12/16/04 — Farmers gather to discuss life after the tobacco buyout

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Farmers gather to discuss life after the tobacco buyout

By Sam Atkins
Published in News on December 16, 2004 1:58 PM

Many Wayne County tobacco farmers will likely spend the coming year deciding whether they will stay in business now that a buyout has been approved.

That uncertain future led about 160 farmers to a workshop in Wayne County called "Tobacco Grower Decisions in a Post-Buyout World." The workshop, held at the Wayne Center in Goldsboro, is one of several being held across the state to explain the buyout and encourage farmers to take their time in deciding their futures.

Chuck Moore with N.C. State University said some farmers could use the money to reduce debt, phase out of tobacco or expand their farm, enter into a new business, buy a gift for the family, invest the money, use it for retirement, or just have fun.

Blake Brown of N.C. State University said the payments will be made as soon as practicable, which will be sometime next year. The United States Department of Agriculture is still developing the rules. Farmers will likely sign up for buyout payments at their local Farm Service Agency offices.

Farmers are also wondering what is going to happen with their compensation for their loss of income due to a reduction in quota, said Rick Tharrington with the Wayne County Farm Service Agency. There will be a hearing on Dec. 20 to determine whether farmers will receive the payments from this program, which is called "Phase II."

There is a clause in the Phase II agreement that states that the payments end when the buyout begins. Tobacco companies are arguing that since the buyout has passed, they do not owe the Phase II money. Farmers believe they are due the money because they have already budgeted it as part of their income for this year, said Tharrington.

Gary Bullen of N.C. State University said that if farmers decide to stay in the business, they must know the costs of labor, machinery and chemicals. If they are offered a contract from a tobacco company, they must consider what the expected yield is and how they will be paid.

They must make sure the terms are clear, what the penalty is for failing to deliver and if the farmer is responsible for any weather damage. Farmers must make sure they read and understand the contract before signing, he added.

Brown said U.S. tobacco production is down because of an increase in production in Brazil and Zimbabwe.

He expects many farmers to leave tobacco farming this year, including those who are close to retirement. Farmers who have some life left in their equipment may decide to continue farming. Some will consolidate farms, and those remaining could pick up additional acreage, he added.

The buyout provides payments of $7 per pound to quota holders and $3 per pound to growers. The payments, based on the 2002 quota level, will be distributed over a 10-year period. Most of the buyout is being paid for by cigarette manufacturers and importers based on their market share of domestic sales of tobacco products, said Brown.

Farmers are allowed to receive the payments over the 10-year period or assign their payments to a financial institution and receive it in a lump sum.