It could have been worse. A last-minute purchase of tobacco kept it from being disastrous. For many, it could be the final blow and an exit to growing tobacco.
Flue-cured tobacco farmers will be allowed to grow a basic quota of 10.45 percent less in 2004 than in 2003. Before U.S. Secretary of Agriculture Ann Veneman announced the flue-cured quota Dec. 15, people in the industry had anticipated a 22 percent from last year.
The national marketing quota for 2004 is 471.3 million pounds. The number is based on a formula that takes into account purchase intentions, un-manufactured exports, reserve stock adjustments and the secretary's discretionary adjustment, says Dan Stevens, director of the USDA-FSA Tobacco and Peanut Analysis staff
“It's certainly better than a 20-percent cut, but it still places farmers in a difficult position of having to decide how much longer they can continue growing tobacco,” says Blake Brown, North Carolina State University Extension ag economist.
Purchase intentions are 254.3 million pounds; the three-year average of un-manufactured exports is 228.7 million pounds; the reserve stock adjustment is minus 25.4 million pounds; and the 3-percent discretionary adjustment is 13.7 million pounds.
For each farm, the 2004 national quota will decrease 10.8 percent. During the 2003 growing season, producers marketed about 30 million pounds less than they were allowed. The under-marketings, added to the national quota, will result in an effective quota of 500 million pounds or 7 percent below 2003.
About 67.5 million pounds of tobacco were placed under the loan this year, according to USDA.
For 2004, the no-net cost assessment will be 10 cents per pound — 5 cents per pound for growers and 5 cents per pound for purchasers.
Last-minute moves cushioned the blow for farmers.
R.J. Reynolds Tobacco Co. and Philip Morris were among several buyers who bought 45 million pounds of surplus, following pleas from North Carolina Gov. Mike Easley and members of Congress. The Flue-Cured Tobacco Cooperative Stabilization Corporation bought the surplus after it failed to sell.
The purchase brought the cut down to 14 percent. Veneman then used her 3-percent discretion to bring the cut to just over 10 percent.
The cut, however, places further pressure on flue-cured producers.
“You can certainly say that a large number of farmers who have been trying to hang on waiting for a buyout may not be able to continue,” Brown says. “Many of these farmers are near retirement age or their farms have become too small to be economically viable. I certainly wouldn't be surprised if there were fewer flue-cured growers in 2004.”
Growers still have hopes for a tobacco buyout.
“The buyout will come back up on Jan. 20 when Congress reconvenes,” Brown says. “It's possible that the Senate could see something happen in terms of FDA and the buyout.
“There continues to be opposition to regulation and anything that looks like a tax in the House,” Brown says. “It's not dead yet, but there are significant obstacles to overcome.”