Ten Years into Buy-Out, Tobacco is Thin Outside N. Carolina

By Allison Floyd

Wednesday, June 19th, 2013

When the U.S. Congress approved legislation 10 years ago to help tobacco farmers to adjust to life without price supports, agricultural economists expected some small-scale farmers would give up the crop.

They just didn’t know how many.

Nearing the end of the 10-year buy-out period, North Carolina now grows more tobacco than it did in 2004, but on a fraction of the number of farms. And production in other Southern states has plummeted, though at least one expert sees the trend turning around.

“In 2004, we had a lot of growers nearing retirement age, a lot of smaller growers, and when the (quota) program was eliminated and production de-regulated, we saw a lot of consolidation of farms,” said Blake Brown, a professor and agriculture economist at North Carolina State University. “But since 2005, we have seen acreage grow steadily in North Carolina.”

Today, North Carolina produces nearly 400 million pounds of flue-cured tobacco a year, up from 344 million pounds a year in 2004. But the number of farms dropped from around 10,000 to 3,000, even as North Carolina production grew to account for 80 percent of the flue-cured tobacco grown in this country.

A lot of smaller-scale farmers used the buy-out money to retire or move toward another crop, but the tobacco operations that remain grew much bigger and still are diversified, Brown said.

While tobacco remained king in North Carolina, farmers quickly moved away from tobacco in other Southern states, in part because the tomato-spotted wilt virus caused devastating losses in 2005 and 2006. In Florida, production dropped to an unreportable level by 2007; in Georgia, it fell from 46.7 million pounds in 2004 to 24.1 million pounds in 2012, in South Carolina, from 63.4 million pounds to 28.4 million pounds; in Virginia, from 57.6 million pounds to 48 million pounds.

The Tobacco Transition Payment Program didn’t require farmers to give up tobacco to receive a check (money that came from tobacco companies, not tax dollars) and some growers in North Carolina used the money to expand tobacco operations.

Throughout much of the rest of the South, though, farmers decided to take on other crops, particularly in the past few years when they could do well in peanuts, cotton, soybeans or corn.

University of Georgia tobacco expert J. Michael Moore, who is the extension agent for both Georgia and Florida, has tracked the decline of tobacco, but also thinks the crop in on an upswing in the Peach State.

Last year, tobacco production dropped to an all-time low in Georgia, just 11,000 acres from a high of 48,000 acres.

"It simply seemed like a time with high grain prices, high peanut prices, high cotton prices, (growers decided) to look at some of those that could be farmed from the cab of a tractor, rather than getting quite so dirty or sweaty and having to deal with quite as much labor (as tobacco)," Moore said.

“We seem to be rebounding a little,” he said. "We're down to 150 or less tobacco growers, but we have some young growers. We have some returning growers that are coming in and adding to our numbers and to our production."

Earlier this month, Moore helped organize the Tobacco Tour to showcase tobacco research and production going on in Georgia and Florida.

 "We've looked at work on farms to present new and better ideas for growers to make better crops. We've looked at work here at the Experiment Station (in Tifton, Ga.), particularly at the Bowen Farm, where we have seen researchers working on things that are yet to go to the farm," Moore said. At stops in Waresboro, Ga., and Lake City, Fla., talks focused on fertility, insecticides, weed control, correcting pathogen problems, and pest management. On-farm demonstrations were also conducted in north Florida and south Georgia, including UGA's Bowen Farm in Tifton.

Moore works with 10 farmers growing tobacco this year who didn’t grow last year and knows of one farm that hasn’t grown tobacco in eight years, but is returning to the crop this year.

While Moore is seeing some new tobacco farmers, it’s a tough start-up crop since it requires equipment, a drying barn and regular rotation. To tamp down on the wilt virus, crop insurers won’t cover a field that’s been planted with tobacco the third year in a row, Moore said, meaning tobacco will have to compete with other commodities for available land.

While some experts think the end of the buy-out next year will send a shock wave through the tobacco market, Brown doesn’t think so.

As they learned 10 years ago, agricultural economists will struggle to predict demand for a product like tobacco. Shortly after the buy-out started, cities and states began to ban smoking in public places. Smoking rates have dropped ever since – down to a new low of 18 percent the Centers for Disease Control and Prevention announced Tuesday.

But demand is more affected by how much less tobacco a smoker today consumes compared to a smoker 20 years ago. A modern-day smoker may have only half a pack a day, while his grandfather consumed two packs a day.

“We predicted consolidation, but what we didn’t predict accurately was the decline in consumption in the U.S. The comprehensive approach to smoking restrictions has had a tremendous impact on smoking rates,” Brown said.

Smoking rates are falling everywhere – except in China, where more people are smoking and a growing middle class has a taste for better tobacco.

That’s good news for growers here.

“The U.S. competes very well in the world market in terms of quality,” Moore said.