Leaf Still Golden for N.C. Farmers

Source from:  Lee Weisbecker CEDAR GROVE 07/26/2005

The mailbox of Dwight Compton, whose family has lived in northern Orange County since 1734 and raised tobacco longer than anyone can remember, has been filling up in recent weeks. The letters are from investment managers and insurance companies, but mostly they are from bankers who consider the 68-year-old farmer a potential customer in the VIP category. That's because Compton is about to come into a large sum of money, about $300,000, in annual installments over the next 10 years, compliments of the national tobacco buyout program. What the direct mail offers are pitching is a way for Compton to take his cash now in a lump sum. "I have no earthly idea how all these people got my name," he says, admitting that he didn't pay much attention to the appeals at first. But that has changed in recent weeks. "I'm looking now," he allows. "I think so, yes, the lump sum is looking better because if you give them 10 years, who knows how they will fiddle with it." According to best estimates, the buyout program will pump some $3.8 billion into North Carolina over the next decade, billions in federally administered payments against which bankers can make loans. Little wonder then that banks and other financial services institutions, both large and small, are falling over themselves looking for every Dwight Compton they can find. Visibly in the hunt at this point are such players as Wachovia, BB&T, RBC Centura, Chase Manhattan, the investment house of Edward Jones and, not surprisingly, smaller lenders with roots deep in tobacco country - concerns such as Raleigh-based East Carolina Farm Credit, a lending cooperative with total assets of $2 billion. "This is a new day for a lot of people," says East Carolina Farm Credit agricultural lender Chris McKenzie. Wachovia's recent wave of full-page newspaper advertising on the subject coaxes tobacco growers and land owners: "Tobacco has been your expertise for generations. Money has been ours since 1879." "It is a line of business we're obviously interested in getting," says Wachovia spokesman Scott Silvestri. At RBC Centura, the emphasis is being put not only on loan terms but also on what farmers and quota holders can do with their money once they have it - including estate planning, tax advice and investment options. Over the past few months, in fact, the bank has been holding seminars for potential customers in both Carolinas. "Attendance to these events has been so strong that we've added several sessions to keep up with demand," says RBC Centura spokeswoman Kristen Doherty. Signed into law in October 2004, the buyout replaces 1930s New Deal-era support programs. With an estimated $9.6 billion collected from tobacco importers and manufacturers, the federal Commodity Credit Corp. will administer the payments with the help of local Farm Service Agency offices. The interest rates that third party lenders can charge to convert the installment payments to lump sums are set in law: the going prime rate, plus two percentage points. Banks can play with interest offerings below that ceiling, plus add in numerous other bells and whistles such as investment and other forms of advice. RBC Centura has even developed a special six-month tobacco certificate of deposit as a "parking place" for initial distributions, which could begin this summer. At East Carolina Farm Credit, lenders have geared up with a number of options and will make partial or full lump sum payments and even write loans against the promise of a first-year payout. "Our offerings will be competitive with what the other companies will make," says McKenzie. 'But one of the things we'll be counting on is the fact that we've had relationships with many of these farmers for years." Numbers unknown Exactly how many growers and quota holders statewide stand to gain is difficult to gauge. In Wake County, where 5,663 acres of tobacco were cultivated in 2004, mostly around Zebulon, Wendell and Fuquay-Varina, the pile of buyout contracts has risen to 3,500. "You can have numerous owners for every acre," explains Keith Miller of the Wake County Farm Service Agency. In nearby Orange, there are about 150 tobacco farms and roughly 1,300 acres under cultivation, including Dwight Compton's 34. In a good year, his return on the product he grew was about $4,300 per ace. If he had put in corn, by contrast, a good payout would be about $300 an acre. "People often tell me I should grow produce, instead," he says. "There's no money in that." When his buyout payments begin, Compton says he'll quit the tobacco business for good and concentrate on his new venture: growing turf grass and selling the strips of sod to lawn improvement companies or directly to consumers. "Why, we had a man come in the other day to buy some sod, and we asked him how he was going to carry it," Compton says. "He told us just to load it up in his trunk, and don't you know he was driving a Mercedes-Benz. Can you imagine that, in the back of a Mercedes-Benz." Enditem