Tobacco buyout in spotlight

Pender Sharp, a Sims, N.C., producer used those words to sum up the feeling of his fellow flue-cured producers at the Commissioner’s Ag Forum held recently at the Carolina Farm Show. "An $8 and $4 buyout is the cornerstone." North Carolina Ag Commissioner Meg Scott Phipps hosted the Ag Forum.

The quota buyout ball is rolling up the hill in Washington, D.C., with both the House and Senate ag committees examining at least five bills. The "bells and whistles" of the bills focus on FDA regulation, a post-buyout tobacco program and funding sources, says Blake Brown, North Carolina State University Extension ag economist. One common point among the bills: $8 and $4.

Bills offered by Reps. Mike McIntyre (D-N.C.), and Ernie Fletcher (R-Ky.) and U.S. Sen. Jesse Helms (R-N.C.) summarize most of the ideas of a buyout, Brown says.

All have an $8 and $4: $8 goes to quota owners and growers whether or not they produce now or later; the $4 goes to the growers only and is based on the 2001 marketing quota grown by an active producer in 2002. To get either payment, the producer can either continue or stop growing tobacco.

The McIntyre bill has no post-buyout program. The Fletcher bill maintains the current system with production license in the hands of growers and a lower price support. The Helms legislation has a post-buyout program, with a safety net that looks similar to cotton and other program crops. It has fixed decoupled payments based on historic quota production, where producers can continue to grow tobacco or quit growing. It also has a price support level for a certain portion of the crop.

The funding sources for each of the bills is different. Helms uses an existing 15-cents excise tax in place since 1999. Fletcher and McIntyre fund the buyout with user fees on cigarettes.

FDA regulation is the only other difference among the three bills, the North Carolina State economist points out. The McIntyre bill has FDA regulation of cigarettes. It would regulate smokeless tobacco, as well as other tobacco products. The other bills do not. (Health groups have signed on to the Fletcher bill.) FDA regulation is one of the major hurdles to passage of the legislation.

While the ball is rolling, a buyout appears unlikely this year, says Jeff Hogg, legislative director for U.S. Rep. Mike McIntyre.

Part of the hold up, Brown says, is the differences in support among burley and flue-cured areas and cigarette manufacturers and health groups.

Rick Smith, Brown and Williamson’s director of leaf buying, says the nation’s third largest cigarette manufacturer supports a buyout, with caveats. A buyout should not be funded on user fees, Smith says, pointing to an increase in cigarette taxes in 20 states. B&W believes a post-buyout program would be neither "appropriate nor necessary." And it should not include FDA regulation. "FDA regulation would erode market share for B&W and other tobacco companies." Unfettered FDA regulation could force tobacco manufacturers to retool. "When we start down that slope, it’s hard to stop."

Philip Morris, the nation’s largest cigarette manufacturer, supports FDA regulation of cigarettes. B&W was the only major cigarette manufacturer to appear at the forum.

"Do whatever it takes," to get a buyout, Sharp says. "But we must be careful how big our wish list is."

Richard Renegar, president of the North Carolina Tobacco Growers Association, says a half to three-fourths of the current tobacco producers would get out of the business following a buyout.

In a question and answer session at the forum, Hogg, Rep. McIntyre’s legislative director, asked the large crowd of farmers where the negotiation points were. "At what point do we stop negotiating?"

Producers seem to be saying that they support $8 and $4 across the board, but realize the window is "narrow," Renegar says.

Pender Sharp goes back to a story that involved a deacon board’s decision to purchase a chandelier for the church. With the exception of a lone dissenter, the board was for approving the purchase. The dissenter spoke up and said he was for the church purchasing lights, but against a chandelier.

For growers, tobacco buyout legislation and the story of the lights and the chandelier have a familiar ring.

"We’re for a buyout," Sharp says. "From a farmer’s perspective, we’re for accomplishing an $8 and $4 buyout."

More information can be found on the tobacco buyout at:

e-mail: [email protected]

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