Much to the disbelief of many, a final version of the tobacco buyout proposal has passed congress and the bill is now on the President's desk for his signature. This controversial issue has been discussed extensively by both those supporting a buyout and those opposing a buyout and has been battered back and forth in congress for almost six years.

Like most actions of our congress, many of those who will be affected by this bill are very pleased with the provisions of the bill and are excited about how it will affect them in the future. On the other hand, there are quite a few people who are not pleased with the outcome of this bill and are very apprehensive about their future.

First glance at the provisions of this bill seem to indicate that there will be a tremendous economic impact to tobacco-growing regions because of the billions of dollars involved. However, reality is that the payments -- to quota owners to buy out their quota and to tobacco farmers for no longer being able to produce under a quota system -- are going to be spread over a 10-year period. The payments each year in essence will basically replace the money that has been changing hands within communities for decades as quota owners and farmers lease, rent, and transfer tobacco quota with each other.

There is no doubt by those supporting or those opposing the buyout that things will change in tobacco-growing communities like Robeson County. It is speculated that many farmers who have been growing small amounts of tobacco and many of those who are approaching retirement age will decide to no longer grow tobacco. On the other hand, some of the larger tobacco farmers and those wishing to specialize in a specific commodity may elect to significantly increase the amount of tobacco they grow.

One of the comments often heard about the buyout legislation is that since there will no longer be a tobacco quota system then anyone can grow tobacco and anyone can grow as much as they want. This is basically true, but in reality, if a farmer would like to grow tobacco, the first thing he needs to determine is if he will have a buyer for it once it is ready for market.

Several years ago our tobacco marketing system shifted from an auction system on the warehouse floor to a contract system with major tobacco companies. Tobacco companies began to contract with tobacco farmers for the pounds and quality of tobacco they wanted and needed. If a farmer did not have a contract with that company, they would not buy tobacco from him.

This contract system will become the standard for the future. Those wishing to grow tobacco, whether on a small scale or an extremely large scale, had better make sure they have a contract before they make any investments in tobacco production. It is easy to understand that these companies will prefer to contract with tobacco farmers that have the reputation and resources to produce the product they want.

Since the tobacco quota system will no longer exist, one of the major concerns for landowners is what will now happen to my farm. Former quota owners will have a tobacco-related income for the next 10 years, but what happens after that? Since there is no longer a tobacco quota on small farms or farms with poor soils, will farmers in the community still be interested in renting or leasing the land to produce corn, soybeans, and wheat? It may not happen immediately, but in the long term, the value of farm land in tobacco-producing counties may drop significantly.

Many tobacco farmers are now asking themselves "what now?"

• Do they need to try to increase or decrease their tobacco production?
• Do they need to quit tobacco altogether?
• Do they need to concentrate on the traditional crops that have always been grown in the county?
• Do they need to consider contract animal production?
• Do they need to consider producing alternative crops or livestock?
• Do they need to consider other ways to generate income from their land or from their farm operations?

The agricultural agents on my staff have recently developed a fairly comprehensive booklet entitled "Opportunities for Your Farm." This booklet provides a brief description of some of the more practical ways to use a farm to generate additional income. References and web addresses are included for additional information about each subject.

There are literally thousands of different things that can be done on a farm to generate additional income. The most important things to determine is what would the farmer likes to do; how much time, effort, and capital investments is the farmer willing to devote; and is there a market for this product or service or can a market be developed.

Please contact my office if you would like a copy of this booklet. Farmers wishing to diversify their farms and landowners seeking alternative sources of income are encouraged to first contact the Cooperative Extension Service for more information and assistance.

E-mail address: Everett_Davis@ncsu.edu

Mailing Address:
P. O. Box 2280
Lumberton, NC 28359-2280

Phone: 910-671-3276
Fax: 910-671-6278

Date Created 11/2/04