1. CAAP Agricultural Policy Analysis Center - University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996-4519 www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298 Tobacco Policy & Economics KY-TN Dark Tobacco Forum Springfield, TN November 7, 2006 presented by: Kelly Tiller

2. CAAPContributors 1.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

3. CAAP Tobacco Policy Analyses of tobacco policy issues –Relevant –Timely –Various stakeholders Serve as a resource for post-buyout tobacco transition

4. CAAP Buyout 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

5. CAAP Other 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

6. CAAP Tobacco 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

7. CAAP Future 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

8. CAAP 2006 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

9. CAAP Likelihood of Producing 2007 2010 2015 Among respondents producing tobacco in 2006 …

10. CAAP Why NOT Producing in ’07? Not profitable enough (88%) Shortage of labor (63%) Age, near retirement (52%) Too risky without a price guarantee (37%)

11. CAAP Biggest 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 …

12. CAAP Investment 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 …

13. CAAP Top Sources of Information 1.County Extension agents 2.Farm magazines / newspapers 3.Neighbors / other farmers 4.Researchers / research publications

14. CAAPhttp://agpolicy.org/tobacco/