Farmers Look to Life Without Allotment

Source from:  By George A. Chidi, Rocky Mount Telegram 03/21/2005

In a New Deal move to save farmers from overproduction 68 years ago, the U.S. Department of Agriculture allotted each domestic tobacco farmer a portion of the total crop to be grown and set a minimum price for it to be sold. The right to grow tobacco became a property right. Attached to land, an allotment increased its value. Farmers rented out the allotment to other growers if they didn't want to farm tobacco themselves. The system worked for years — tobacco growers had a predictable market, and cigarette companies had a predictable supply. Tobacco companies met with the USDA each year to discuss how much supply they would need and to set prices. Those prices have usually been much higher than tobacco grown in most other countries, but cigarette companies were usually willing to pay the premium because domestic quality was higher. Then the Brazilians learned to grow tobacco. In 1960, about 90 percent of the tobacco in domestic cigarette brands was grown in the United States. Today, cigarette manufacturers use about 50 percent, according to USDA figures. Buyers for the cigarette companies say the only reason they use any domestic tobacco anymore is because consumers demand the flavor of domestic tobacco and wouldn't smoke their cigarettes without it. Domestic tobacco exports declined to 8 percent of the world market in 2002 — an all-time low, according to the reports. Brazil alone increased production in 2003 by about 500 million pounds, or about the same amount as the U.S. exports in a year, according to figures from Tobacco Associates Inc., an industry marketing association. Farmers lobbied Congress for about a decade to end the quota system. The legislative logjam broke in November, when Republican leaders attached the buyout to politically unpalatable revisions to tax rules as a means of attracting tobacco-state support. The buyout provides 10 years of payments to farmers and quota owners. Each tobacco grower will receive $3 per pound grown, as an average of crops harvested between 2002 and 2004. Allotment holders will receive $7 per pound. Legislators hailed the buyout as the salvation of the small farmer and the end of an era. "A lot of farmers wanted the buyout, and when they got ... you go whoa, we did pull it off," said U.S. Rep. Bob Etheridge, D-2nd District, a former tobacco farmer. Etheridge's family sold its allotment a few years ago, he said. "Even though (tobacco) brought in a life line, we're looking at $4 billion over the next 10 years coming into North Carolina. ... It could create as many as 3,000 new jobs, depending on how it's invested." The buyout provides debt-burdened farmers with a way to retire without bankruptcy if they choose, he said. "It's a source of income coming in where (quota owners) and growers are getting out." Enditem