Tobacco Buyout

Another key factor that led to a decrease in the tobacco industry was the Tobacco Transition Payment Program, also known as the tobacco buyout. The tobacco buyout is when the U.S. government decided they didn’t want be involved in the price support system for tobacco anymore (Tobacco Transition Payment Program” 2009). In the 1940s, the U.S. government decided that tobacco companies were not paying the American farmer enough for their tobacco crop. In addition to this the government created a tobacco quota, which limited the production of tobacco to raise prices. After this farms had “tobacco bases.” With tobacco bases the government told you how much tobacco you could grow on your farm and the location of the farm determined how big of a base the farm had. Areas where there was a lot of flat ground had smaller bases than areas with hills and valleys. The flatter farms had smaller bases because the government said the ground could be used for grain and other crops, whereas in hilly and mountainous areas the ground wasn’t laid out for raising grain. If a farmer didn’t use his base for two consecutive years then the base was taken away from the farm. As a result most farmers in the state grew tobacco to just to keep the base or they leased it to other farmers who wanted to grow more tobacco.

In 2004 the government decided that they no longer wanted to be involved in the price support system and this is when the buyout occurred. To buyout the farmers’ bases, the government paid anyone with a tobacco base on their farm a certain amount per pound for the next ten years. For example, if a farm had a 1500 pound base, for each year from 2004-2014 they would receive a set amount of money per pound for the base. So if that set amount of money was $1.50 per pound then the farmer would get paid $2250 every year for the next ten years. This money was also to help the tobacco farmers diversify their farm now that many decided not to raise tobacco anymore. The United States Department of Agriculture also helped tobacco farmers get established in other areas through a cost share program where they would help pay for a new barn or new equipment the farmer may need. So starting in the 2005 tobacco season there were no planting restrictions on tobacco. Now tobacco farmers make a contract directly with a tobacco company. Most farmers did away with raising tobacco after the buyout because they grew little acreage and were not dependent on tobacco for most of their profit. Other farmers used this opportunity to increase their acreage and use tobacco as their major cash crop such as my family farm. We now grow 15,000 pounds of tobacco each year and have a contract with a tobacco company located in Danville, Virginia.