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555 Dirksen Office Building
Washington, DC 20510
Ph: 202.224.6342
Fax: 202.224.1100
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Raleigh Office:
310 New Bern Avenue
Suite 122
Raleigh, NC 27601
Ph: 919.856.4630
Toll Free: 866.420.6083
Fax: 919.856.4053
Salisbury Office:
225 North Main Street
Suite 304
Salisbury, NC 28144
Ph: 704.633.5011
Toll Free: 866.420.6084
Fax: 704.633.2937
Western Office:
401 North Main Street
Suite 200
Hendersonville, NC 28792
Ph: 828.698.3747
Fax: 828.698.1267
Eastern Office:
306 South Evans Street
Greenville, NC 27835
Ph: 252.329.1093
Fax: 252.329.1097
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Floor Statements
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INTRODUCTION OF TOBACCO QUOTA BUYOUT
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July 30th, 2003 - Mr. President, tobacco farmers across the southeast have been anxiously waiting for this day – the day when they could see hope for the future. During the past six months Senator McConnell, Senator Bunning and I have been working with all of the other Senators from major tobacco states to craft legislation that will enable tobacco-dependent communities to survive. The “Tobacco Market Transition Act” which we are introducing today will mark a major change from the current tobacco program and it will bring a major sigh of relief to countless farm families across the southeast.
For years the federal tobacco program created economic opportunity for farm families in North Carolina and other tobacco producing states. It allowed towns to prosper that would have been hard-pressed to make it otherwise. It provided stability when other commodities suffered low prices; it was the standard bearer of all farm programs. Buyers of tobacco would come from all over the world to purchase America’s leaf. America’s tobacco farmers held the world standard for quality – and they still do today. But the environment in which they find themselves is much different. And it is not of their own making.
The current tobacco program was never designed to accommodate the significant changes that have engulfed this industry during the past decade. Extensive litigation has forced the companies to cut costs and thereby purchase increasing amounts of cheap foreign tobacco. The increasing cost of US leaf as a result of the current tobacco program has caused more and more foreign buyers to look elsewhere for their supply. The numbers do not lie: The U.S. now accounts for only 7 percent of all flue-cured tobacco production in the world.
We must not forget that behind every economic statistic is a human element. The tobacco farmer bears the brunt of these changing forces with no where to turn. Unlike the companies who can (and most often do) pass their extra costs on to the consumer, the tobacco farmer must absorb any extra cost and hope for better days ahead.
During the past six years the amount of tobacco allowed to be grown (also known as quota) has been cut more than 50 percent. In fact, not since 1874 has so little been grown.
Let me explain what that really means: The tobacco farmer’s paycheck has been cut in half. And they only get that if they can produce a good crop. The weather, disease and insect infestation make it all the more challenging. Costs continue to rise. And making this even more unbearable is the increasing cost of leasing quota.
In North Carolina more than sixty percent of quota is leased – a major factor in the increasing cost of production. As quota has continued to decline, farmers have sought to rent more quota in order to maintain the economic viability of their operations. The quota owners, trying to maintain their income stream with less, demand a higher price for the use of their quota. It is simple supply and demand – with an aim at meeting a bottom line. But you can only go like this for so long – until you reach the breaking point.
Mr. President, this is where the growers are today. Many have hung on and continued to produce in hopes that things would get better -- knowing that if they got out they would have to sell their farm and liquidate other assets to settle up their debt. Even then, many would still be short.
Every week my office receives calls from farmers in desperation. They’ve worked hard all of their lives – sent their children to college – contributed to their community, but now – now, all of that is passing before their eyes. There is a deep feeling of helplessness.
It is estimated that more than sixty percent of the tobacco farmers today will exit the business entirely if a tobacco buyout is achieved. Most are at retirement age.......just hanging on a little while longer in hopes of being able to pay off their debt. Those who would like to continue to produce know that their market is shrinking – not because of a lack of demand in the world for tobacco, but because the price of US tobacco is too high as a result of the current tobacco program. All they can do is watch as Brazil and other countries take their market share.
Many say, “Well, why don’t they just produce another crop?” The truth is, they are. North Carolina ranks 3rd in agricultural diversification behind only California and Florida. Our farmers are very diversified, but as other members from farm states will attest, prices have been at historical lows for every commodity over the past five to six years – further exacerbating the problem for tobacco farmers in the southeast.
Tobacco farmers are at a crossroads, but unlike most people who reach a point of decision in their lives these salt-of-the-earth folks have no options – because the current tobacco program does not accommodate the changes needed for them to have an opportunity to survive in this new marketplace. To them it is like standing on the tracks while watching a train speed closer and closer – yet they can’t move – they strain and try, but they’re shackled – with nowhere to go.
Mr. President, this is why a tobacco buyout is so sorely needed. It will allow those who want to retire, the opportunity to do so with dignity. The opportunity to know that all they have worked for has not been in vain. It will allow the widow whose sole source of retirement income is from quota rent and social security, the opportunity to get a fair return in exchange for the taking of her quota. It will allow young farmers who want to continue to produce, the opportunity to compete in the world market – and compete very well because of their skills.
Let me bring a little more perspective to the buyout of quota. This program was created in the 1930s. Right or wrong, the federal government has allowed quota to be bought and sold. Rather than investing in stocks and mutual funds as many Americans have, tobacco farmers and their spouses have invested in quota over the years to prepare for their retirement. But they never predicted this massive change in the environment for tobacco that has led to such a steep slash in quotas --- and how could they? Unlike a stock holder whose shares lose value if the market tanks, the quota holder has lost not only the value from this steep decline in quotas – but the quota itself – for good. Unlike the stock market where time is a prudent investor’s best friend, those who have invested in quota will never get that investment back.
In the legislation that we are introducing today, the federal tobacco program is eliminated. Quota owners are compensated for their investments – for the taking of their asset – just like the owners of peanut quota were compensated with the peanut quota buyout in the 2002 Farm Bill. Traditional producers are provided direct payments over a six year period in order to allow them to better transition into this new marketing environment – again mirroring what Congress provided for all program crops under the 2002 Farm Bill.
There is no re-creation of price supports or a new quota program. Rather, this legislation keeps tobacco production in traditional areas and on a traditional level of acreage while allowing private industry to develop insurance products so that farmers will be better able to manage their price risk in the free market.
And perhaps the most important point for my colleagues in the Senate: Every penny that this buyout will require is paid for in full by all manufacturers and importers who sell tobacco products in this country.
Mr. President, status quo is simply not an option. If nothing happens this year, many of these farmers will be forced to give up all that they have. After six years of loaning on collateral, there’s nothing left for the banks to do except foreclose. There will be no holding out for just a little while longer. This may sound like rhetoric to some, but it is the precise truth for countless numbers of farm families. And the lenders who call my office confirm it. Status quo is simply not an option.
I want to thank Senator McConnell and his staff for working so diligently to address this issue. It is vitally important that this legislation is achieved this year, and I am grateful indeed for Senator McConnell’s commitment to making this a reality. I look forward to my continued work with him and all the other tobacco state Senators on this important legislation.
It is either now – or never. Many livelihoods hang in the balance, and with it the future of rural communities in North Carolina and other tobacco-producing states. These rural citizens – the very ones who have helped make this country great – have been caught in a battle between corporate interests, some greedy trial lawyers, and those whose true desire is to ban tobacco from the face of the earth.
Let us allow these farm families who have been trapped in this battle to move on with their lives. They deserve it.
Mr. President, I yield the floor.
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| Elizabeth Dole |
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