Tobacco Exit Plan Could Cost $1 Billion

Source from:  By Jeff Helsdon - Staff Writer Friday March 10, 2006 The Tillsonburg News  03/13/2006

Delay in crop negotiations frustrating some growers Dire predictions that half the remaining tobacco farmers could end up bankrupt was the message heard at a mass meeting Wednesday night. The Ontario Flue-Cured Tobacco Growers' Marketing Board held the meeting to update its producers on progress towards a long-term exit plan. About 1,100 people turned out. Prior to Christmas, the board released a statement saying a long-term exit plan for all producers was the only solution to the current situation. Board chairman Fred Neukamm told growers the board has been working hard to get that message across to federal and provincial politicians. Both the federal and provincial governments have committed to a forum to discuss the implementation of such a plan. For the first time a price tag was put on the proposed exit package. Total cost of quota buyout and community assistance was pegged at $1.11 billion. The board's proposal is that taxes from the sale of Canadian tobacco products fund the buyout. Details of the plan are: • Farmers would relinquish their base quota to receive an exit payment of $3.30 per pound. Total funding to buy out the current 271 million pounds of quota is $897 million. In addition, the board believes a negotiated payment must be made to sharegrowers forced to out of tobacco production. The exit would take place over a negotiated time span. • Farmers who exited through last year's TAAP plan receive a top-up payment of $1.23.40 per pound. This would equate to a cost of $63.2 million • The plan would include a comprehensive economic development strategy for tobacco communities. Estimated cost of such a program is $150 million. • During implementation of the plan, growing tobacco must still be profitable for remaining farmers. Elgin-Middlesex-London MP Joe Preston, who the Conservatives have made the go-to man to move the process along, told the crowd his government is going to be more cognizant of farmers' needs, but has only been in office a month. "We will move this process (along) as fast as we can, but we won't endanger it by moving too fast," he said. Pushed for a timeline by the audience, Preston said he couldn't give a definite date. While he admitted the forum wouldn't convene this week, he said it won't be April either. "It's as soon as we can put the right butts and chairs around the table," Preston added. Negotiations for a 2006 crop size won't get underway until that forum starts, Neukamm stressed. Although the board has talked to banks, explaining the situation and asking for leniency for farmers, the fact no crop size has been set was a contentious issue for some growers in the audience looking for operating loans. Langton-area grower Bob McKnight told Neukamm and the board farmers need to have a 2006 crop size established. He added farmers won't tolerate being told by companies what price will be paid for tobacco. "If the board is not capable of negotiating with companies, they should take it to government arbitration now, not next week," he said. Neukamm admitted, in recent years, the Tobacco Advisory Committee has fallen short of what it was designed to do, but said the board needs to stick to its plan not to negotiate a crop size until the forum begins. Provincial and federal governments requested an indication of a preliminary acreage for 2006. Neukamm said that information will be gathered in the next week and then shared with growers to give them some indication of crop size. "I want to make it clear though, an indication of pounds requested by the government is not the beginning of crop negotiations," he said. Diane Meulemeester asked Neukamm who the board was trying to hurt by not setting a crop size until June. "It's not the government, they'll go ahead with or without a crop size," she said, adding farmers are the ones hurt. Neukamm said, until that night's meeting, he hadn't heard from farmers demanding the board get on with negotiations, but to hold fast on its position. One message that resonated over and over again from speakers during the question period was the financial stress being experienced by farmers. Mike Parezanovic, of West Lorne, said not only are farmers losing their livelihoods when the bank forecloses, but they are losing their homes. He blamed the situation on greed of government and companies, saying a farmer gets $80 to $90 per bale while the government and companies rake in thousands of dollars. "That little lousy pack with two leaves is $8," he said. Leaving the meeting, Straffordville-area grower Frank Pihokker was frustrated saying he didn't know anything more than he did going in as far as crop size or price. "How can they expect us to invest a dollar in a 2006 crop not knowing if there is a dollar to be made," he said. Houghton-area farmer Mark Demaiter said his banker told him to report back information on crop size after the meeting. Teeswater financial consultant Alan Emerson reminded the board the last time tobacco growers tried to hold out on negotiating a crop - in the mid-1980s when the push was on for a national agency - many growers lost their farms as banks foreclosed. He said the logic of withholding crop negotiations was flawed. Emerson knew of at least one bank currently working on seizing a farm. "They don't care if he gets $1 million a few months from now," he said. "They want his home sold, his machinery sold because they're not sure if you're going to get the money." Emerson called on the government to tell banks to hold off while the situation is being negotiated. Preston said he was willing to do just that. "There's an end to what we're trying to do here and I think the banks will be pleased," he said. Another point of contention with some farmers was the concept the full exit will mean no possibility of growing without quota, as is the case with the United States buyout. "All of our work on this issue over the past years has shown us that governments in Canada wa