CCAAAAPP Agricultural Policy Analysis Center - University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996-4519www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298

Tobacco Policy Tobacco Policy & Economics& Economics

KY-TN Dark Tobacco ForumSpringfield, TN

November 7, 2006

presented by:

Kelly Tiller

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ContributorsContributors1. Tobacco Policy

– Kelly Tiller (APAC)

2. Tobacco Economics– Area Farm Management Specialists

• Jerri Lynn Sims, Alan Galloway– Clark Garland (Extension)– Vickie Witcher (Research Associate)

3. Tobacco Production/Market/Industry Information– Kelly Tiller– Vickie Witcher– Extension Specialists

• Multi-state collaboration for regional/national policy and economic issues

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Tobacco PolicyTobacco Policy

• Analyses of tobacco policy issues– Relevant– Timely– Various stakeholders

• Serve as a resource for post-buyout tobacco transition

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Buyout Policy Clientele ServedBuyout Policy Clientele Served• Understanding FSA implementation

regulations• Signup procedures and deadlines• Tax implications• §1030 like-kind exchanges• Tax basis of quota• Legal implications• Discounted lump sum options• Lump sum financial and tax implications• Post-buyout production and management • Investment and financial planning

considerations• Post-buyout marketing

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Other Policy IssuesOther Policy Issues• Federal farm bill legislation and alternatives• Labor markets and policies• Federal crop insurance and risk management• Bilateral and multilateral trade negotiations and

agreements• Federal disaster assistance and ad hoc assistance• Federal regulation of the tobacco product industry (FDA)• Other policies affecting the product industry

– Smoking restrictions and bans– Legal filings and actions – Health policy– Tax policy

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Tobacco EconomicsTobacco Economics• Competitiveness of U.S.

tobacco• Production economics

and efficiencies• Market efficiencies and

economics• World market trends• Tobacco production

budgets• Tobacco Info Online• TnFARMS representative

tobacco farms

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Future Industry Information NeedsFuture Industry Information Needs• Standardized and timely reporting of acreage,

yields, production– Geographically disaggregated– Traditional and non-traditional areas

• Market prices

• Domestic and export use, disappearance, stocks

• Producer information– Operation, costs, challenges/issues, profiles

• Publicly available and accessible

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2006 TN-VA-NC Burley Survey2006 TN-VA-NC Burley Survey• Mail-based survey of 6,000 burley

growers in traditional areas of TN, VA, NC– Sample drawn from burley active grower

buyout contract recipients

• First available market and production information post-buyout

• Surveys completed May 2006

• 813 completed responses, preliminary results available

• Follow-up Extension agent survey, expanded states, in December

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Likelihood of ProducingLikelihood of Producing

Probably Not

Definitely Not

Not Sure

Definitely Yes

Probably Yes

2007 2010

2015

Among respondents producing tobacco in 2006 …

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Why NOT Producing in ’07?Why NOT Producing in ’07?

• Not profitable enough (88%)

• Shortage of labor (63%)

• Age, near retirement (52%)

• Too risky without a price guarantee (37%)

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Biggest Challenges Next 2-5 YearsBiggest Challenges Next 2-5 Years• Contract prices too low

(66%)

• High costs of hiring labor (58%)

• High costs of nitrogen fertilizer (52%)

• Shortage of affordable and/or legal labor (35%)

• High costs of other production inputs (26%)

Among respondents producing tobacco in 2006 …

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Investment PrioritiesInvestment Priorities

1. Curing barns

2. Upgrading equipment or new equipment

3. Market prep facilities and baling equipment

4. Acquiring more good land

5. Field curing structures

Among respondents producing tobacco in 2006 …

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Top Sources of InformationTop Sources of Information

1. County Extension agents

2. Farm magazines / newspapers

3. Neighbors / other farmers

4. Researchers / research publications

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http://agpolicy.org/tobacco/http://agpolicy.org/tobacco/