Shift in Payments Angers Tobacco Farmers

Source from:  By TOM MURPHY Rocky Mount Telegram Sunday, February 05, 2006 02/06/2006

Angry farmers say the U.S. Department of Agriculture is violating the clear intent of Congress for the tobacco buyout. About 35 Eastern North Carolina farmers attended a meeting Wednesday in Wilson for legal advice on the buyout program. Congress enacted the American Jobs Creation Act of 2004, ending the tobacco price support system built around quotas and establishing a program of transitional payments to buy out tobacco quota holders and producers. The buyout is paid for by assessments on tobacco companies and is not taxpayer-funded. The assessments on tobacco companies are altered quarterly, so that the tobacco companies' assessments are reduced if the payments to the producers are reduced. Jimmy Lee, a Zebulon farmer, said that under the tobacco buyout statute, quota flue-cured and burly tobacco producers were to receive $3 per pound, multiplied by the 2002 base quota level of the producer. "The government's changes to the equation mandated by Congress in the tobacco buyout statute resulted in farmers receiving significantly less money," Lee said. The federal government, as of September, has paid almost $385 million to North Carolina farmers with the first installment of checks from the $9.6 billion buyout of tobacco quotas. Under the buyout, quota owners will get $7 a pound over 10 years for the quota they owned in 2002. Farmers will get $3 a pound for the leaf they grew. Lee said the U.S. Department of Agriculture has changed the regulations for producers - basing the $3 per pound buyout payments on the average yield for the years 2002, 2003 and 2004. "The bill has been passed in Congress - with the buyout based on 2002 levels and not to exceed $10.4 billion," Lee said. "Some of that money will go to the Farm Service Agency for administration costs. "Using the U.S. Secretary of Agriculture's formula, I believe it will save tobacco manufacturing companies some money. Every grower will get less than what the intent of Congress was because we had quota cuts in 2003 and 2004." Nash County farmer Gerald Coggin, who has grown tobacco for 31 years, said the agriculture department does not want to figure producer buyout payments the same for farmers as they did for quota owners. "What they want to do to farmers is to average the production years and pay them on that basis," he said. "In each of those years, we were not able to produce as much tobacco because of quota cuts. "The bottom line is that we will receive less money. I can't tell you how much money, but it's going to be a considerable amount. The secretary of agriculture has taken it upon himself to change the rules, and that's what the argument is over." Coggin said he was a quota owner and was paid for his quota. Most farmers had some allotment and were paid for it, he said. "I've received one buyout check and expect to get another one soon," he said. "As a producer, I'm not being paid like an allotment owner. If a farmer didn't produce tobacco in 2004, he'll lose a third of his buyout money under the agriculture department's regulation. If he didn't farm in 2003, he'll lose two-thirds of his money." Coggin said he does not think the government can fairly deal with the buyout unless they figure payments for each grower individually. "When they go by your yield for 2002 through 2004, with the quota cuts, and not by your actual quota - that hurts," he said. "When they penalize you on the years you didn't farm - that hurts." Rocky Mount farmer Sammy Tant said growers are losing money because of the buyout program. "We've got a serious problem with it," he said. "Farmers need to get paid - based on the year 2002 - as Congress intended." Farmers at the Wilson meeting said they think that once other farmers realize how much money they are going to lose, they will start "making calls and showing up to meetings on the buyout." Two Virginia burly tobacco farmers have filed a lawsuit against the agriculture department and Commodity Credit Corp. challenging the federal regulations they say U.S. Secretary of Agriculture Mike Johanns has changed - a step that farmers contend will mean the loss of between $400 million and $600 million for growers. The challenged regulations - referred to in the lawsuit as "USDA Tobacco Regulations" - are unconstitutional because they violate the clear intent of Congress to base production payments on the 2002 tobacco crop, according to the lawsuit filed by burly tobacco growers Williams Neese and Daniel Johnson, both of Virginia. Neese has produced burly tobacco in Washington County, Va., for 40 years. As a producer of burly tobacco, Neese participated in the tobacco quota system. Johnson is a burly tobacco producer with farms in Washington County, Va. He has grown burly tobacco for 33 years and participated in the tobacco quota system. The agriculture department and the secretary of agriculture are responsible for administration of tobacco regulations, Eastern North Carolina farmers said at the meeting. The Commodity Credit Corp. is a federal agency within the agriculture department, supervised by the secretary of agriculture, they said. In the Agriculture Adjustment Act of 1938 and the Agriculture Act of 1949, Congress authorized a marketing quota and related price support system for growers of tobacco, known generally as the tobacco quota system. Under the system, the agriculture department set quotas for each farm for each growing year based on the amount of tobacco that tobacco manufacturers indicated they would need for that year. These quotas acted as a government license to annually grow a certain amount of tobacco. Enditem