Buying Out Coal Miners as We Did Tobacco Producers

 Took me a while but after seeing Alec Tabarrok suggest buying coal mines and discussion on twitter of paying coal miners, I realized there's precedent--we bought out tobacco farmers, or rather their tobacco quotas, back when the FSA tobacco program was eliminated. 

See this ERS page.

Burley Tobacco Growers Co-op

 Al Cross at the Rural Blog notes the Burley co-op is going out of business.  From the website:

• A partial settlement has been reached that would result in dissolving the Co-op and paying between $2000 and $6000 each (estimated) to certain tobacco growers in Kentucky, West Virginia, Ohio, Indiana, or Missouri that are members of a settlement class certified by the Court.
• The settlement class is made up of those individuals or businesses that were a landowner, operator, landlord, tenant, or sharecropper growing burley tobacco in Kentucky, West Virginia, Ohio, Indiana, or Missouri during at least one of the 2015–2020 crop years.

I don't know the story behind this--apparently there was a class-action suit claiming it didn't serve any purpose these days.

The co-op movement was strong in agriculture in the last century, both on the producer side and the supply side. The tobacco, peanut, and cotton co-ops were precursors and enablers of the New Deal farm programs.

[Updated:  Wendell Berry's brother on its history.]

No Federal Money for Tobacco, Except in Pandemic

 In 2004 when Congress provided for the ending of the tobacco program, they included a blanket provision that no CCC money could go to tobacco growers.

That was fine, except when things change.  It's 2020, an election year, and North Carolina is a battleground state, and tobacco is still important to the state, and the pandemic hit.  So USDA will provide up to $100 million to tobacco growers from the second pandemic law (CARES Act), but they'll do it bypassing CCC.   All this from here.

USDA ended most of its tobacco reporting shortly after the program was ended, but I did find it in the crop report--NC grows about half the US acreage--150,000 acres in 2018.  (Got there from a hit on a CDC publication. ) That's about a third of what we grew in 2000 and about a tenth of what China grows now.

Hemp and Tobacco (and Taxis) III

Reverting back to tobacco, in contrast to the article quoted in my first quote, there was at least some evidence that the benefits of the tobacco allotment/quota programs eventually benefited the owners of the quotas more than the actual farmers.  This article from the 1981 Washington Post discusses the issue, tied to the fact that Sen. Helms, a man for whom I had about as little respect as possible, was pushing the tobacco program while his wife was an owner of tobacco quota.

Note: IIRC over the years, maybe in the 1990's, the law was changed so that absentee owners of quota had to either sell the quota or become more actively engaged in farming.

Hemp and Tobacco (and Taxis) II

I never did get to the "taxis" part of my post yesterday.

The NYTimes yesterday had a piece on how New Yorkers had made inroads on the Chicago taxi industry.

To recapitulate the Times' previous articles on taxis in NYC:

• to operate a cab you need a medallion, issued by the city.  IMO medallions are a way to limit entry, by restricting entry you're able to manage the prices/rates charged and limit turmoil.  That's very similar to supply management for tobacco in the US and dairy and eggs in Canada; also it's similar to the marketing co-ops for things like cranberries
• NYC had a bidding war for the medallions,  which savvy investors used to manipulate prices and make exploitative loans to individual drivers hoping to gain an asset for their retirement..  With Uber and Lyft hitting, medallion prices have plunged, and drivers are unable to repay the loans, forcing them into bankruptcy.
• in yesterday's article the same pattern was followed in Chicago by wised-up guys from NYC.

I've noted the parallel with agricultural supply management already.  While the medallion program likely worked reasonably well for many years, as did the tobacco program, with time smart people with money found a way to exploit the rules and make money, gaining their returns at the expense of those with fewer smarts and/or less money.

Hemp and Tobacco (and Taxis)

The Atlantic has an article using a history of the tobacco program to talk about hemp.

The history is accurate enough.  The professor points out that tobacco quotas were initially based on past tobacco production, so they tended to provide existing tobacco farmers with a guaranteed annual income (disregarding weather and similar hazards) for years.  That stabilized the regional economies.  When the program was ended there was immediate upheaval and consolidation of farms. By locking out new farmers (she doesn't note the limited provision for new farmers in the program, though the amount of quota available each year was small) it meant black and white sharecroppers lost a chance for upward mobility.

Her argument thus becomes:

"Instead of charging would-be cannabis growers for the privilege of growing, states should award licenses to a larger number of applicants from communities that have been hit hard by the War on Drugs. Much as small-scale tobacco farms anchored entire communities across the Southeast, cannabis cultivation on a human scale, rather than a corporate one, can build wealth within communities of color where opportunities to amass property have been denied—frequently at the hands of the government.

 The argument seems good, but as I've argued in other posts, the growing of hemp in the new world of legal pot (and industrial hemp) is subject to many hazards, even for experienced farmers trying to add a new crop to their operation.  If the argument was that people who had been growing illegal pot should be given licenses to grow it legally, I'd have fewer concerns.  But asking people from the inner city to grow hemp would be stupid. You'd have to have a new hemp producer program to offer financing, help gain access to land, and provide mentoring. ( I don't know the failure rate for new farmers of conventional crops, but I suspect itt's high.) That's not happening.

In the absence of such a program what would likely happen?  As in programs reserving government contracts for minority and female owned companies--you use a figurehead with the right attributes, while the real money goes to the men behind the curtain.

Stretching History

From a Dylan Mathews interview with Edgar Villaneuva on his book on the dominance of whites in philanthropy:

"Many families and many institutions that have amassed wealth have done so on the backs of people of color and indigenous people. One example I often share is my first job in philanthropy was in North Carolina, and it was all tobacco money. My office was on a plantation.
The R.J. Reynolds family had amassed all this wealth through the tobacco industry. Clearly, slave labor was a major part of that and helped to build this family’s fortune.  [Emphasis added.] There are multiple Reynolds foundations that now exist. I think that [money] should be given in a way that sort of centers and prioritizes giving in communities of color that helped amass that wealth.

The only problem with the statement is this: R.J. Reynolds was, according to wikipedia, born in 1850 and formed his company in 1875. 

It's sloppy work and tends to cast doubt on the book.

The Effect of (Some) Government Programs

From the Rural Blog's post on tobacco, specifically moves raising the minimum age to buy cigarettes from 18 to 21:

"The [tobacco] industry has shrunk since the federal program of production quotas and price supports ended in 2004, and consolidated into larger farms. Pratt estimated the number of burley growers has plummeted from 175,000 to 3,000. And that has reduced the political influence of the crop that once had a powerful hold on Congress and state legislatures."

In other words, in 15 years the number of farmers has dropped to 2 percent of its starting level.

Side comments:  there's still the meme on the left that farm programs help the big guys, which drastically oversimplifies by lumping all farm programs together.

Wendell Berry Meet Westby Cooperative Creamery

Washington Monthly had a piece on the Westby:

Westby is the exception, not the rule. It’s a holdout from an earlier era when co-ops helped farmers and rural communities keep a much larger share of the nation’s wealth than they do today. Most everywhere else across rural America, the powerful cooperative movement has either faded or, worse, become co-opted by giant monopolies that prey off the very small-scale producers they’re supposed to protect. In that way, they reflect a broader change in the economy. While pretending to represent farmers’ interests, these co-ops in fact dictate prices to farmers just as Amazon dictates prices to book publishers and Walmart to its suppliers. Cooperative Creamery in WI

Wendell Berry writes for the Henry County Local on the recent spate of creameries and distribution channels dropping dairy farmers and includes this:

The person interviewed in these several articles who makes clear and admirable sense is Gary Rock, a dairyman, one of Dean’s terminated, in LaRue County: “He would like to see a base program across the nation that sets production quotas in line with market demands.” He thus sees through the problem to its solution. He is advocating the only solution to the problem of overproduction. Kentuckians don’t have to look far for an example of the necessary solution, for we had it in the Burley Tobacco Growers Co-operative Association. That organization effectively controlled production, maintained fair prices, and gave the same protections to small producers as to large ones. The history of the Burley Association disproves, as its membership conscientiously rejected, the “inevitability” of the destruction of family farms by agribusiness corporations.

Of course Berry is wrong.  Production wasn't controlled by the co-op, but by your faithful USDA/ASCS bureaucracy (operating in conjunction with the co-op).  "Supply management", one term for the sort of program involved, is something Canada still uses for dairy and eggs and maple syrup. We dropped the tobacco and peanut supply management programs after I left, not that there's any relationship. :-)

I'm From Wall Street and I've Got a Deal for You

ProPublica studies the tobacco bonds.  Last century (1998) the state attorneys general and the tobacco companies reached a settlement, which gave states money over a number of years with the amount dependent on how much people smoked: the more they smoked, the more money since the logic was to cover the costs/externalities of smoking.

Wall Street came along and persuaded states to securitize the settlement, to sell bonds based on the stream of anticipated income from the tobacco settlement.  States would get more cash upfront (to be used as the politicians desired).  That's not a new idea but surprise, surprise, the deal is turning out to be better for Wall Street firms than for the states.

There were a lot of fancy deals made during the 90's and 00's; I hope someday there's an overview study which shows how many turned out okay and how many were snake oil.  The KISS rule also applies to finance.

Oh For the Days of "No Cost" Tobacco

Once upon a time long ago there was great outrage when people discovered the government (ASCS) was doing tobacco price support (and marketing quota) programs at the same time the Surgeon General was saying smoking was bad. 

After sufficient pontificating on the Hill, legislation was passed which tried to make the tobacco program "no cost"--that is, the costs of the program were borne by the tobacco industry, at least in theory--some dispute over the accounting for administrative functions. 

That was a while ago, and the meme about USDA supporting tobacco had dwindled almost to nothing.  Dwindled at least until today, when some Senators have discovered that RMA/FCIC subsidizes crop insurance for tobacco and are hoping to amend the farm bill to prohibit that.

All cynicism aside, I can't disagree with them.  When pot is legalized, I would firmly oppose offering crop insurance for it.

Smoking and Sex

I owe a hattip to Suzy Khimm at Ezra Klein's blog; here's a post on the economist with maps showing worldwide cigarette consumption, by sex.

About 800m men smoke cigarettes, compared with fewer than 200m women. More than 80% of these male smokers are in low- and middle-income countries. The problem is particularly acute in China, where 50% of men smoke (compared with just 2% of women), consuming one-third of the world's cigarettes in the process.

 I can remember when the local radical (she was a Democrat and she wore slacks) was also a smoker, a scandal for a woman in that small community. She was one of my mother's best friends, and suffered from emphysema in her latter years.

I wonder if the dynamics leading to male smoking in China are the same as in the U.S.

Tobacco Growing in Canada

Via Freakonomics, an article, part of a series, on tobacco growing in Canada.  It seems there's an underground trade in tobacco, grown in Canada and sold to contraband manufacturers, who sell the cigarettes tax-free on First Nation (i.e., "native Americans") land.


"We" (i.e., I) usually think of tobacco as a Southern crop, grown in the Carolinas and Kentucky.  Not so, Wisconsin and Connecticut have been/still are growers of certain varieties and it turns out Ontario also grows tobacco.  And, like the U.S. but a little slower, Canada had a buyout of tobacco growers who had tobacco quotas. Three paragraphs:

"The federal government offered a controversial buyout of Ontario tobacco growers in 2009. Though most took the payments — designed to usher them out of the business — more than 200 have returned to producing tobacco through a loophole that allows them to rent their land and hire themselves out to licence holders, often their non-farming children.

The new system replaces one where farmers held tobacco quotas worth hundreds of thousands of dollars each and the Flucured Tobacco Marketing Board kept close tabs on production. With the previous regime, farmers would lose that valuable quota if caught selling tobacco on the black market, a powerful deterrent, noted Mr. Stewart. Having the new licence cancelled carries no such financial consequences.

And

"These guys [the farmers who earn big cash money] are pretty crafty," the farmer said. "You think when you talk to them they're honest and they're salt of the earth and they're good people. Not at all."

A Third Surprising Statistic

From the NY Times today in an article on the possible banning of smoking from New York City's parks.  Apparently after the Mayor got smoking banned in restaurants and pubs the smoking rate dropped from about 20 percent to about 16 percent.

The End of Tobacco

A little tobacco was grown in Alabama, but now the tobacco program is gone so too is AL baccy. So says this human interest piece from the Birmingham News. I liked the quote about tobacco and handling hay as the two hardest jobs on the farm. I miss the smells of haying, but not the scratches.

The Tobacco Story, Continued

House Ag held a hearing on the tobacco industry. Skimming the prepared testimony, it seems the numbers of farmers are down (from 8,000 to 3,000 in NC, a 72 percent drop in KY to 8,000), but flue-cured is more competitive with Brazil. It fits with the impressionistic evidence from newspapers--the old tobacco programs did their job of slowing the process of change, keeping more people in tobacco growing. Ending the program looks to have speeded change, made the industry more competitive but more volatile. And the program wasn't keeping prices down and encouraging smoking.

Calories and Nicotine

I posted yesterday marveling at how far the country had come in 50 years, from ads on Christmas specials promoting cartons of cigarettes as stocking stuffers to now. Today the NYTimes has an article following up on the posting of calorie counts in restaurants and food vendors. It feels to me similar to the time when the Surgeon General's cancer warning was first printed on cigarette packs. While it took a while for cigarettes to become socially disapproved, it happened. I predict the same will happen for calories. Hope I'll be around 50 years from now to see it.

How Far We've Come--Tobacco

Listening to a 1956 Bing Crosby xmas special on Sirius/XM--sponsored by Chesterfield, with Bing et.al. pushing cartons of smokes for stocking stuffers just before launching into "Silent Night.."

Tobacco Program Aided Small Farmers

The different farm programs are just that: different. So you can't take results from one and apply them to another. But a post mortem on the now defunct tobacco quota program suggests it, at least, helped small farmers. We didn't run parallel tests, but looking at what happened after the program ended is suggestive.

Washington Times has a story on tobacco growing in the U.S as of now. When the program ended, many small farms went out of business, at least out of tobacco, to be replaced by fewer bigger growers. There also may have been an impact on smoking--the price has gone up so smoking has gone down. The program also operated as a price umbrella for developing countries, which could undercut US on price. Now we're exporting more.