Fallout from the tobacco settlement continues as cigarette companies plan to buy less tobacco from farmers
Updated December 3, 1998
2:07 p.m. ET
RALEIGH, N.C. (Court TV)— Confirming the fears of tobacco farmers, cigarette makers have told the Agriculture Department that they plan to buy 28 percent less domestic tobacco next year.
The tobacco companies' announcement, along with a tobacco crop surplus and lagging export sales, mean that the U.S. Department of Agriculture may allow farmers to grow only approximately 622 million pounds of tobacco next year, down from the 813 million pounds allowed this year.
On Nov. 30, the National Tobacco Growers' Association, noting the immediate price hike in some cigarettes after the $206 billion settlement, predicted that product demand and sales would drop significantly and demanded $12 billion in compensation over a 10-year period from the tobacco companies.
As expected, tobacco farmers are distressed by the news.
"I think everyone was expecting the purchase intentions to come in a lot higher than they did," said Lionel Edwards, executive director of the Flue-Cured Tobacco Cooperative Stabilization Corp. in Raleigh.
North Carolina may suffer the worst from the tobacco companies' announcement. According to the projected 1999 tobacco production figures, North Carolina may produce its smallest crop since the government began keeping records in 1938. Rep. Bob Etheridge, D-N.C., said he was "shocked and dismayed" by the tobacco companies' announcement and called for the industry to stand by the farmers who have supported its legislative battles in Washington.
"Tobacco farmers and their families have stood by the manufacturers in every major battle on Capitol Hill," said Etheridge. "The manufacturers have provided for their own stability through a national legal settlement, yet they have only increased the risk to the tobacco farmers who have supported them."
Etheridge said he would encourage cigarette companies to buy the surplus before the USDA sets the 1999 quotas.
To pay for the $206 billion settlement, some tobacco companies have raised wholesale prices of cigarette packs by as much as 45 cents. The companies are considering a plan suggested by North Carolina Attorney General Mike Easley that would provide tobacco farmers $5 billion over 10 years, far less than the $12 billion requested by the National Tobacco Farmers Association.
The Associated Press contributed to this report.
