Tobacco Season Begins as Usual

Source from:  By James Roberts, Staff Writer 04/14/2005

Chad Sullivan's family has grown tobacco since the federal price support system started in the 1930s. Today, that system is gone and the Sullivans' future in burley is up in the air. "We're growing 10,000 pounds this year," Sullivan said. "We'll probably grow it for a couple of years anyway. It depends on whether it is profitable." The Sullivans' situation is something all tobacco farmers are now facing. The buyout, which has been a major topic of discussion for five years now, is here, though it appears the majority of producers will grow tobacco again this year. As of Monday, about half of Taylor County's tobacco farmers and quota owners have signed up to receive buyout payments. And while signing up doesn't mean farmers are giving up on the state's former No. 1 cash crop, it does provide the means to call it a day. "This is just payment for their loss in quota," said David Claycomb, county director of the local Farm Service Agency. "The farmers can still grow it if they contract." Passed by Congress last year, the Fair and Equitable Tobacco Reform Act of 2004 ends the federal quota and price support programs with the 2004 market. Beginning this year, growers will not be restricted as to how much tobacco they can grow. However, they will have to contract directly with a tobacco company. And it seems that most farmers are going that route this year. "I've talked to several who are going to raise it and several who are not going to," said Pat Hardesty, Taylor County Extension Agent for Agriculture. However, Hardesty said he's also talked to local farm supply stores and "they seem to be running close to normal." As in years past, Taylor County's tobacco producers are seeding their plant beds and breaking ground, preparing to transplant tobacco plants into fields by May. That Taylor County will have a fairly normal production year surprises Hardesty. "I would have thought one-third to one-half of our producers would not grow tobacco this year because of the buyout." Renamed the Tobacco Transition Payment Program by the U.S. Department of Agriculture, the buyout provides payments to tobacco quota holders and tobacco producers beginning in 2005 and ending in 2014. The first payments will be made between June and September this year. Starting in 2006, payments will be made each January. To receive payments, tobacco quota holders and tobacco producers must sign up at the Taylor County Farm Service Agency by June 17. Sign-up for the program began March 14. Claycomb encourages people to come in early. Eligible quota holders are the owners of a farm with an established 2004 basic marketing quota on their farm as of Oct. 22, 2004, the date the President signed the bill that ended the quota system. Eligible tobacco quota holders will receive $7 per pound based upon their basic quota at the 2002 marketing year level. Eligible producers include owners, operators, landlords, tenants or sharecroppers who shared in the risk of producing tobacco during any of the 2002, 2003 or 2004 marketing years. Producers will receive up to $3 per pound based on their share of the risk in the 2002, 2003 and 2004 crops. If a producer did not share in crop year 2002 but did share in crop years 2003 and 2004, that producer is eligible for payment for only 2003 and 2004. The funds required to pay for the transition program and other related costs will be obtained through assessments on manufacturers and importers of all tobacco products totaling no more than $10.14 billion over the 10-year period. With the 2006 payment, quota holder and producers will be eligible to receive a lump sum payment from a financial institution. According to the United States Department of Agriculture, if a private party enters into an agreement where an individual quota holder or tobacco producer is to receive a lump-sum payment from them in return for the individual's rights to Tobacco Transition Payments, the private party will likely request that either the contract payment be assigned to them as the payments are earned over 10 years or they will request that all rights be transferred under the contract to them by executing a successor-in-interest contract. Successor-in-interest contracts will be available beginning with the Fiscal Year 2006 payment. Assignment forms are available from local USDA Service Centers. While it may allow some producers to close the door on tobacco production, Hardesty said the buyout isn't likely to change Taylor County's agricultural landscape that much. "For some reason, we have not seen a lot of [new agricultural ventures]," he said. "The majority have stayed with traditional enterprises." Farmers may see an influx of money this fall, Hardesty said, due to the transition payments, an anticipated award from a price-fixing lawsuit and possibly, if the North Carolina Supreme Court rules favorably, Phase II monies. Hardesty said producers are most likely to funnel the money into current operations. Enditem