The Fair and Equitable Tobacco Reform Act passed the House of Representatives on June 17 - attached to an important corporate tax reform bill - marking the first time a buyout proposal has journeyed that far toward becoming law. If enacted, the $9.6 billion buyout would pay producers $10 per pound for their tobacco quota in exchange for doing away with guaranteed price support and the quota system that controls who grows how much tobacco.
Buyout has serious detractors in the Senate
While gaining House approval is a big first step, the buyout has serious detractors in the Senate. Opponents want the crop to come under Food and Drug Administration regulation and believe the buyout should be funded by tobacco companies rather than taxpayers. Neither provision is in the House bill and it's not clear what compromise, if any, can be worked out in conference committee. Many observers believe the matter will be worked out or dropped completely before Congress takes its summer recess in late July.
"What I'm telling people is that we've got to second base on this but there are still a lot of hurdles to go before we make it home," said Will Snell, a tobacco economist with the University of Kentucky. "A lot of people are not happy with the plan. It will be interesting politics."
Growers themselves are not ablaze in optimism that this year's buyout proposal will bear fruit, said Mike Carter, agricultural extension agent in Garrard County. They've heard buyout talk every year for the last five years, Carter said, and nothing short of a real deal is apt to get them excited.
"People are pretty tired of all the discussions," he said. "They're ready and willing to accept whatever buyout they can get and the attitude is 'Hopefully they can work something out this time,' but nobody is holding their breath."
If this version of a buyout does come to be, it will effectively put a quick death to a way of life that has long kept small farmers like Haggard on their land.
"This one's cold turkey, an abrupt end," Carter said.
For Haggard, the current buyout proposal would mean roughly $16,000 spread over five years beginning in 2005. While that kind of windfall would come in handy for him at this stage in his life, Haggard believes it will be disastrous for the state's economy, especially in rural counties like Casey with few factory jobs where burley has sustained many families over the years. He worries about what will happen when the buyout money is gone and there is nothing to replace it.
"It will be like a big factory closing down. What will anyone have to do, go on welfare?" he wondered. "A little farmer like me with small acreage can't make it on cattle. You need tobacco."
All but the largest growers likely to be forced out
John Goggin, a vice president and agricultural loan specialist at Farmer's National Bank in Danville, said a buyout would likely force all but the largest growers out of the market. Without government controlled prices and quotas, the crop will be grown under contract to the tobacco companies and only the big-time operators will be able to reduce labor costs enough to make the crop profitable, he said.
"The tobacco companies won't even fool with growers with 3,000, 4,000 or 5,000 pounds," Goggin said. "You'll need 50,000, 60,000 or 100,000 pounds to stay in the game. I bet I could count on one hand the number of people I know who said they will keep growing after a buyout."
Goggin said that buyout money would create "a good cash flow in the short term," but it isn't clear what, if anything, could replace tobacco income further down the road. Efforts to wean growers away from tobacco by switching to vegetable, grapes, goats, blueberries or other attempts to diversify remain unproven in the region's drought-prone hills and hollers where tobacco has long been the ideal crop, he said.
Even with the loss of their tobacco income, farms in Boyle County and others with an established industrial base should hold their value, Goggin said, but that isn't necessarily true for the more rural counties.
"Around here, any place that has water and road frontage has value to it, but the further you get away from industrial centers, the more negative impact it will have," he said.