SMITHFIELD, N.C. - Testimony at a recent Senate subcommittee hearing pointed out the economic “necessity of a tobacco buyout” as well as the political reality of what’s riding on it.
“If we don’t get it, I wouldn’t want to be a politician that had to face election in November,” said Keith Parrish, president of the National Tobacco Growers Association. “I mean no disrespect by that,” he added, after applause from the audience died down.
Sen. Elizabeth Dole, R-N.C., who chairs the Senate Subcommittee on Production and Price Competitiveness, organized the field hearing held at the Central Tobacco Marketing exchange in Smithfield.
Farmers, tobacco industry executives, bankers and a county commissioner all testified that, in effect, the way tobacco farmers go, so goes the fortunes of rural North Carolina. They testified that a buyout and reform of the tobacco program is the only way to save the rural economy.
A buyout would provide at least $9 billion to farmers and quota owners. North Carolina would get an estimated 40 percent of that total, going to 8,000 farmers and 80,000 quota holders. The buyout would also make American tobacco farmers more competitive in the world market.
After testimony from each group, Dole asked the witnesses what the effect of a 30-plus percent cut in quota would be on their particular segment of the industry.
This year, U.S. tobacco growers are planting the smallest crop in history. Blake Brown, North Carolina State University Extension agricultural economist, predicts that if the program is still in place in 2005, the crop could shrink by more than 30 percent.
Larry Wooten, president of the North Carolina Farm Bureau, said that without a buyout and an end to the current system more than the farm economy would be hurt. He specifically pointed to six counties in southeastern North Carolina that have already felt the pinch of reduced quota.
Bruce Flye, president of the Flue-Cured Tobacco Cooperative Stabilization Corporation, says a cut of that magnitude would mean fewer farmers in business. Parrish made his comment about elections in response to the same question. “It affects everyone in their heart, their way of life,” Parrish says. “Everybody’s hanging on for a buyout.”
Sam Crews, president of the Tobacco Association of North Carolina, pointed out that tobacco equipment is specific to the crop. “Unless sweeping changes are implemented many more (tobacco farmers) will unnecessarily succumb to the unprecedented and unpredictable increased pressures of simply trying to stay in business,” Crews says.
On the leaf dealer side, Universal Leaf Tobacco Co.’s Todd Haymore pointed to his firm’s investment of a new, multi-million dollar processing facility in North Carolina. Because of fewer burley pounds last year, Universal had to close its Danville, Va., facility seven weeks earlier than anticipated. “We are a volume-driven business,” he said, “…the biggest question mark is, how long can we continue scaling back operations?”
Tommy Bunn, executive vice president of the Leaf Tobacco Exporters Association, says the situation with the tobacco program and the price of U.S. leaf is also affecting the export markets. “Foreign buyers are quitting doing business with us because of price,” he says.
On the banking side, a 30-percent cut in quota would mean less available credit for farmers. That would have a “significant impact” on rural communities, says Gene Charville, president of East Carolina Farm Credit. More than 40 percent of the loans made by East Carolina Farm Credit are to farmers who rely on tobacco to pay their bills.
Wallace Herring, senior vice president of First Citizens Bank, says tobacco income plays a big part on the credit decision. “Reduction in tobacco has had an impact” on the ability of farmers to service debt. It’s time to end the uncertainty and make the buyout a reality, while we still have the opportunity to help our farmers and their communities.”
In his testimony, Wooten, North Carolina Farm Bureau president, said that the tobacco program is not working for farmers or the industry. “It was never designed for the current intense world competition that our farmers face today. It was never designed for large-scale farming operations. It was never designed to operate under the current marketing conditions, especially contracting. It was never designed to withstand the consequences of the Master Settlement Agreement.
“The program has run its course,” Wooten says. “We have plowed this row to the cliff and can go no farther.”
He called for a buyout that would adequately compensate farmers for their investment in the program and “allow many to exit the industry with dignity.
“However, there must be a stable future for those farmers who wish to invest in growing and selling tobacco,” Wooten says.
This year, five buyout bills have been introduced in the House and one in the Senate. Their passage, however, is still uncertain.
Last year, efforts in the House and Senate failed to secure a buyout. Dole vowed to keep the issue on the “front burner” and take the hearing transcript with her to educate colleagues to the vital necessity of a buyout.
Two North Carolina congressmen, Bob Etheridge, D-N.C., and Richard Burr, R-N.C., opened the testimony.
Burr, who is running for the U.S. Senate, pointed to a recent bill, H.R. 4033, that would pay quota owners $7 per pound and growers $3 per pound. Pointing out that politics is “the art of the possible,” Burr said, “I would rather get a buyout done for less money rather than lament that we couldn’t get more.”
Earlier bills had $8 and $4 for quota owners and growers. Food and Drug Administration regulation of cigarettes is still a contentious issue related to the buyout.
Etheridge, himself a tobacco farmer, asked, “Why can’t we pass a buyout when we can send billions of dollars to Iraq?” The comment drew applause from the overflow crowd of farmers. “It’s deteriorated so badly and for so long, we’ve got to have some relief.”
Flye, the president of Stabilization, said, “Only the U.S. Congress has the authority and the power to set this right. We are pleading for our very survival.
As farm leaders, bankers and tobacco industry executives testified, many tobacco farmers in the audience wondered about their future. Some are looking at the buyout to pay off debts while others are looking at retirement or a way of staying in business.
“I don’t see a light at the end of the tunnel,” says Benny Collier, a Warren County tobacco producer. “If we don’t get a buyout, there are going to be some mighty bad times for North Carolina.”