A new year starts Wednesday, and with it comes the end of the Tobacco Transition Payment Program, also known as the tobacco quota buyout.
In 2004, the federal government reached a settlement with tobacco farmers that ended the tobacco quota and price support system that had been in existence since the Great Depression. To help ease farmers’ transition to the free market, the government agreed make annual payments to farmers for 10 years. The $10 billion program has been funded by fees paid by tobacco companies.
Once the program ends, North Carolina farmers and quota owners will have received a total of $3.9 billion from it. That’s a significant amount of money flowing into our state’s economy over the past 10 years, particularly in rural areas, Commissioner Troxler says.
Growers have used that money in several ways. Many growers left tobacco farming altogether, either by retiring or switching to other commodities. But right many have used the payments and the new free market opportunity to expand their operations.
Despite fewer farmers growing the leaf, North Carolina still leads the nation in tobacco production, and the acreage is actually higher today than in the final years of the tobacco quota program. In 2004, which was the last year of the price support system, North Carolina farmers harvested 156,000 acres of tobacco. This year, that number was 172,000 acres.
Still, it’s a tough climate for tobacco farmers. Prices have been good, but input costs are high, excise taxes have increased, and domestic demand for tobacco has decreased. Fortunately, the export market for tobacco is strong.
There’s another challenge. The final transition payment in early 2014 could be reduced by 7 percent because of sequestration.
North Carolina’s congressional delegation has been working hard on this, and Commissioner Troxler has spoken to officials at the U.S. Department of Agriculture about the issue. It’s not yet clear what the outcome will be.
Click on the audio player below to listen to Commissioner Troxler and Rhonda discuss the end of the Tobacco Transition Payment Program and what could happen if the final payment is reduced.
Southern Farm Network is a division of Curtis Media Group.