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Tobacco Policy & Economics

Tobacco Policy & Economics. presented by: Kelly Tiller. KY-TN Dark Tobacco Forum Springfield, TN November 7, 2006. Agricultural Policy Analysis Center - University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996-4519

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Tobacco Policy & Economics

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  1. Tobacco Policy & Economics presented by:Kelly Tiller KY-TN Dark Tobacco ForumSpringfield, TNNovember 7, 2006 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

  2. Contributors • Tobacco Policy • Kelly Tiller (APAC) • Tobacco Economics • Area Farm Management Specialists • Jerri Lynn Sims, Alan Galloway • Clark Garland (Extension) • Vickie Witcher (Research Associate) • Tobacco Production/Market/Industry Information • Kelly Tiller • Vickie Witcher • Extension Specialists • Multi-state collaboration for regional/national policy and economic issues

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

  4. 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. 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. Competitiveness of U.S. tobacco Production economics and efficiencies Market efficiencies and economics World market trends Tobacco production budgets Tobacco Info Online TnFARMS representativetobacco farms Tobacco Economics

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

  10. 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. Among respondents producing tobacco in 2006 … 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%)

  12. Among respondents producing tobacco in 2006 … Investment Priorities • Curing barns • Upgrading equipment or new equipment • Market prep facilities and baling equipment • Acquiring more good land • Field curing structures

  13. Top Sources of Information • County Extension agents • Farm magazines / newspapers • Neighbors / other farmers • Researchers / research publications

  14. http://agpolicy.org/tobacco/

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