Jump to full article: Associated Press (AP), 2009-04-05
Author: Emery P. Dalesio Associated Press
Intro: But last week, the federal tax on a pack of smokes more than doubled. Pender Sharp says cigarette makers had already cut back orders in anticipation, leaving him to wonder if Sharp Farms and thousands of fellow growers across the South will be forced to hire fewer seasonal workers or lay off full-time employees.
Driven in part by bans on public smoking and the relentless efforts of health advocates, cigarette sales in the U.S. were already expected to drop 4 percent this year. Industry analysts say the decline could be twice that after an increase in the federal excise tax from 39 cents to $1.01 per pack took effect Wednesday.
Growers say some tobacco buyers are cutting back orders by as much as 25 percent and, in some cases, trying to renegotiate existing contracts to buy less than originally agreed. Sharp says Philip Morris USA and Reynolds American cut orders for his crop by 5 percent after the tax increase passed in January.
“It also will be a 5 percent cut to all the vendors that I buy tires, fuel, repairs and equipment from. It has a huge ripple effect in the community,” said Sharp, who raised 1.5 million pounds of tobacco on 500 acres last year. “There’s nothing else we’re doing that comes even close to yielding the profits that tobacco yields.” . . .
It’s a blow felt in the sandy soil fields of eastern North Carolina that are just OK for sweet potatoes, cotton, soybeans, but fantastic for tobacco. Production dropped by 27 percent to roughly 645 million pounds in 2005, the year after the quota system came to an end, but has slowly recovered in the past few years, boosted by exports and new marketing tactics.
Jump to full article » |