Settlement threatens a way of life

Tobacco growers want their cut

BY CAROL D. LEONNIG, MERCURY NEWS WASHINGTON BUREAU

WASHINGTON Tobacco farmers and their champions in Congress want a
multibilliondollar cash infusion to prepare tobacco's heartland for what
could be a harsh new world.

For the past 60 years, a New Dealera program has provided farmers with a
way of life that has grown outdated. In the shelter of a controlled market,
hard work and handeddown advice sometimes were enough to harvest a
lucrative crop at a stable price.

But a $368 billion tobacco industry settlement reached by tobacco
companies and states in June is expected to drastically shrink the U.S.
demand for tobacco if it becomes law.

Congress will weigh the settlement this fall, and already lawmakers from
the tobacco states of North Carolina and Kentucky are eyeing a way to make
sure farmers left out so far get from $7 billion to as much as $20
billion out of the deal if it survives.

``We will still be all right if we get protected,'' said Richard Renegar, a
tobacco farmer in North Carolina whose family has worked the land since the
Civil War. ``But if not, farm communities are all in trouble the tobacco
farmer, the church, the grocery store, the car lot the whole thing is
going down.''

A crucial question facing members of Congress is this: Should the
government protect farmers to continue what they've done for generations
or use any money from a settlement to help them start new lives?

Farmers say their first choice is to keep farming. They are seeking
guarantees from manufacturers to buy American tobacco before they buy
cheaper foreign leaf. Though domestic demand is likely to fall,
international demand is booming particularly in Asia and foreign
growers supply a larger portion each year.

``Our growers want to keep growing and get their money out of the market,
not a handout,'' said Larry Wooten, a North Carolina Farm Bureau leader who
helped craft a $7.4 billion compensation proposal with farmers in a July
meeting in Raleigh, N.C. ``But if we can't get that, we need a nest egg.''

That nest egg, based on the two compensation plans now circulating,
primarily would be used to pay farmers the difference between what they
typically make now and what they might make if the settlement becomes law.
Some money could be used to buy out farmers entirely. Some older or smaller
farmers might find a buyout attractive, and others may want to grow larger
to compete more effectively. Most want to hang on.

But several economists argue the money should help move farmers into the
21st century not protect the status quo.

The tobacco quota program, which since the 1940s has controlled how much
U.S. farmers grow each year, has made U.S. tobacco more expensive than
foreign tobacco. Growers in Brazil, for example, are now delivering tobacco
that some say matches American quality but at a lower price.

``You cannot continue to insulate the farmer from the global marketplace,''
said George Autry, president of MDC, an economic think tank based in
Raleigh. ``You have to set some of that money aside to let farmers become
entrepreneurs and compete in new ways and let these communities save
themselves.''

Another compensation plan, offered by Kentucky Sens. Mitch McConnell and
Wendell Ford, would create a $17.4 billion fund out of the settlement deal.
As much as $250 million a year would help rural, tobaccodependent
communities, and $100 million a year would go to train displaced tobacco
workers.

Autry has been interviewing tobacco farmers about how the settlement and
increasing foreign competition would change their lives. He said it's
important to create new local enterprises and pump education and technology
into rural areas.

As more small farmers sell out to large companies, he worries that whole
communities will migrate to the cities.

Predictions vary on the settlement's fallout for farmers.

Dewey Gaskins, a Wilson, N.C., tobacco warehouse owner, visualizes disaster
if there is not a significant bailout program.

``I tell you what I see: a lot of unemployed people,'' Gaskins said.

Others say that technology and foreign competition already are eroding the
tobacco farm community. In eastern North Carolina, more small farmers are
leaving and farms are growing in size to stay competitive. The average
farmer is in his mid50s. His children aren't taking over his land, and his
tobacco barns are crumbling by the roadside.

``It's a niche where tradition and hard work were enough,'' said David
MoltkeHansen, director of the Center for the Study of the American South
at the University of North Carolina in Chapel Hill. ``That's not going to
be the case in the future and they are going to be disadvantaged.''

Renegar hasn't made up his mind what he'll do if demand drops, but the
farmer hopes Congress thinks tobacco growers are as important as trial
lawyers. The Raleigh plan gives farmers 2 percent of the industry
settlement about the same amount trial lawyers are expected to get.

``People fall on hard times every now and then, but they don't stay that
way for generations,'' Renegar said. ``None of this was any of our
choosing.''

Published Monday, August 18, 1997, in the San Jose Mercury News