| Virginia tobacco farmers buy in to a buyout
Virginia Business
April 2004
Strapped
by shrinking demand, foreign competition, rising production
costs and an outdated quota system, Virginia's
tobacco growers are desperately hoping that U.S. lawmakers
will finally pass a tobacco buyout bill this year.
“These farmers are on a sinking ship,” says
Haywood J. Hamlet, general manager of the Virginia Dark-Fired
Tobacco Growers Marketing Association. “Their
profit margin becomes less every year.”
One bill, introduced by Rep. Jack Kingston (R-Ga.),
would cost $9.6 billion and pay quota holders $7 per
allotment and their corresponding lessee grower $3 per
allotment. The money would be raised from cigarette
excise taxes.
Some senators are refusing to pass any bill that doesn't
also give the Food and Drug Administration regulatory
authority over cigarettes.
Virginia tobacco growers care about these concerns —
but only to a point. Says Hamlet: “They're
just hoping for anything that will keep their heads
above water.”
A buyout would end the existing quota system, first
put in place in 1938. Each quota, or allotment, gives
a tobacco grower the right to grow one pound of tobacco
each year, but over the years many allotments have been
purchased by non-growers, who then lease the rights
to active growers for a fee. This system makes U.S.
leaf prices too high to compete with foreign growers,
Hamlet says.
Tobacco sold at auction in Virginia in 2003 averaged
$1.78 per pound, while an allotment lease currently
costs growers anywhere from 40 to 70 cents per pound.
With tobacco demand dropping, the national quota has
been cut in half since 1997. Without a buyout, some
agricultural economists anticipate another quota cut
of 30 percent in 2005.
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