Bad News for Subsidized Farming

According to a recent Wall Street Journal article, tobacco growers are demonstrating that farmers can survive without government subsidies:

Three years after the federal government stopped subsidizing it, the leafy crop is gaining new popularity among U.S. farmers. Cheaper U.S. tobacco has become competitive as an export, and China, Russia and Mexico, where cigarette sales continue to grow, are eager to buy. Since 2005, U.S. tobacco acreage has risen 20 percent. Fields are now filled with it in places like southern Illinois, which hasn't grown any substantial amounts since the end of World War I.

For decades, Martin Ray Barbre, who farms the lush rolling hills here, was not eligible for federal price supports to grow tobacco under a program dating back to the Depression, making it economically infeasible for him to do so. The same was true for many farmers in 33 other states. Now the tarry plant is the most profitable crop Barbre grows on his 4,200-acre spread.

"If somebody told me seven or eight years ago that I'd be growing tobacco today, I'd say they were crazy," said the gruff 52-year-old farmer, plucking a yellowing leaf from one of his plants and taking a deep smell of the raw, woody aroma.

As laborers from Mexico and Honduras used axes to chop down 6-foot plants and hang them on wooden planks to dry in the sun, Barbre explained the attraction of the crop. Even factoring in higher labor and other costs, he's netting up to $1,800 an acre from his 150 acres of tobacco, compared with $250 an acre from his corn. He credits tobacco with boosting his annual income about 35 percent since he started planting the crop three years ago.

Although corn is flirting with near-record prices at around $4 a bushel, "there's no way corn can get high enough" to compete with tobacco, says Barbre, shaking his head. "There's just too much money in tobacco."

Barbre's profitable tobacco business adds a wrinkle to the debate over the farm bill Congress is preparing to take up. Many farmers say that without the system of subsidies for commodities like corn, cotton and soybeans, they'd be at risk of going under. But critics say the system fosters inefficiency, distorts international trade and supports mainly the wealthiest farmers. Now these critics can point to tobacco as evidence that subsidies are unnecessary.

With tobacco, "we are finding that farming can be done without subsidies," says David Orden, a Virginia Tech professor and agricultural economist at the International Food Policy Research Institute.

Read the rest here.