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AGRICULTURE - August 2004
“Of course, I’ve been on a farm my entire life,” Amburgey said. “I was raised on a farm.” The youngest of 11 siblings, Amburgey moved with his family to Montgomery County from neighboring Bath County when he was six months old. The house he and Donna, his wife of 40 years, live in sits on 410 acres, which includes the land where his boyhood home still stands. He can’t recall how many generations of tobacco farmers he has among his descendents. It’s just something folks in his family have always done. “All the way back. We’ve always been a farm family.” But like many of his peers in the Montgomery County farming community, he may scale back his tobacco operation significantly if Congress approves either the House’s $9.6 billion buyout bill or the Senate’s $12 billion version. Both would end the federal price support system for tobacco, which has been in place since the 1930s. The idea behind price support was that the federal government would assign farmers a production quota for burley tobacco, which is used by cigarette manufacturers, and would guarantee a certain price per pound if a farmer did not exceed the quota. In recent years, however, anti-smoking campaigns and cheaper imported tobacco have decreased demand for domestic leaf and reduced quotas nationwide. In Amburgey’s case, his quota has dropped almost 44 percent in the past five years, falling from 30,000 pounds to almost 17,000 pounds. The government has not sent farmers any letters explaining what they would receive if a buyout passed. Under the $9.6 billion plan, at least, farmers would get somewhere around $10 for each pound of quota they gave up, and a few dollars less for leased quota. But after a whirlwind of changes to the buyout provisions in mid-July, Amburgey is not quite sure what to expect. Amburgey said any amount would help him in running his farm, which he guesses costs more than $100,000 per year to operate. Regardless of how much tobacco he’s allowed to grow, his costs are relatively constant. Tobacco must be stripped, which costs 19 or 20 cents per pound. Amburgey also leases quota from another farmer, essentially allowing him to grow tobacco on the farmer’s land from that farmer’s quota allotment. Amburgey still provides labor for planting and harvesting the leaf, but he also pays the farmer 70 cents per pound for use of the land. “You take the 19 to 20 cents a pound stripping out of it, and the 70 cents a pound leasing, you’re already over a dollar a pound coming out of $2 tobacco,” Amburgey said. “Plus you’ve got setting, plants, fertilizer, and everything else involved. So really, you’re probably getting down to 30 cents a pound of pure money on a pound of tobacco when it boils down and you figure everything in.” U.S. Department of Agriculture statistics show that in 2002, the typical burley farmer made just under $250 per acre. “You can’t make a lot of money on two acres of tobacco unless you do all the labor yourself.” Then there are elements like the weather, blue mold, and damaging insects. They don’t take weekends or holidays off. In Amburgey’s line of work, there are no such things as weekends. “Every Sunday morning there’s always something that needs to be done before church and after church.” Taking the buyout money and ceasing his tobacco production is not likely to get Amburgey his weekends back. There are still cattle to tend to, corn fields to look after, and hay fields to bale. But many older farmers would probably look at the buyout as a way out of the apparent downward spiral quotas are taking. “Most of your farmers who are getting up to 70 years old, 75 years old, they don’t want to raise tobacco and it’s a headache to get someone else to raise it for you,” Amburgey said. He added that taking the buyout would not put many of them out of the farming business, as most tobacco farmers have cattle on the side. It’s become nearly essential for farmers to sell alternative agricultural products to make up for losses associated with tobacco. “I’d say 92 percent of tobacco farmers do have livestock,” Amburgey said. “It’s a lifesaver for farmers.” An imperfect way out “The Senate’s 10-year buyout is too long,” said Donna Amburgey, who serves on the Montgomery County Cattlemen’s Association executive board and was just appointed to the state agriculture development board by Gov. Ernie Fletcher. “Hopefully, in the process, the House and Senate will settle on five or six years.” The potential loss of Phase II funds would also be a blow to family farmers. Phase II funds are important to farmers like Amburgey, who has used his Phase I and Phase II funds to improve overall farm operations. To complicate matters further, the buyout has been criticized as a boon for the rich that would give 67 percent of the money to just 10 percent of eligible quota holders – who, incidentally, live in all 50 states and a few other countries, according to a study by the nonprofit Environmental Working Group. Ron Catchen, Montgomery County’s extension agent for agriculture, described the recent developments in the House and Senate as “very volatile,” adding that he was “a little amazed” at last week’s legislative action. “This has been on a roller coaster for several years,” Catchen noted. “It will be interesting to see if the opposing sides can work out their differences. There is still a bit of a hurdle, in my opinion.” Catchen and other extension agents throughout the state have been updating and educating farmers on the buyout as it unfolds. “We’re also trying to educate farmers in pursuing wise investments of [buyout] funds in order to remain sustainable in farming,” Catchen added. “A lot of farmers will use the funds to liquidate debt. There’s a lot of debt in agriculture.” The USDA Economic Research Service reported that in 2002, 89,000 Kentucky farms carried an aggregate $3,784,584 in farm debt. Catchen said a typical farmer’s debt is comparable in amount to a home mortgage. Advocates of ending the price support system say its artificial valuation system damages tobacco farmers’ ability to produce enough tobacco to compete on a global market. Eliminating it would do the reverse – fully exposing small farms to the cutthroat global free market, while at the same time clearing the way for large corporate farms to offer competitive prices. “Basically the tobacco program, which farmers have greatly supported over the years, is not effective in allowing our growers to compete in the world market,” said Dr. Will Snell, a University of Kentucky agriculture economist who is the county extension agents’ go-to man on matters of agriculture policy. Snell, who spent part of mid-July in Washington, D.C., working on the buyout, said he believes that not only will a great number of farmers cease growing tobacco, but also that production may shift out of Central Kentucky. “I anticipate around three quarters of the program participants (quota owners plus growers) to exit following a buyout, with production shifting to the lowest-cost regions, which could be outside Central Kentucky in some cases,” Snell said. For the time being, Amburgey will continue to raise his tobacco, although he admits he has shifted more of his focus toward his cattle operation. For many longtime farmers like him, the job goes beyond the checkbook and the wallet and simply exists as a task that must be done right and with the pride that comes with a job well done. “You’d make very little raising tobacco, by the time you take the depreciation of the equipment and all the land and everything,” Amburgey said. “Most of us don’t look at it that way. We try to raise our crop of tobacco as good as we can raise it, as cheap as we can raise it.”
The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners.
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Bob Amburgey’s feet hit the floor at 6 a.m. every day. Most midsummer evenings, he’s home for supper at 7:30 or 8 p.m. It’s a life the 64-year-old Montgomery County tobacco and cattle farmer has led for more than 35 years.
One thing is sure: The largest quota holders would easily become millionaires if the Depression-era system were scrapped. Among those poised to reap benefits are many who have never farmed tobacco and some who live as far away as Hawaii, Iceland and Japan.
In the coming weeks, representatives from both houses will work to draft a compromise buyout that will meet White House approval. In the meantime, the Amburgeys remain hopeful that the final version will not harm small farmers. This is the farthest such an agreement has ever made it in Washington. 
But farmers aren’t holding their breath just yet. The buyout has had a rough ride so far. On July 13, the House rejected a version of the bill it had just approved days before as part of a $140 billion corporate tax bill. The Senate’s controversial version, which was approved July 15, tacks the buyout on as a provision of an appropriations bill that would give the Food and Drug Administration regulatory power over the tobacco and cigarette industry. That’s an unpopular move with industry supporters, though Senator Mitch McConnell, a chief author of the measure, called it a “marriage of convenience.”