Congress this fall was less money over a longer period of time than some quota owners had hoped. The $10.3 million will be paid out over 10 years. As for the 2004 Phase II money, Kentucky growers expected to receive $124 million, with $1.3 million of that going to local producers, said Thomas, who sits on the board of directors of the state Farm Bureau Federation. North Carolina Business Court Judge Ben Tennille released cigarette companies of the obligation Thursday. An appeal is expected. This is the sixth year of the $5.15 billion Phase II program, which would have lasted a total of 12 years. The money was intended to help farmers make up for loss of revenue from higher cigarette prices. A final payment made this week or early next year would have helped carry growers over until buyout payments start next August. For the average producer, yearly Phase II payments are about the same as buyout payments are expected to be, said Ray Allan Mackey, a local farmer and president of the Hardin County Farm Bureau. If farmers thought the state would make up for the loss of these payments, they'd be wrong. State officials have compensated for a shortfall in Phase II money in the past, but the law that allowed it does not make up for the absence of any sort of payment, said Keith Rogers, executive director of the governor's office of agricultural policy. Also, the North Carolina judge continued a moratorium on disbursment of those funds. "That money had been promised," Mackey said. "The money should have already been set aside." Tobacco companies made some Phase II payments this year, but farmers have not received the funds and the manufacturers expect to receive refunds. "Clearly, the tobacco companies are not meeting their agreed upon obligations," said White Mills grower Steve Meredith. "It's a significant amount of money that we would have anticipated." It's also money he, other farmers and even those who lend to growers had figured into their budgets. Meredith also said he would have been better off had the Phase II payments continued, instead of the buyout funds. Because of the ruling, individual Hardin County farmers lost up to a few thousand dollars this year, Mackey said. Not only will they not get a Phase II check, but they must also deal with production losses caused by one of the wettest years on record and, possibly, lower contract prices. Because of these factors, most tobacco farmers must consider whether or not to grow next year, Mackey said. "There's a lot of decision making yet to be done." Enditem