Tobacco acreage to be lowest since 1874

WASHINGTON -- It was the nation's first export and the collateral for financing the American Revolution. But with lawsuits, less smoking, import competition and a soon-to-be dismantled system of government controls, farmers are planting the smallest tobacco crop this year since Gen. Ulysses S. Grant was president.

Tobacco will cover just 413,710 acres this year, 3 percent fewer than last year and the smallest crop since 1874, the Agriculture Department said Monday. Farmers in Florida, Kentucky, North Carolina, Tennessee and Virginia have cut back on planting.

"It's tough times for tobacco growers," said Thomas Capehart, an economist for the department.

Lawsuits against cigarette manufacturers are just one reason that growers are cutting back. Demand is dropping as states and cities raise taxes on cigarettes and increasing numbers of cities and businesses ban smoking, Capehart said.

But one of the biggest problems facing the tobacco growers is government quotas, he said.

While corn and soybean growers get help from the government in subsidies, tobacco growers are given quotas aimed at protecting them from overproduction and low demand. If prices fall below a fixed level, growers can qualify for government loans.

Demand for U.S. tobacco is shrinking fast because American manufacturers of cigarettes and other tobacco products are buying more leaf from Zimbabwe, Brazil and other countries, Capehart said.

Last year, the United States imported $715 million in tobacco, up from the $676 million in 2001 and $628 million in 2000.

Meanwhile, the quotas decrease annually. This year, the effective quota for flue-cured tobacco is 540 million pounds, compared with the 582 million pounds allowed last year. That's a decline of 9.5 percent for every tobacco farm.

For burley tobacco, this year's effective quota is 320 million pounds, down from last year's 324.2 million pounds.

Roger Quarles, a grower in Georgetown, Ky., said farmers try to work around the quota by leasing the rights of other farmers, but this year it became more difficult for them to stay afloat.

"Quite frankly, there's just not enough to go around anymore," he said. "At some point, people say: 'I have to quit and go get a job in town.' That's kind of the short story on the effect of the quota."

Quarles paid $30,000 to increase his selling rights by leasing from other farmers.

"That's $30,000 I didn't have to pay about four years ago."

He continues to grow burley tobacco because he earns about $1,000 per acre on his 30 acres of it. The return on his corn and soybeans, which cover 180 acres, doesn't even come close.

"I would expect to have to grow 2,000 acres of corn and soybeans to be able to make a living," Quarles said.

Quarles hopes Congress will approve a buyout of the quotas so that some growers will quit and give others a chance to increase production.

Several lawmakers from tobacco states have been discussing legislation to end the quotas and give farmers an incentive to stop planting tobacco. For example, Rep. Mike McIntyre, D-N.C., has a bill that would pay $8 per pound of the 1998 marketing quota to each farmer who quits growing tobacco and $4 a pound to growers who want to continue planting without price protection from quotas.

"Now more than ever, we see that this is the time to get something done," McIntyre said. "Most of the farmers in my area have gone to contract farming."

He said tobacco auction houses all over the country are shutting down, the end of an old-fashioned way of life.

A presidential commission in 2001 put the cost of buying out the quotas at about $16 billion over five years if three-quarters of tobacco farmers should stop growing the crop. It recommended raising the money by increasing the federal excise tax on cigarettes from 34 cents to 51 cents a pack.

While health care advocates endorse the plan, they want it coupled to a bill that would give the Food and Drug Administration authority to regulate tobacco. Some conservatives oppose the buyouts, complaining user fees would amount to a new tax on smokers.

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On the Net: USDA Farm Statistics: www.usda.gov/nass/pubs/pubs.htm

USDA Economic Research Service: www.ers.usda.gov