Back to February 2006 home page

2006 Industry Report: Agriculture

Salad days dawn in tobacco's twilight

Crop report

TREND: Tobacco acreage fell in 2003 and 2004, and final numbers should show it shrank more in 2005.

OUTLOOK: More farmers are likely to quit growing tobacco in the short run, but expansion by successful growers with tobacco-company contracts may boost acreage during the next few years.

North Carolina’s hottest agricultural fad is spreading from one end of the state to the other, and a $54 million Dole Food processing plant to open in 2007 in Gaston County will accelerate its movement. It’s crop diversity. And as tobacco fades from the spotlight, the state’s terrain and soil make it ideal for a variety of other products.

North Carolina already is one of the nation’s most agriculturally diverse states, and millions of dollars became available last year for even more experimentation. In 2005, Tar Heel tobacco farmers and quota holders received more than $160 million from the state’s share of a $246 billion settlement against tobacco companies eight years ago. They also received $384 million in payouts from the federal buyout of their tobacco acreage allotments, to be followed by $3.4 billion more during the remaining nine years of the program.

The Dole plant should encourage diversity by expanding the local market for fresh lettuce and other produce. California-based Ventria Bioscience further diversified the state’s crop mix in 2005 by planting 70 acres in the Northeast with genetically modified rice, engineered to produce artificial human milk and saliva proteins that could be used in drugs or food for infants in developing countries.

“There are hundreds and hundreds of farmers trying new things,” says Jim Cummings, environmental-programs manager for the N.C. Department of Agriculture. “I get three to four calls a week from people saying, ‘What do I do with my farm now that there’s not going to be tobacco?’”

Rest assured that farmers are still growing tobacco in North Carolina, but the crop dropped from 168,300 acres in 2002 to 156,100 acres in 2004, the year the nation’s tobacco-subsidy program ended, and another decease was expected in 2005. The program paid quota holders a guaranteed price that made even small tobacco acreages profitable. But it also made U.S.-grown leaf too pricey for tobacco companies.

More Tar Heel farmers will quit growing tobacco this year, says N.C. State University tobacco economist Blake Brown. As expected, prices dropped after the subsidies ended, and an increase in fuel costs has pinched margins, especially those of farmers without tobacco-company contracts. Acreage could increase during the next few years, as successful contract farmers raise the size of the average Tar Heel tobacco farm from about 50 acres to 150 acres or more, Brown says.

This year, fuel costs will be one of the top concerns for all North Carolina farmers. Among other things, higher fuel prices will affect the prices of fertilizers, tires on farm equipment, freight, distribution, planting and harvesting, says Larry Wooten, president of the North Carolina Farm Bureau. Yet there may be some benefit. High gasoline prices mean more opportunities for biofuel initiatives — most of which use corn — and for farmers experimenting with bioenergy crops such as switchgrass and reedlike donax.

Increased fuel costs also make North Carolina produce more competitive with California fruits and vegetables in East Coast markets. Proximity to those markets will save Dole not only distribution costs but four to five days of shelf life, says Nick Augostini, marketing specialist with the N.C. Department of Agriculture. The state is working with farmers who could grow both spring and fall lettuce crops, with melons between.

Meanwhile, North Carolina continued to lose farmland to urban sprawl at a higher rate than the national average in 2005. About 100,000 acres of farms and forests are developed in North Carolina each year. But for the first time since 2002, the legislature allocated money to study and plan farmland preservation.

Back to Industry Report Index >>