Tobacco buyout refresher

Posted October 31, 2009 at 2:53 pm and filed under Community.

In fall 2004, the government ended a federal tobacco program by eliminating controls on the amount of tobacco that could be grown in the U.S., a system in place since the New Deal in the 1930s.

The federal government cut the program after years of declining demand for domestic tobacco and increasingly cheaper tobacco from international growers. With price controls, U.S. prices were artificially high, preventing American farmers from competing, experts say.

Under the program, tobacco growers could only sell as much tobacco as they had a quota for or had rented a quota for.

In addition, the government also negotiated a $9.8 billion federal tobacco buyout, which issued farmers compensation based on the amount of tobacco they were growing at the time and how much quota they owned. In North Carolina, $3.9 billion of federal money was authorized to go to farmers in 10 annual payments. Money from buyouts came from the federal government who assessed tobacco manufacturers the costs.

Without the controls, farmers faced a choice: They could continue growing or get out of business.

In North Carolina, many older growers retired, according to N.C. State University professor Blake Brown. Brown says many smaller farms (50 acres or less) in more developed areas, like the Piedmont, were sold off to land developers.

Nonetheless, overall tobacco production has actually increased since the program ended, with a shift to bigger producers (over 150 acres) along the I-95 corridor that are much mechanized.

“There was a lot of pent-up change; and when they did away with the tobacco program, the dam burst, and all this change began to happen very quickly,” Brown said.

—Paul Tambasco

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