Tobacco Farmers Feeling Pinch of Quota Cutbacks; Incomes Going Up in Smoke, Growers Say
Byline: Jeffrey Sparshott, THE WASHINGTON TIMES
WILSON, N.C. - Greg Hipp stands next to more than 200 tons of tobacco just harvested from nearby fields, cured and then baled for sale to middlemen and manufacturers.
"It's really good tobacco. We had a real good crop in our area," the 40-year-old said inside the Liberty Warehouse, where Wednesday he auctioned about 15,000 pounds from his farm.
Wednesday was the first payday of the season for many of the region's farmers as markets opened. Coupled with the quality crop, it traditionally would be a day for celebration in eastern North Carolina, the heart of tobacco country.
But Mr. Hipp and thousands of other tobacco farmers scattered through 16 states face uncertain times.
A federal system of quotas, reacting to declining domestic cigarette consumption and rising foreign competition, in the past six years has cost tobacco farmers more than half of their annual sales and income.
Congress established the quota system in 1938 to stabilize prices and support farm income, largely by limiting tobacco supplies.The U.S. Agriculture Department each year determines quotas based on purchasing commitments from manufacturers, estimated exports and any product left over from the previous year. The limits on production help stifle supply and boost prices, but also make American tobacco more expensive than foreign-produced products.
"It's obvious that the quota system is just outdated. It needs to be eliminated so we can compete in a world market," Mr. Hipp said.
Tobacco farmers are the closest they have been to a quota buyout, a potential cash infusion of up to $12 billion in return for ending a system that, while still supporting income, makes U.S. tobacco uncompetitive on the world market.
North Carolina is the biggest tobacco-producing state and would be the biggest beneficiary.
"We've been talking about a tobacco buyout ... for the last 10 years. This is the first time we have ever been this close," said Rep. Walter B. Jones, North Carolina Republican.
The House in June and the Senate in July approved separate buyout programs as part of a broader corporate tax bill. Next month, lawmakers are expected to try to reconcile differences that include several billion dollars in payouts, funding sources and authority for new, far-reaching Food and Drug Administration regulations on cigarette manufacturing, advertising and sales.
"The long and short of it is, we have a chance, but we have a long way to go," said Rep. Bob Etheridge, North Carolina Democrat.
Nationwide, last year's tobacco crop generated about $1.6 billion in income - less than half the cash receipts from only six years ago.
The steep decline in income mirrors dwindling quotas.
U.S. and foreign cigarette manufacturers increasingly are turning to cheaper tobacco grown in countries such as Brazil and Zimbabwe, while health concerns, regulations, taxes and other factors diminish the U.S. taste for cigarettes.
"When we were the only source for quality flue-cured tobacco, it worked well. But now we're trapped in this system, and we can't afford to walk away because we have such a substantial investment," David Blalock, a Wilson County farmer, said while walking between rows of tall, broad-leafed tobacco plants growing on about 85 acres of his land.
Investments include equipment such as Mr. Blalock's propane- and diesel-fueled curing barns and specialized harvesting equipment. But farmers also have invested in the quotas themselves, which are attached to land in specific areas of the country.
"The federal government told me, if you want to grow tobacco, you have to buy a quota. So for the last 30 years, we've bought quota whenever possible," said David Rose, a Nash County farmer who grows tobacco on about 320 acres - half of which he owns and half that is leased. …