01/30/04 — Farmers meet

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Farmers meet

By Bonnie Edwards
Published in News on January 30, 2004 2:01 PM

WARSAW -- It looked Thursday as if the VFW post was holding a pickup truck convention.

Inside, 120 farmers and representatives of corporate sponsors listened to sober forecasts about corn, soy beans and tobacco. The workshop had started for Duplin and Sampson farmers in the afternoon, and it lasted into the night.

Prices of corn and soy beans had rallied, but the status of a buyout program still looked bad for flue-cured tobacco.

David Smith and Blake Brown, both extension specialists with N.C. State University, told the tobacco farmers to keep an eye on Brazil. Bryant Spivey, the group's co-host from Duplin Cooperative Extension Service, had recently returned from that country.

Brazil has many small farms that produce flue-cured tobacco. They use cheap labor, produce cheap tobacco and handle every leaf three times. Buyers find no strings, weeds or morning glories in them.

Argentina has large farms of 100 acres or so, about the size of the ones in the U.S. These farmers pay people $7 a day to pick out the foreign matter. U.S. tobacco farmers pay $7 an hour.

The average number of pounds being exported is disturbing, said Brown. "Our exports have really taken a nose dive," he said. He blames it on cheap foreign tobacco. "Brazil has a huge crop."

The world demand for flue-cured tobacco is about 2 billion pounds. Brazil is growing about 1.4 billion pounds, compared to the U.S. quota this year of 471.3 million pounds, which is 10 percent lower than the previous year.

It's not easy to think about how to plan in a situation like this, he said.

Brown said he's tired of hearing about the tobacco buyout, but he suspects he'll be talking about it again this time next year. The buyout failed to make it in a Senate bill in July, a House bill in September, and then failed in an attempt to attach it to an omnibus appropriations bill in November.

"That's probably the closest we've come to having a buyout," he said. A buyout will have to be a part of an Omnibus Act or the Food and Drug Administration regulations, he said.

But one set of tobacco companies is wanting tobacco to be part of the Food and Drug Administration, while another set of companies is against it. This is catching the tobacco farmer in the middle.

Health advocates and Phillip Morris are for the FDA's set of proposed regulations. Reynolds American, formerly RJR and Brown & Williamson, Lorillard and the small tobacco manufacturers are against them. Lorillard is not against stricter regulations, said Brown. They're just against the FDA's proposal.

Health advocates want some sort of production control. And they can be patient, said Brown. They can wait until the next administration. "That's fine for them, but flue-cured tobacco farmers need a buyout now."

Increased regulation of cigarettes is going to happen some day, said Brown. There has to be a way for these tobacco companies to be pulled together to rally for the same regulations, he said.

One issue that could galvanize all these groups together is an increase in cigarette imports. Small importers are gaining an increased market share and cutting into the money the big companies are able to pay into cigarette settlements.

"In 1997, you could put the 'big four' together, and they accounted for 97 percent of the market," he said. Small manufacturers and imports were getting 3 percent of the market share; now they have 14 percent.

Cigarette manufacturers on Indian reservations are exempt from the laws in the master settlement agreement and are importing "by the boat load."

"How do I conduct business -- stay in production or think about something else?" he asked.

He can see three scenarios:

*The quota declines and stabilizes at a low level.

*The quota declines and the program ends.

*Farmers leave the tobacco business.