Friday, April 12, 2024

Tariffs hit tobacco growers hard

In late August in Browns Summit, north of Greensboro, the last, straggling leaves of stripped tobacco stalks have marked the end of the year’s harvest for rural families for generations. This year, weeds carpet unplanted fields, marking instead the dramatic impact of tariffs and global politics on North Carolina’s $87 billion agriculture economy.

All crops are affected, but experts say tobacco, the state’s largest cash crop for three centuries, has been hit hardest, with plummeting acreage and prices and recently the loss of its biggest customer. China, targeted in a bitter trade war by the Trump administration, scaled back imports of Tar Heel leaf in 2018, then retaliated with a complete ban on U.S. agricultural commodities.

“In 2017, we exported from North Carolina $162 million in tobacco to China,” says Larry Wooten, president of the N.C. Farm Bureau, a not-for-profit with 50,000 farmer members. “In 2018, we exported $4 million,” a figure likely to drop to zero this year.

Tobacco is about a $700 million annual crop for the state, but planting fell from a modern-era high of 192,000 acres in 2014 to 122,000 this year. That’s the lowest amount since the 1930s, Wooten says. Production has declined in a similar pattern, adds Graham Boyd, executive vice president of the Raleigh-based Tobacco Growers Association of North Carolina. The state has about 2,000 tobacco farms.

North Carolina has the land and infrastructure to produce 1 billion pounds a year, but contract volume this year is 270 million, down from 500 million in 2014, Boyd says. Because of its health stigma, tobacco was specifically exempted from the Trump administration’s $12 billion in bailout payments that began last fall to ease the impact of the tariff war on U.S. farmers. (The bureaucratic term is “market facilitation payments.”) North Carolina farmers overall received about $105 million through July. Boyd fumes that the Chinese and Trump administration have turned tobacco into a pawn in the tariff disputes.

In the 1990s — when general farm subsidies were abandoned — and again in 2004, when tobacco’s long-standing quota system ended, the intent was to allow prices and production to be determined by market forces. The 1996 Freedom to Farm Act “did away with domestic support price and payments to farmers,” Wooten says. “The idea was that farmers would get their money from the marketplace and not the mailbox.”

Now, he and Boyd say, the government is using agriculture as a bludgeon in trade disputes without adequately compensating several thousand N.C. farmers. “We’ve lost $200 million in sales in North Carolina because of the trade negotiations,” Boyd says. “Tobacco should have been treated like every other legitimate commodity we legally grow, especially considering that it’s the heaviest consumer-taxed product in the United States, and the government collects $80 billion a year in tobacco taxes.”

Other Tar Heel farmers aren’t much happier. The state’s soybean and cotton producers received most of the initial compensation payments, while those marketing hogs, dairy products, wheat, corn and other crops received less. Hog payments are particularly controversial, considering the state’s largest pork producer is Chinese-owned Smithfield Foods Inc., and many hog farmers hold Smithfield contracts.

Boyd and Wooten say tobacco is clearly on the ropes. Agriculture Commissioner Steve Troxler calls 2019 “one of the most challenging times facing North Carolina agriculture that I can recall.”

Even nature is getting in its licks. “It’s hard to know what the worst part impacting agriculture is right now: low commodity prices, the devastation from hurricanes Florence and Michael, tariffs and trade issues or now drought conditions in parts of eastern North Carolina,” Troxler says. It’s easier to understand the bottom line: “Farmers are hurting.”

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