MONOPOLY MATTERS

The Forgotten History of Small-Scale American Tobacco Farming

by Open Markets Food & Power Reporter Claire Kelloway

On Wednesday, the CEO of e-cigarette maker Juul abruptly stepped down after a tumultuous month. Two weeks ago, President Trump proposed banning products that represent 80 percent of Juul’s sales and federal prosecutors and agencies have launched investigations into the company’s marketing tactics and supply chain. Also Wednesday, tobacco giant Phillip Morris International ended merger talks with Altria, which owns a 35 percent stake in Juul.

Lost in all the talk about big tobacco mergers and the future of vaping, however, is another issue: the increasingly dire conditions facing tobacco farmers and farm workers. Many analysts point to vaping, retaliatory Chinese tariffs, and decades of declining domestic demand as the source of tobacco growers’ woes. But a lesser-known policy shift around the turn of the millennium helped create our current system of high-stress large-scale contract tobacco farming.

You might be surprised to learn that well into the 1990s, tobacco production was a hidden hold out of profitable small-scale family operated agriculture, especially in Appalachia and the Piedmont plateau. In 1987, the average tobacco farm was just 4.6 acres, and run mostly with family labor. One 1998 study by the Appalachian Regional Commission estimated that a three-acre family-operated tobacco farm could net $6,000 annually, the equivalent of $9,200 today, adjusted for inflation.

This network of small farms was largely made possible by a federal New Deal-era supply management program that helped to stabilize tobacco prices, prevent oversupply, and support smaller farms. This system limited tobacco production through quotas that farmers either owned or leased, and quotas could not be leased across county lines.

This system certainly wasn’t perfect. When first implemented in the 1930s, production cuts initially displaced many tenant farmers and black farmers faced discrimination by county governments that allocated quota. Quota also created significant barriers to entry, and near the tail end of the program, as much as one-third to one-half of all quota were owned by retired farmers who leased them out.

However, the federal program helped farmers to control supply and maintain higher prices after self-organized cooperatives had failed to do so. It also helped maintain a “relatively robust” tobacco auction market into the 1990s, according to Florida Atlantic University history professor and author of When Tobacco Was King, Evan Bennett.

Naturally, tobacco corporations did not like this program. Outwardly, most tolerated the system to appease farmers, who became important allies as public opinion of tobacco soured following the 1964 Surgeon General’s report on the hazards of smoking. But internally, corporations like Phillip Morris made plans to undermine the program by investing in overseas production as early as the 1960s.

Price pressure from lower-cost international tobacco producers shrunk US tobacco export markets just as domestic demand declined. Farmers felt pressure to compete globally, get big, and lower prices at the same time that tobacco corporations consolidated through the 1990s and 2000s.

These pressures, along with some changes to the quota system, began driving farm consolidation in the late 1990s, before the Bush administration fully repealed the quota program in 2004, wiping out small tobacco farmers.  Within two years, over half of all burley tobacco-growing households in Tennessee, North Carolina, and Virginia stopped farming. In 2002, there were roughly 80,000 active tobacco farmers. By 2015 there were 4,268.

What farms remained dramatically expanded. In North Carolina, the total number of tobacco farms fell from nearly 8,000 in 2004 to 1,682 in 2014, but the average size of farms quadrupled. Tobacco corporations moved away from auctions to purchasing tobacco from farmers on contract.

Today, corporations dictate many aspects of farmers’ operations through contracts, including what type of plants to grow, how to harvest them, and how much water and chemicals to apply. Farmers carry “a good deal of anxiety,” says Bennett. “As we’ve seen in chickens and other products in the contracting system, farmers take on a lot of [financial] risk and then they’re at the mercy of the company they’ve contracted with.”

Fewer buyers and contract farming not only squeeze growers, but their workers as well. “These companies decide who’s in business and who’s not,” says Justin Flores, Vice President of the AFL-CIO’s Farm Labor Organizing Committee (FLOC). “Growers have been really pressed and that means growers and their [labor] contractors have been pressing workers.”

Organizations like FLOC, Oxfam, Human Rights Watch, and others have exposed dangerous working conditions and labor exploitation on today’s tobacco farms, including wage theftdilapidated and unsanitary housing and food for migrant H-2A workers, child labor, and acute nicotine poisoning from handling tobacco leaves.

These issues are made worse by the rise of farm labor contractors, who recruit and employ workers on behalf of growers, removing growers’ liability for labor violations. Contractors undersell labor to farms because they charge workers exorbitant (and illegal) recruiting fees.

The history of tobacco is relevant to ongoing debates about adopting agricultural supply management, as proposed by the Dairy Together coalition and presidential candidates Bernie Sanders and Elizabeth Warren. Long the libertarian poster child of overbearing market intervention, the policy is drawing interest for its potential to support farm prices, reduce the cost of farm subsidies, and promote conservation.