Tobacco States Cool Crop's Slow Burn

 

Writing as Virginia's governor during the last days of the American Revolution, Thomas Jefferson described tobacco farming as "a culture productive of infinite wretchedness" and looked forward to the crop's decline in his state and Maryland after the war.

Two hundred years of Chesapeake history appeared to have proven the father of modern democracy dead wrong. But with total acreage at its lowest level since 1874, the Old Domininion putting half of its first installment of the 1998 tobacco settlement in the hands of leaf growers, and Maryland offering them a full-scale buyout, Jefferson's vision seems less crackpot than prophetic.

"The consumption of tobacco has fallen," confirms Tom Burgess, deputy director for tobacco and peanuts at the federal Farm Service Agency. "And the [manufacturers'] demand for the crop is falling," thanks also to declining cigarette exports and cheaper raw leaf imports.

Now, with questions of profitable alternatives ranging from hemp to houses in the air, Jefferson's successors in Tobacco Belt government are sorting out what to do about it.

Their answer so far has been farm diversification, regional economic development and steady doses of financial aid to individual growers funded for the next 25 years by payouts from the tobacco industry."Over the past three years, the amount of acreage that farmers can plant in tobacco has dropped dramatically," notes tobacco analyst Lee Dixon of the National Conference of State Legislatures (NCSL). "These are people with families and kids and wives who are being hurt. The states are trying to cushion that fall. At the same time, they're trying to bring industry into these areas."

Of twenty states where farmers harvest tobacco, seven - Georgia, Kentucky, Maryland, North Carolina, Ohio, Tennessee and Virginia - have set aside generous portions of their first payments from Big Tobacco to shield growers from a series of blows to their livelihood. South Carolina, the only significant tobacco state to rely solely on the National Tobacco Growers Settlement Trust (phase II of the Master Settlement Agreement) to support growers so far, begins supplementing that money in 2002.

Apart from the $5.15 billion that cigarette manufacturers are to pay directly to growers over the next 12 years through the Trust, the states have committed $537 million of the $8.1 billion they have in FY2001 Phase I funds to support growers and communities, an NCSL breakdown shows.

The federal government has also lent a hand, compensating farmers with $328 million in 1999 and another $340 million this year through the Tobacco Loss Assistance Program.

Market uncertainties generated by the MSA and related arrangements between the states and the tobacco industry are only one part of the combined headache for the nation's 80,000-plus tobacco farmers.

Health concerns, state and federal cigarette excise taxes, constant litigation and diminishing exports continue to hamper demand among U.S. cigarette manufacturers, North Carolina State University professor A. Blake Brown told the U.S. House Agriculture Committee on July 26.

The result is a rapidly shrinking national tobacco quota, administered by FSA under a price support program launched during the Depression and approved every three years by growers and quota holders. This year, FSA cut acreage over 20 percent - the most devastating cut in a long recession - and the total yield threatens to dip below one billion pounds for the first time in over 80 years. Meanwhile, severe drought singed top tobacco states in 1999 and compounded growers' woes.

Tobacco still reigns as the South's top cash crop but, despite the stable prices created by the quota, these are hard times to plant it. While most leaf growers cultivate a variety of crops, the 1997 Census of Agriculture shows that nearly three in four receive at least half their income from tobacco. And Brown estimates that the 2000 harvest will bring in a mere $1.5 billion, far leaner than the $2.7 billion that growers averaged between 1994 and 1999.

Growers in North Carolina and Kentucky, who harvest over 65 percent of the U.S. crop, are hit hardest. Preliminary estimates dropped Kentucky's acreage the farthest of any large tobacco producer (38 percent) while North Carolina reductions left fallow one in six tobacco acres harvested last year.

Legislatures in both states, charged with the responsibility of allocating the national settlement, withstood national political pressure to bankroll massive anti-smoking campaigns and related healthcare initiatives and instead invested comparatively large sums in the future of their tobacco communities.

Earlier this summer, Tarheel lawmakers put the finishing touches on their allocation plan, setting aside 50 percent of their annual share in the Golden Leaf Foundation for tobacco communities, 25 percent into a Tobacco Trust Fund for growers and farm laborers and the remaining 25 percent for healthcare.

Golden Leaf "provides economic impact assistance to economically affected or tobacco-dependent regions of North Carolina," according to program literature. It includes support for:

  • educational programs, job training and employment assistance for farmers and displaced farm laborers and warehousemen;
  • scientific research to explore new uses for tobacco;
  • rural health care and social service programs;
  • local public works and economic development projects designed to attract business and new investment to tobacco communities.

The health and tobacco fund legislation, which awaits Gov. Jim Hunt's signature, establishes an 18-member commission nine of whom must be flue-cured or burley tobacco farmers charged with creating programs for aid to farm owners and workers.

Kentucky lawmakers dedicated half of their payments to early childhood and health care programs, sewing the remainder into agriculture. Kentucky is the only state to date to share allocation responsibilities with local governments, which will receive agricultural development funds according to current production figures.

Highlights from other state plans:

  • Ohio, which ranked seventh in total tobacco production in 1999, put $229 million in the Southern Ohio Agricultural and Community Trust Fund through 2012.
  • Virginia has already passed out $62 million to tobacco growers from its phase I funds alone. The rest of the state's 2001 tobacco relief dollars will go to community college scholarships for growers and their families and to Virginia Tech research on pharmaceutical uses for tobacco.
  • The One Georgia Fund directs $63 million toward rural economic development and Tennessee lawmakers divided nearly $180 million evenly between health care and agriculture.
  • Gov. Parris N. Glendening left little doubt for farmers pondering the crop's future in Maryland when he promised in January "to help our hard-working farmers transition out of tobacco, and into wholesome, productive crops, closing the book on Maryland's history as a tobacco state." Lawmakers allocated $9 million from the settlement to a buyout program, offering farmers $1 for every pound of tobacco they grew in 1998 over the next ten years while they consider either new crops or new careers. An early survey estimated that 86 percent of Maryland tobacco farmers will take them up on it, leaving officials to scramble for adequate funding.

For the moment, Maryland stands alone in the buyout business. But farmers everywhere will still confront unappealing choices in either pinning down a new moneymaker or opting out of agriculture altogether.

Niche endeavors like strawberries, herbs and even fish farms offer one set of risky solutions. Industrial hemp, a favorite of colonial planters and the subject of a growing and controversial re-legalization movement, may one day be another.

"There are the usual row crops, which are always alternatives, but they're very low-income alternatives. And then in Kentucky, especially, there's the possibility of raising cattle. But neither one of these are the highest or best uses of the land, given tobacco as an alternative," says Thomas Capehart, tobacco analyst for USDA's Economic Research Service.

"I don't think they can find a crop out there right now that can give the return per acre that tobacco's giving them," adds FSA's Tom Burgess.

Capehart says that growers' choices will depend heavily on their region. Growers near the prosperous hubs of central Kentucky and the Carolina Research Triangle enjoy a distinct advantage over their more remote brethren. "They might sell [their land] for development or they might just keep it and do part-time farming and get a job in the Toyota plant or in some kind of high-tech industry."

But William Upchurch, who specializes in tobacco affairs for the North Carolina Department of Agriculture, cautions that those anticipating the death of American tobacco have some waiting to do.

"I would say that we're changing the way we do business. That it's going to be a lot different than the way it's been done in the past. But in some shape or fashion, tobacco will continue to be part of North Carolina," he said.

 
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