Published on 03/21/01

No 'Business as Usual' for Tobacco Farmers

With the coming of spring, Georgia tobacco farmers are preparing to plant the state's third most valuable crop. But it won't be business as usual. Experts say ongoing changes will continue to affect farmers and the rural economies that surround them.

Change in the Field

Tobacco has been a major source of farm income in Georgia since the early 1900s. It is grown under the provisions of a quota system, which includes supply control and price supports.

Regulated by federal legislation, the system sets a quota, or an amount a farmer can grow each year, says Bill Givan, an economist with the University of Georgia College of Agricultural and Environmental Sciences.

Since 1997, the farmers' quota has been cut by 44 percent, or about 45 million pounds, Givan said.

"For every pound of quota lost, the farmer is losing about $1.70 from not selling that pound of tobacco," Givan said. "The farmer is buying less fertilizer and other farm inputs, because he's not growing as much tobacco. He's using less labor, and the area economy loses economic activity."

Since 1997, Georgia tobacco growers' incomes have been cut by $176 million. The ripple effect, Givan said, has been big:

  • A $440 million reduction in economic activity statewide.
  • An estimated 2,043 lost full-time jobs.
  • A $2.4 million loss of non-tobacco sales tax.

In 2000, about $13 million of the Georgia Master Tobacco Settlement was paid to Georgia farmers to help compensate for their quota loss. While this money is taxable as farm income, Givan said, it has allowed farmers and local economies some sustained economic activity.

Change at the Farm

Farmers have had to change, or are in the process of changing, the ways they handle tobacco on the farm, said J. Michael Moore, a tobacco agronomist with the UGA Extension Service.

"The tobacco industry has been facing many changes over the past few years," Moore said. "The industry has been looking for more efficient ways to package, transport and market tobacco."

Two of the changes have cost farmers extra time and money.

  1. In the past, farmers brought their tobacco wrapped in sheets to warehouses, where the tobacco was sold. Now, tobacco companies prefer the tobacco in 750-pound square bales. To stay competitive, farmers have had to buy baling equipment. After the first year, Moore said, most farmers say the baling requires as little or less labor than sheeting tobacco and that bales are much easier to load and transport.
  2. Before going to market, tobacco is cured in barns on the farm. Studies show that old curing practices increase the potential for certain carcinogens in tobacco. So farmers have been asked to install equipment to reduce the risk of these carcinogens. Though some funds have been available to help, Moore said, this has still cost farmers time and money.
Change at the Market

The newest shift in the tobacco industry comes at the market. Instead of going to warehouses and buying tobacco at an auction, tobacco companies now want to direct contract with growers.

Direct contracting isn't new, Moore said. But it's expected to become more prevalent. Last year, Georgia had 18 warehouse auction sites. This year, it's expected to have only eight.

Moore advises farmers to know the specifics and consider the long-term implications before making a contract decision.

With all the changes to the industry, why don't tobacco farmers just grow something else?

"The farmers may try to grow other things," Givan said. "But it won't have the (profit) of tobacco. The only alternative for tobacco is tobacco. It's a pretty emotional thing for some folks. Tobacco has paid the bills for a lot of years."

Brad Haire is the former news editor with the University of Georgia College of Agricultural and Environmental Sciences.