Replacing Tobacco

1. Replacing Tobacco The Evolution of Agriculture in Durham County

2. A Brief History of Durham Tobacco

3. 1865 – Civil War ends, John R. Green’s small store inundated with orders for Brightleaf Tobacco 1874 – W.T. Blackwell partners with Green, founds Bull Durham Tobacco Company 1881 – W. Duke Sons and Co. established 1885 – James B. Duke acquires license for and purchases first automated cigarette rolling machine 1890 – Duke consolidates four major competitors into the American Tobacco Company 1907 – ATC indicted under Sherman Antitrust Act 1911 – Broken up into ATC, R.J. Reynolds, Liggett & Myers, and P. Lorillard

4. The Quota System • FDR establishes Federal Tobacco Quota System in 1938 as part of New Deal • Included poundage quotas and acreage allotments • Control on supply; maintained stable price • Became important financial assets; could be sold and traded like stocks and bonds • When farmers grew old and retired, would lease quotas to neighbors in return for tending other crops as well • Ended by the Fair and Equitable Tobacco Reform Act of 2004

5. The Tobacco Master Settlement Agreement • 1965 – Congress mandates Surgeon General Dr. Luther Leonidas Terry’s warning be printed on cigarette packages • Explosion of anti-tobacco litigation follows • 1998 – Facing lawsuits from attorney generals of 46 states, Phillip Morris USA, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., and P. Lorillard Tobacco Co. settle out of court • Manufacturers agree to pay $206 billion in damages over 25 years • North Carolina to receive 38% of the funds ($78 billion)

6. The TMSA in North Carolina • Three institutions established to distribute funds • Golden LEAF Foundation allocated 50% to improve state’s economic and social conditions • Tobacco Trust Fund received 25%, charged with helping tobacco-related businesses and individuals, including farmers, quota holders, and individuals who lost tobacco-related jobs • Health and Wellness Trust Fund gets 25% to improve health and wellness of North Carolinians with emphasis on reducing youth tobacco use

7. Percent Changes in Golden LEAF Foundation (GLF) Grants by Category and Year: North Carolina, 2000-2004

8. The Death Blow • Federal Tobacco Quota Program ended in 2004, primarily as response to international competition • Program kept US tobacco prices stable while international prices dropped • Widening price gap between foreign and domestic leaf caused decline in exports, shift to overseas production, and loss of domestic market share to foreign producers • Declining demand for US tobacco forced government to reduce quotas • Farmers, needing sufficient acreage make their investments in machinery, equipment, and buildings effective, bid more to rent quotas • Rising labor costs • Abolishment of quota system means no reason to grow tobacco on expensive land around Durham

9. Number of Farms by Type in North Carolina Market Value of North Carolina Agricultural Products Sold ($1000, all values converted to 2007 dollars)

10. Declining Demand • US tobacco production by year (million lbs)1950: 1,7701992: 1,7002007: 778 • Consumers more aware of health effects • Quality of tobacco worldwide has homogenized; international buyers no longer willing to pay American prices (kept artificially high by taxation and quota program)

11. Mechanization • Labor expenditures: • In 1950, average hired tobacco farm laborer paid $888 annually (about $8,000 adjusted for inflation), makes up 53% of total farm expenditures • In 2007, average laborer earns $8,051, but hired labor only 28% of total expenditures • Buying up of quotas encouraged smallholders to sell • Tobacco now produced on fewer, larger farms to the east • Fewer farms and owners with the capital to invest in best machines means 1/10 the farms can produce ½ the tobacco

12. Farming in Durham • Land around Durham expensive and not particularly suited to farming • Soil mainly heavy red clay • Region fluctuates between drought and heavy rainfall • Tobacco one of the few plants that prospers

13. Why Bother? • Having farmland in the watersheds helps preserve clean water for city residents • Farmers help subsidize local taxpayer-funded services, as they pay far more in taxes than they receive in benefits • Cultural, environmental, and aesthetic advantages

15. Replacing Tobacco • Despite huge drop in tobacco production, total market value of agricultural products in NC has risen • NC unable to compete with low cost of cash crop production in other states and overseas • Farmers turned instead to food production

16. The Rise of Food • Demand for and price of food have steadily risen worldwide for past decade • Huge demand increases for organic and locally produced food • Cattle ranching, hog farming, and animal aquaculture so low 1950 census lumped them into single category; today they are 31% of NC agricultural production • Poultry 40% • Grain and fruit production double, vegetable production quintupled

18. Durham County’s Response • Production has shifted away from cash crops and towards food, but high land prices make it difficult to compete • Durham farmers look for goods that gain value from proximity to population centers

19. Greenhouse, Nursery, and Floriculture • Includes cut flowers, cut cultivated greens, potted flowering and foliage plants, and bedding and garden plants • Due to the difficulty of shipping these products, it is cheaper to grow them near the population centers where they will be sold • Low acreage requirements • 72% of market value of crop production in Durham County

20. The Aging Issue • Many farmers’ children have no interest in agriculture • Farms that would traditionally stay in the family are being sold instead • Though there are young people interested in farming, high land costs remain a barrier to entering the industry • Older landowners are pushed to sell to developers • Solution: subsidy or loan to help young people purchase farms of their own

21. Biotechnology: the Future of Agriculture? • North Carolina has become the center of America’s biotechnology industry • Food modified to increase crop yield, reduce vulnerability to environmental stresses, increase nutritional value, improve taste, texture, or appearance, reduce dependence on fertilizers and pesticides, etc. • Biofuels from corn and algae • Flu vaccines from tobacco • Insulin from potatoes, tomatoes, tobacco, lettuce