Suckered in the Tobacco Patch; Hung out to Dry by the Government

usda-badgeOne morning a Farmer sat down to his breakfast, barely getting his gravy over the hot biscuits, when a sharp “rap” “rap” “rap” at the front door demanded his attention. Opening the door the farmer was greeted by a city dressed fellow with a wad of papers in one hand and a badge in the other. “Sir, I am from the US  Department of Agriculture and this badge gives me the authority to inspect your cattle,” the man demanded.  “Well, they’re right over there,” the Farmer responded, pointing to a nearby field. “I’m going to finish my breakfast.”

Shutting the door, the Farmer returned to his breakfast, grumbling to himself that his biscuits and grits were surely getting cold. The Farmer had no more than took his first fork full, when he heard the first “HELP ME!” Returning to the door, there was the agent running as fast as he could with the herd’s biggest bull close behind. “Farmer, HELP ME!,” the USDA agent pleaded. “Show him your badge,” the Farmer responded, as he closed the door wondering if there was enough coffee left in the pot for a refill.

Such has been the relationship between farmers and their regulators since the government first decided it needed to “help” the farmer.  I grew up mistrusting government.  My father was 29 when the stock market crashed in 1929 and was convinced that the county extension agent was a communist.  Looking at the New Deal tobacco allotment program begun in 1938, I’ll have to admit he had a point.

In the hilly, poor ground of East Tennessee tobacco was THE cash crop.  Tobacco sales sent many small farmers’ sons and daughters to college.  Even today its hard to find an adult over 50 in the area that can’t recite the process for bringing in a crop of “baccy”.  I planted, suckered, topped, cut, staked, hung and handed it off throughout my youth on the farm.  Those days are gone now, and the case can be made that government programs did more to destroy small tobacco farms than any court case or health concern.

ronald_reagan_chesterfieldSince 1938, at the beginning of the growing season, every farmer was notified of his “allotment” by the USDA. He was allowed to grow that amount, and in return the government set price supports to guarantee a “fair” price for his crop.  By the end of Ronald Reagan’s Presidency, however, tobacco production in the US was in turmoil.  Between 1980 and 1998 (the year of the tobacco case), production had dropped 48%.  At the same time tobacco exports dropped 20%.  Health concerns weren’t the primary cause.  The biggest culprit was cheap foreign tobacco, made possible by the US Government exporting tobacco production methods to every corner of the earth.  The US mandated market price was simply to high to compete with cheaper foreign tobacco.  So, in 2004 Congress scraped the allotment system, offering buyouts to farmers to “explore” alternative crops which, with demand dropping from the relentless anti-tobacco campaign, squeezed the small farmers out of production.  To date, no alternative as dependable has been found for small farm production.

Worldwide tobacco demand is not decreasing.  In fact, it is increasing.  So why can’t US farmers compete?  Simple, growing tobacco is very labor intensive, requiring 250 hours farm6per acre.  The rewards, however, are huge…well for government anyway.  On average you can grow 2,000 lbs per acre in tobacco.  At current pricing the farmer gets $4,000.  Government on the other hand does much better, and now with zero investment.  One acre yields 54,000 packs of cigarettes.  The federal tax is $1.01 per pack and Tennessee gets $.62 per pack for a total of $88,000 per acre of tobacco rolled and sold here.  State taxes are different so states vary from a low of $63,720 in Missouri to a whopping $279,000 in New York.  So, the way it works out, cigarette manufacturers get cheaper product to maintain profits in order to pay the settlement, while demand increases bolster tax coffers. Light up sinner, your government is depending on you.

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