Settlement meetings show tobacco's decline
RALEIGH, N.C. (September 13, 1999) - There was a time when discussing the tobacco industry's decline around tobacco people was sure to set off a fierce argument.
To folks who earned their living from the golden leaf, the same as their fathers and grandfathers had, tobacco was the heart and soul of North Carolina agriculture. They could not envision a future without the long rows of lush leaves gently fanning in the breeze.
But sit in at a meeting of the Phase II settlement board and you can't help but think that if that future isn't quite here yet, it's not far off.
And the people talking about an industry in rapid decline aren't tobacco's opponents, but the crop's most ardent supporters.
Keith Parrish, executive director of the National Tobacco Growers Association, told the settlement board last week that he expects a "bloodletting" in the tobacco industry this fall if quotas are significantly reduced for the third time.
Quotas, the government grant to grow tobacco for guaranteed prices, already have been cut 35 percent in the last two years as demand declined.
"With another huge cut this fall, I anticipate a lot of farmers leaving the tobacco business," Parrish told the board, which is deciding how to distribute up to $2 billion from cigarette makers to growers and quota holders over the next 12 years. The money is intended to help farmers cope with the expected drop in demand as a $200 billion national settlement between cigarette makers and the states drive up the cost of tobacco products.
"We will have a mass exodus this fall (with another quota cut)," he said. "And those farmers will be forced to sell their equipment for prices at a tenth of what it was just three years ago."
Mechanization that came to the tobacco industry 30 years ago as labor became more difficult to find resulted in equipment that is tailor-made for tobacco and no other crop. The only market for the equipment is other people who grow tobacco.
And the quota reductions of the last two years already have produced an equipment glut and a steep decline in prices.
For most farmers, the 35 percent decline in the amount of crop they can grow also meant a 35 percent decline in their income over the last two years.
It is those losses the board is trying to take into account as it parcels out $140 million this year to about 100,000 growers and allotment holders.
The quotas, established in the 1930s as the government tried to stabilize the tobacco market, were issued to farmers based on the amount of leaf they grew. But over 60 years, the right to grow tobacco for price supports has become a commodity itself - inherited as part of an estate, sold or leased out by non-farming owners to growers eager to expand their crop.
"When I was a young lawyer in Wilson, the way you bought farms was you gave $10,000 an acre for the allotment and they threw in the rest of the land for free," said Gov. Jim Hunt, who chairs the settlement board. "That's how you bought a farm.
"It is of great value, and they (quota holders) have suffered losses," he said.
Billy Carter of the North Carolina Tobacco Growers Association told the board a lot of farmers are banking on the settlement payments to help them stay afloat.
"We watched as a market that opened very weakly has turned into something less than weak," Carter said of this year's tobacco sales. "This process is becoming the only glimmer of hope out there in the farming community."
But it is a glimmer that some farmers may be making brighter than it is, said John Cyrus of the North Carolina State Grange.
"I find a lot of growers anticipating getting a lot more money than they are likely to get," Cyrus said.
If divided equally, the $140 million available this year would give each of the roughly 100,000 growers and quota holders about $1,400. Since the distribution will be based on the number of pounds of tobacco sold or quota held, some will receive considerably more than that, but many could draw considerably less.