Watauga Democrat
March 9, 2007

Watauga tobacco output on the decline

By Scott Nicholson

In the third year of the tobacco buyout program, local tobacco production continued to decline even though last year the state had a historic high production of burley tobacco, the kind most often grown in the High Country.

Bud Smith, local Farm Service Agency representative, said those who didn’t take lump-sum buyouts for the value of the quotas received their annual payment as scheduled in January. Under the buyout, which marked the end of federal price supports for the crop, growers received payments of between $3 and $7 per pound based on the quota they grew or held in 2002.

At that time, 1,033 families or growers held base poundage of 813,000 pounds, according to N.C. Department of Agriculture statistics. Smith said though payment totals for the county had not been collected, that poundage suggests several million dollars came to the county through the buyout and one analysis suggested five growers would receive over $100,000 each for their quotas.

Smith said those taking one-time lump-sum payments probably paid what amounted to a 30 percent penalty, because the payments were arranged through lending institutions that agreed to give the payment in exchange for the money due of the 10 years of the buyout. Most people opted to take their money in 10 separate annual payments.

While the payments can be handed down to heirs, it can be complicated. Smith said one quota holder died and the payments were divided among 11 heirs in seven different states.

Statewide burley tobacco production totaled 6.46 million pounds last year, a 31 percent increase. Yield per acre averaged 50 pounds more than the 2005 crop, suggesting large-scale farmers were achieving more efficiency. “I saw the figures in January, and it led me to believe those boys down East had picked up the slack,” Smith said. “Burley just migrated off the mountain.”

Larger growers have an advantage because burley is air-cured and farmers have to find barns and other covered, dry buildings in which to store the crop, while flue-cured tobacco is dried using heat. Smith said the Piedmont and Coastal growers had been successful because they run larger operations.

“They’re not growing two or four or six acres like we did up here,” Smith said. “They have 50 or 80 or 100 acres.”

Smith said market prices would dictate whether local growers continue with the crop, which is now sold either through auction or direct contracts with cigarette manufacturers.

Last year production value in the county was under $600,000, which Smith said was a decline from historic levels of about 70 percent.

The quota system was established in the 1930’s to guarantee farmers a reliable market for the commodity and also set limits on production, providing federal control of supply and demand. The buyout was part of a settlement the government reached with cigarette makers to avoid federal lawsuits.

At the time of the buyout, only a third of those who held quotas were actively growing tobacco. Despite the decline, Smith said he had heard of several people who were considering growing the crop this year as crop prices remain a little higher than many expected in the wake of the change.

“The prices will dictate whether people get back in or not,” Smith said. “A couple are cautiously optimistic.”

About 80,000 North Carolina growers will receive about $4 billion in payments.


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