Article Images (Click for larger view)
U.S. growers representative Keith Parrish discusses the challenges facing tobacco farmers after the quota buyout.
After President George W. Bush signed the American Jobs Creation Act of 2004 on Oct. 22, 2004, most tobacco growers and leaders breathed a sigh of relief. This act created the Fair and Equitable Tobacco Reform Act, which established the Tobacco Transition Payment Program, better known as the tobacco quota buyout. The road to a buyout was a long one, lined with politics every step of the way.
It isnít over. More implications have surfaced. Tobacco Farm Quarterly sat down with Keith Parrish, chief executive of the National Tobacco Growers Association and a North Carolina tobacco farmer, and asked him about the challenges and opportunities for American tobacco farmers in the post-buyout market.
TFQ: What are the implications of the buyout?
Keith Parrish: We had hoped that, with the buyout, there would be more stability. Yet there is still a lot of uncertainty because of the contracts and the dependence of farmers upon those contracts for their livelihoods. Weíve left one sustaining element, which was the tobacco program, and gone to another sustaining element, which is total contracting.
Whether youíre dealing with Stabilization, leaf dealers or manufacturers, youíre still dependent on somebody. If youíre one of the chosen, then you pretty much feel secure in what youíll be able to grow. Folks who have either rocked the boat or are rocking the boat may not be nearly as secure with the future. The manufacturers tell you that quality and other issues are driving the amounts theyíre allowing people to grow. This year, some people got a fairly large increase; others maintained the same amount as they had last year, and yet others got cut.
More farmers are saying, ďIím going to try it one more time and see how it turns out.Ē In many respects, that describes a lot of us, including myself. I donít want to continue putting money thatís coming off the farm into the farm to keep it sustainedóeither from mailbox money from programs, the buyout itself or whatever. If it doesnít pay for itself, you have to look at whatís wrong with the picture and consider either getting out or making the necessary changes to survive. Ten years sounds like a long time. The older we get, we find out that 10 years is not that long, and this money will be gone. Once itís gone, itís never coming back.
TFQ: What are growersí most pressing questions after the tobacco quota buyout?
Parrish: The main questions are dealing with how the buyout is going to be calculated and how itís going to affect each individual farm. Itís taken a long time for the federal regulations to come out, and there have been many misinterpretations of those regulations. I think that once the programs are installed with the Farm Service Agency and folks are able to actually see a hard copy of what this means to them, it will be better.
[Growers have] a lot of questions about marketing itself. Theyíre definitely concerned about how the tobacco will be graded, how growers will be treated at the marketing centers, and how they are going to come out at the end of the year with all these extra expenses [increased fuel, fertilizer and chemical prices etc.].
Farmers are trying to play catch-up with the missing linkóthe Phase II [payment] that didnít show up in January. It created a tremendous amount of pressure on every farmer I know. We pretty much started out in the hole, and it takes a lot to overcome starting out in the hole. Questions are there. Itís just a matter of trying to survive long enough to get the answers.
TFQ: With U.S. prices lowered, can U.S. growers compete against foreign producers, or is it going to take more?
Parrish: I donít see that farmers can change much more than what they are trying to change. Everybodyís trying to retool and make things better for a foreign market, which I think folks are targeting. Itís going to be an educational process all the way through.
Farmers are going to try and cut what they can and still maintain the quality. Thatís a tough thing to do. Farmers are going to try and do what they can this year and see how it shakes out in the fall. If the moneyís not there, I donít see that we can maintain these low, low prices and stay on the farm.
If the manufacturers want this thing to survive, itís going to have to become a partnership where both sides have a good understanding of the other, and open communications without fear of retaliation, which is very hard to do. Until that occurs, it will be troubling times in our new era.
TFQ: In the past, weíve relied on quality to compete overseas. Can we still rely on that, or do we need more?
Parrish: I sense the contracts and the insistence of the companies about stalk positions and other things are leading to consistently better quality tobacco each year. Everything that the export customers wanted has happened. Weíre doing what weíve been asked to do.
I donít think thereís anything else we can do, except to strive to be better. If you pay the farmer more, heíll do a better job. Heíll make these additional changes, and he will be able to stay there consistently, year after year. But theyíve got to be able to make money. Itís hard to look at the bottom line when you see the manufacturers making millions of dollars in profits each quarter, while the farmer is having to go back and take his buyout money just to stay there. If itís a true partnership, we need to spread this thing [profits] around a little bit. Letís be a familyóor tell us that weíre not.
TFQ: What country do you consider to be our greatest competitor?
Parrish: Brazil is still the big dog. China may well be the very biggest threat, depending on how they advance into the future and how they react to what has occurred to us. They, by far, have the [greatest] potential to become our biggest threatóeverybodyís biggest threat. Farmers there have many consumers, and donít have to depend nearly as much on exports. If we could ever crack into that market, I think that would really help us into the future. As time goes on and as markets open up, I believe we would have an excellent opportunity there. A lot of these countries are hungry for American tobacco, but weíve been barred from there by trade barriers and other obstacles.
TFQ: Whatís to stop manufacturers from going completely overseas for their purchases? Do they still need the U.S. grower?
Parrish: In my opinion, they are always going to need U.S. growers. We still grow the top-quality tobacco, and under the contract deal itís even better than it has been in years.
We have made every change that the manufacturers asked for. We might have griped a little on the way, but weíve done it. I donít think they can say that of the [farmers in] foreign countries. They donít know from one year to the next if somebody is going to go in and overthrow everything there, and [if the tobacco companies will] lose all their investment. The U.S. farmers are going to do what they say theyíre going to do. If they want a billion pounds, weíll put it in the ground.
Countries such as Brazil and Zimbabwe cannot cut [prices] but so much. Weíve cut now 50 cents a pound. I donít think they can match it and stay there. Even working with an ox, the family has to survive. I just donít believe they will be able to continue coming down [in price].