Tobacco Buyout Change Irks Farmers

Source from:  By Stephanie Stoughton Associated Press RICHMOND, Va. 10/10/2005

William Neese began farming burley tobacco in southwest Virginia's foothills when he was 12. He quit only because payments from a federal tobacco-quota buyout promised to help him exit a business that no longer guaranteed profits. But in March, the 52-year-old farmer from Abingdon was stunned to learn that he would receive only a third of what he had expected from the $10.1 billion buyout. Other longtime growers were getting similar unwelcome surprises. Neese and another Virginia farmer have sued the U.S. Department of Agriculture, accusing it of steering away from Congress' directives and effectively slashing their payments. For Neese, that means he would receive about $190,000 rather than the $563,000 he expected. The other burley farmer, Daniel M. Johnson of Meadowview, would get $217,000 versus $503,000. The farmers say the agency replaced a simple calculation approved by Congress with a complex formula that cuts payments to many farmers. "I didn't realize that if the House passed it, the Senate passed it and the president signed it, that the USDA had any power to change it," said Neese, who stopped growing tobacco last year and now raises more cattle. "I guess we're getting an education here." A spokesman for the USDA declined to comment and deferred to the Justice Department, which said it planned to file a response this month. But in an April letter to Sen. George Allen, an official with the Agriculture Department said a lot of farmers got the false impression that they would receive payments based on their 2002 tobacco quotas. Quotas, which represent the amount of tobacco that growers can market, have been assigned to individual farms since 1938. "We understand many farmers were mistakenly led to believe that they would receive payments based on the farm's 2002 effective quota," wrote J.B. Penn, a USDA undersecretary. "However, the statutory language requires many adjustments to be made to the 2002 effective quota when calculating payments for producers." Exactly who contributed to any miscommunication is unclear. Penn's letter came after Allen, R-Va., raised questions about possible inequities in the agency's formula. In March, Allen told Penn in a letter that he was concerned that the USDA's formula appeared "to deviate from the clear direction" of the law. The farmers' lawsuit emerged from Congress' decision last year to end the federal program setting price and production controls on U.S. tobacco. Tobacco quota holders will be paid over a decade to compensate for losses as this system ends. The buyout will be financed from assessments on tobacco companies. About $9.6 billion was to go to quota holders and producers, while the remainder was to pay outstanding expenses. Under the law passed by Congress, farmers who grew tobacco in 2002, 2003 and 2004 would receive $3 per pound, based on their 2002 quota. Owners of tobacco quota – which includes landowners who lease their production licenses to active farmers – would get $7 per pound. According to the farmers' lawsuit, Agriculture Secretary Mike Johanns issued regulations in the spring that deviated far from Congress' directive. Instead of basing the formula on the 2002 quota, as the farmers say Congress intended, Johanns effectively used the growers' sales for each of the three growing years, the lawsuit said. But many burley farmers have been unable to produce up to their quota levels due to crop disease and poor weather conditions. "Our biggest gripe is that Congress has said $10.1 billion," said Daniel McKinney, chief executive officer of the Burley Tobacco Growers Cooperative Association in Kentucky. "How come we're not getting that?" Enditem