Georgia tobacco farmers could lose millions of dollars next year from a cut in the amount of tobacco they're allowed to grow, says a University of Georgia expert.
The U.S. Department of Agriculture announced Dec. 15 that the flue-cured tobacco quota for 1999 will be cut by almost 18 percent. The impact for Georgia farmers is clear.
"The difference in what we sold in 1998 and what we could sell in '99 could amount to a potential $28.5 million loss," said UGA scientist J. Michael Moore.
Moore is an Extension Service crops scientist for the UGA College of Agricultural and Environmental Sciences. He specializes in tobacco production.
The 1998 Georgia tobacco crop had a cash value to farmers of $154 million. It is the state's third-largest row crop, behind cotton and peanuts.
"An 18-percent reduction in the basic quota leaves us with a 1999 basic quota of about 70.1 million pounds in Georgia," Moore said. "That would compare to last year's basic quota of 85.6 million pounds."
"The basic quota," he said, "is the amount of tobacco designated to that piece of land. What we actually produce to sell is the effective quota the basic quota plus or minus any over or under marketings from the previous year."
Last year's effective quota for Georgia was 93.7 million pounds. The 1999 effective quota is expected to be 73.6 million pounds.
"The reason for the difference between the basic and the effective quotas is that we undermarketed the 1998 crop by 3,469,182 pounds," Moore said. "We can add that to the 1999 basic quota to arrive at the '99 effective quota."
The reduction in the basic quota means Georgia farmers will face a 1999 effective quota 21.4 percent lower than last year. That means they may grow 21.4 percent less tobacco.
Farmers aren't the only ones who will feel the financial pinch of the quota drop. Georgia agribusinesses, including equipment, chemical and fertilizer suppliers, will also take a hit.
"They simply will have fewer acres for which to sell their supplies," Moore said.
A. Blake Brown, an agricultural economist at North Carolina State University, said the 1999 quota will be "the smallest flue-cured quota in the history of the tobacco program."
National 1998 farm revenues from flue-cured tobacco were about $1.4 billion. The lower quota may slash '99 farm income by more than $250 million, Brown said.
A number of things caused the decline, he said. The biggest is the belief that higher prices and increased restrictions on smoking and sales will cause a permanent decline in U.S. cigarette sales.
Cigarette makers are already cutting inventories in response to lower sales. The export market is depressed, too, due largely to the economic slowdown in Asia, a key export region.
Tobacco companies had indicated plans to buy 28 percent less tobacco next year. That led farmers to fear a quota cut closer to 32 percent.
The price support level for the 1999 crop is $1.632 per pound, up $0.004 from 1998.
(Faith Peppers is the director of public affairs with the University of Georgia College of Agricultural and Environmental Sciences.)