IDRC.CA > Publications > Books Online > Health > 96 / 36-755-8 >

Topic Explorer |
Books Online Economics Environment/Biodiversity Food & Agriculture General Health 96 / 36-755-8 Information/Communication Natural Resources Science & Technology Social & Political Sciences
Participate
Owner
Bill Carman
ID: 28833 Added: 2003-05-02 8:58 (Ottawa) Modified: 2003-06-23 12:23 (Ottawa) |  |
16. Farmers on Tobacco Road |
Document(s) 24 of 37
######
#### Tobacco farming in Canada Canada’s success in controlling smoking is all the more notable given the large quantity of tobacco leaf grown in Canada. Tobacco is both a significant cash crop and an important agricultural export. Canada is the world’s sixth largest producer of flue-cured tobacco.[553] When all types of tobacco are included, Canada is one of the world’s top 20 producers. About 90% of the tobacco grown in Canada is produced in a highly concentrated area in southwestern Ontario, especially near the towns of Delhi and Tillsonburg close to the north shore of Lake Erie. The remainder is grown near Joliette, Quebec (98 farmers), and there is a smattering in New Brunswick (5 farmers), Nova Scotia (9 farmers), and Prince Edward Island (35 farmers).[89] At one time, most of the tobacco used in Canada was imported from the United States. What was grown in Canada was principally cultivated in Quebec, but some was grown in Essex and Kent counties near Windsor, Ontario. Tobacco growing had been introduced in these counties by United Empire Loyalists, who brought seeds from their tobacco farms in the United States. A number of events stimulated domestic tobacco farming. The American Civil War (1861–65) raised the price of US tobacco, which prompted companies in Canada to look for other sources of supply. In the early 1880s, the federal government’s National Policy stimulated domestic growing by setting taxes on domestic tobacco at lower levels than the tariffs on imported tobacco. Other fiscal changes in 1897 gave further protection to Canadian growers. The amount of tobacco grown increased from 726 000 kg in 1870–71 to 7 938 000 kg in 1910.[289] Part of the growth was attributable to the introduction in 1900 of flue-cured tobacco in the Leamington area of southern Ontario by the Empire Tobacco Co., a forerunner of Imperial. By 1920 the upswing of Canadian-grown tobacco continued, but still two thirds of the tobacco used in Canada was imported. It was in the 1930s that tobacco started to be produced in great quantities in what today is Ontario’s tobacco belt, much of which was once a sandy dustbowl. By the 1950s, 99% of the tobacco in Canadian cigarettes was grown in Canada. Historically, tobacco companies have encouraged and helped farmers to begin growing tobacco. Naturally, a strong domestic supply of tobacco leaf can be nothing but beneficial for the industry because more farmers means a more secure supply and lower prices. More tobacco farmers also means more political clout. Not surprisingly, tobacco farmers have always been strong opponents of tobacco-control measures: measures that reduce tobacco use may have a direct impact on their income. MPs in regions representing tobacco growers have typically taken strong pro-tobacco positions. Today, there is no doubt that tobacco continues to make a huge contribution to the local economies of four Ontario counties: the Regional Municipality of Haldimand – Norfolk in particular and Brant, Elgin, and Oxford counties to a lesser extent. Canadian tobacco farmers are sometimes perceived as innocent victims harmed by decreases in smoking. However, the majority of tobacco farmers probably began farming after the government started efforts to reduce smoking, so presumably they knew of the financial risks. In fact, tobacco farmers do very well financially. In 1990, according to Statistics Canada, tobacco farmers earned an average income of $79 062, more than any other type of farmers. The average among farmers in general was far lower, at $47 426.[81] In 1990, the income of the average tobacco farm exceeded the income of about two thirds of Ontario families.[561] Although the amount of tobacco grown has declined since the early 1980s, farmers have done remarkably well maintaining production in the face of the “health scare.” Total 1993 Ontario flue-cured crop sales of 70 761 600 kg is barely below the annual average of 76 204 800 kg for the years 1961–65.[456] The total number of cigarettes sold in Canada in 1994 was still higher than in the early 1960s or any time before that. During the 1960s and 1970s, Canada’s growing population more than offset the modest decreases in per capita tobacco consumption. Total cigarette sales increased, resulting in more demand for tobacco leaf. In the late 1960s and much of the 1970s, average raw leaf production exceeded 90 000 000 kg a year. This growth prompted more farmers to grow tobacco, farmers who would soon have to get out when the massive decline in smoking began in the 1980s. Tobacco farmers have also been affected by two other situations. First, manufacturers have been paying farmers less for their crop. In 1981, the average price per pound was $1.52. In 9 of the 12 subsequent years, farmers received a lower price. In 1993, the average price was $1.44.[456] This, combined with increased costs due to inflation, has caused the net income per pound to fall. Second, manufacturers are using less tobacco per cigarette, partly to save money and partly to lower the tar and nicotine yields. New manufacturing processes “puff up” tobacco so that less is needed to fill each cigarette. Health Canada researchers reported that the average amount of tobacco in a 1991 cigarette was 0.77 grams, less than half of the amount in a 1952 cigarette (1.67 grams). With lower tobacco prices and less tobacco per cigarette, the cost of tobacco per cigarette fell from two thirds of a cent in 1950 to just over a quarter of a cent in 1990. As a result, the researchers concluded, the tobacco industry saved as much as $229 million between 1982 and 1990, mostly at the expense of farmers.[324] The number of flue-cured tobacco farmers in Canada decreased from 2 916 in 1981 to 1 326 in 1992.[85,89] The major reason for the decrease was that declining sales and prices had made tobacco farming financially unattractive to many. The decrease is also partly explained by better technology, bigger farms, and improved efficiency and economies of scale. These trends have been found in many agricultural sectors. An additional consideration is that some of the farmers who left in the early 1980s retired. Canadian tobacco farmers are known as producers of high-quality leaf; at the same time, they are high-cost producers because of the cold climate and the high cost of labour. To address the inherent inefficiencies of growing tobacco in Canada, a supply-management system was established. The Ontario Flue-Cured Tobacco Growers’ Marketing Board, created by law, pushes up prices by restricting how much tobacco can be grown. Manufacturers, for their part, help tobacco farmers stay in business by paying them far more than the world prices for tobacco used in Canadian cigarettes. This higher price is passed on to consumers; in effect, Canadian smokers subsidize tobacco farmers. As is the case in some other farming sectors, the government helps farmers by allowing them to import seasonal workers from Jamaica and Latin America to work for minimum wage. About 40% of the tobacco grown in Canada is exported. Thus, even when Canadian tobacco-consumption decreases, a large portion of farmer sales remains unaffected; as well, more tobacco becomes available for export, albeit at lower prices. Canadian exports have mostly gone to the United Kingdom, the United States, and recently Hong Kong (often on their way to China), but some tobacco has also been exported to Egypt, Ghana, Cameroon, Bangladesh, Trinidad and Tobago, and Indonesia. Spokespeople for tobacco farmers sometimes assert that fewer pesticides are used in the growing process in Canada because of the colder weather, so Canadian leaf tobacco is “cleaner” and thus safer for health. This very unusual concern for the health of Canadians is commendable, but the representatives offer no studies to support their assertion. #### Early manufacturer exploitation of farmers In his 1968 book Tobacco in Canada, tobacco grower Lyal Tait described in detail how leaf buyers, including manufacturers, resisted farmers’ efforts to organize and to get higher prices for tobacco crops. During the 1930s, and even earlier, representatives of leaf buyers went to individual farms to negotiate prices. This “barn buying” system was comparable to a “divide and conquer” strategy. Buyers were in a powerful bargaining position; farmers were not. Often there was little competition among buyers; farmers might receive only one offer, or maybe none.[577] Farmers had almost no room to negotiate. Low prices at the beginning of the buying season in 1932 prompted the Tillsonburg News to write in an editorial that “the tactic as reported employed by some of the buyers during the past few days in intimidating the growers, is so degrading and dastardly that one might think we were back in slavery days.” [577, p. 127] The situation prompted some dissident growers to organize a selling cooperative. The dissidents sent a petition to the federal government expressing the opinion “that the Imperial Tobacco Co., Canadian Leaf Tobacco Co., Macdonald Tobacco Co., and other manufacturer dealers are combining for the purpose of regulating, controlling the purchase, and fixing the price of tobacco.” An investigation was started, but “no combine among buyers to affect prices or limit competition was discovered.”[577, p. 128] In 1936, because of farmer dissatisfaction, the Flue-Cured Tobacco Marketing Association of Ontario was established in Simcoe. Seven of the 23 Board members represented buyers, a clear sign that the organization’s role was not to act just in the best interest of farmers. According to Tait, the Association made progress, but there were still “gross inequalities, patronage, graft (and above all, fear) in the marketing of the leaf and in the allotment of basic acreage.”[577, p. 146] (Basic acreage referred to how much a farmer could grow.) In 1951, the Ontario Minister of Agriculture authorized a vote for an all-grower marketing board under the provincial Farm Products Marketing Act. This would have benefited the farmers, but the idea was vigorously opposed by the Association. Tobacco companies hired PR experts to help in the No campaign, and the Association paid the bills. Thus, farmer money was being used against farmer interests. After a virulent campaign, the proposal was defeated by a vote of 1 752 to 369. In 1954, buyer influence increased when the Association bylaws were amended to provide equal representation for farmers and buyers. The Association controlled membership and often prevented new growers from joining. In 1954, there were 304 such excluded independent farmers. Being excluded from the Association meant the independents had no basic acreage rights. They had to wait until Association members’ crops were sold before they could sell their own, usually at a much lower price. Thus, buyers had a clear financial incentive for keeping new growers out of the Association — the greater the number of independents, the greater the opportunity for the tobacco companies to pay low prices at the end of the season. In 1956, the federal Restrictive Trade Practices Commission investigated and strongly criticized this closed arrangement. In 1957, the Ontario government authorized another vote to create an all-grower board. Once again, the Association aggressively opposed the proposal, and once again it hired PR experts to help in the No campaign. The campaign played on farmers’ fears about keeping acreage rights and losing bank credit. For example, the special committee campaigning for the Association sent local bankers and lawyers letters suggesting that banks had the right to foreclose on anyone voting in support of the proposal. But in the end, the Yes side won 64% of the votes; 92% of the eligible voters voted.[577] This led to the creation of the Ontario Flue-Cured Tobacco Growers’ Marketing Board, a body made up exclusively of tobacco farmers. The Board is still functioning today. Under the marketing-board system, it is illegal for individuals to grow flue-cured tobacco unless they have a quota to do so. All tobacco has to be sold through a Board-organized auction. After the Board was created, the farmers and the buyers continued to have disputes, but at least the farmers were organized and better able to take a position. Ten years after the Board was established, said Tait, there remained “little trust or cooperation on either side.”[577, p. 484] Today, the relationship is better. The Board and the buyers get together to negotiate crop size before the farmers do any planting, thus reducing uncertainty for farmers. There are still disagreements over prices, but according to Board Chairman George Gilvesy, “both sides recognize that each other is one of the few friends they have left.” #### Attempt to create a national tobacco marketing agency In January 1985, federal Agriculture Minister John Wise announced plans to create a Canadian Flue-Cured Tobacco Marketing Agency. The national agency had been proposed by Ontario tobacco farmers, and Wise, whose Elgin riding was in the tobacco belt, was supportive. Farmers strongly supported the proposed agency because it would strengthen their hand in negotiations with buyers. The agency would control supply, establish a pricing formula, and limit imports. Tobacco farmers would be subsidized through higher prices charged to manufacturers. Tobacco exports would be subsidized through a levy on manufacturers. Not surprisingly, tobacco manufacturers strongly opposed the proposed agency. Rothmans, for example, threatened to suspend purchases of Canadian tobacco for 1 year if the agency was created.[552] To health groups, it made no sense that one hand of government would promote tobacco while the other was discouraging it. One of the agency’s functions would be to “undertake and assist in the promotion of the consumption and use of unmanufactured flue-cured tobacco.”[455, p. 36] As well, the agency was to look for new markets inside Canada and elsewhere. To the health groups, this seemed intolerable. When the National Farm Products Marketing Council held public hearings on the proposal, the health groups got together and campaigned against the proposal. NSRA took out a two-page ad in Maclean’s magazine. After the hearings, the Council submitted recommendations (which were never made public) to the Minister of Agriculture, but tobacco manufacturers went to Federal Court, arguing that the hearings had been improperly conducted. The Court agreed and ordered that hearings be reopened. However, hearings never really resumed because the health lobby had succeeded in making a national marketing agency politically undesirable. The idea of a national agency eventually died away altogether, prompting the national health lobby to claim victory, albeit this time with substantial help from the tobacco companies. #### Government support for tobacco farmers The federal government has a long history of supporting tobacco farming. Around the turn of the century, when most tobacco leaf was imported, the Department of Agriculture worked hard to encourage a domestic growing sector. Officials saw tobacco as bringing tremendous economic benefits and wanted Canada to have a piece of the action. The Department conducted research and experiments on growing tobacco and sought help from knowledgeable US sources. The Department even made arrangements to exhibit Canadian leaf tobacco at the 1900 Paris Exposition. In 1906, the Department created the Tobacco Branch. Three years later, a tobacco station was established in Harrow, Ontario, to conduct research. This later became the Dominion Experimental Station for all of Southwestern Ontario. In 1933, the Department of Agriculture established the Delhi Research Station. (The station is still functioning, although its mandate is no longer just tobacco research.) It is through research that government has provided an indirect subsidy worth millions and millions of dollars to farmers. Research has resulted in more pest-resistant, better growing, higher quality strains of tobacco with altered tar and nicotine ratios. Research also led to the development of a Canadian tobacco seed industry, and farmers no longer had to import seeds from the United States. To publicize research developments, the Department of Agriculture put out its own publication, The Lighter (1931–90). A 1964 inquiry into the tobacco-growing industry found that “tobacco research in Ontario has been marked with close and harmonious relations among government departments, firms, and organizations remotely as well as closely connected with the industry.”[577, p. 490] Some research projects have been jointly funded by Agriculture Canada, CTMC, and the Ontario Flue-Cured Tobacco Growers’ Marketing Board.[289, p. 24] Provincial governments, especially the Ontario government, have also supported tobacco farmers. The Ontario Ministry of Agriculture and Food sponsors an Extension Service that provides farmers with advice on growing their crops. The Transition Crop Team has helped farmers establish new or alternative crops. Federal and Ontario government representatives sit on the Ontario-based Tobacco Advisory Committee along with members representing the farmers, manufacturers, and other leaf buyers. The Committee is designed to promote cooperation between the various parties. Today, neither the federal government nor the provincial governments provide direct financial subsidies to tobacco farmers the way governments in the United States and the European Union do. However, tobacco farmers have been able to take advantage of other programs designed to benefit all farmers. These programs have included farmer loans, debt relief, advance payments for crops, and a $500 000 capital-gains tax exemption. The Canadian Rural Transition Program helps farmers move into nonfarming employment. On the export side, farmers, through their marketing board, have been able to benefit from government-sponsored trade missions, the services of Canadian Embassies and High Commissions, and the Program for Export Market Development of the Department of Foreign Affairs and International Trade. In the last case, the use of the program has been small, with no net cost to the government. The Export Development Corporation has supported leaf tobacco sales in nontraditional markets and has provided financial guarantees in established markets. Federal and Ontario government officials have traveled abroad to help promote Canadian tobacco leaf. In 1988, for example, Agriculture Canada sponsored technical seminars in China to help Ontario tobacco growers sell surplus tobacco.[211] This initiative was successful and led to new sales. Also in 1988, three agronomists from China spent 3 months at the Delhi Research Station to receive training in tobacco research and production technology. A departmental document stated that “these trainees expressed their sincere gratitude prior to their departure from Canada and assured us that they would make suggestions and proposals to increase the imports of Canadian tobaccos into China.”[7, p. 2] A 1989 Agriculture Canada document discussing tobacco exports to China stated that “it is important that all possible efforts be made to expand this market in support of our tobacco industry.”[163, p. 1] The document discussed a forthcoming visit of a Chinese delegation to Canada. From the Department’s perspective, the objective was “to ensure that the Chinese are aware of the on-going efforts to improve the already high quality of Canadian tobacco through research and biotechnology and to reinforce their confidence in the Canadian capacity to supply tobacco in order to facilitate sales to China.”[163, p. 1] In 1994, representatives of the Ontario Flue-Cured Tobacco Growers’ Marketing Board accompanied federal Agriculture Minister Ralph Goodale on a trade mission to China and other Asian countries. Goodale defended the trip: “They (tobacco growers) are a part of agricultural production in the country . . . so it’s a matter of us discharging our normal commercial responsibilities.”[454] Specific programs to help tobacco farmers exit from tobacco farming have been part of Canada’s overall strategy to reduce tobacco, although sometimes these programs have been underrecognized. Few countries have implemented initiatives comparable to Canada’s. Between 1987 and 1993, more than $50 million was paid by federal and provincial governments to farmers who stopped growing tobacco. A further $13 million was spent on projects helping to find alternative crops.[627] These initiatives have had three obvious practical and political benefits: They assisted affected farmers; They reduced the number of people with a vested economic interest in opposing tobacco-control measures; and They gave governments a handy response when faced with farmer complaints about efforts to reduce smoking. Federal aid to help farmers exit from tobacco farming was critical in assisting passage of the TPCA. Easily the most expensive part of the government’s comprehensive tobacco-control policy announced in 1987, the aid allowed the Agriculture Minister to remain substantially silent as the Health Minister championed the ban on tobacco advertising and other health measures. The Tobacco Diversification Plan, announced in 1987, was funded by the federal and provincial governments. The plan had two components: the Tobacco Transition Adjustment Initiative (commonly known as Redux) and the Alternative Enterprise Initiative. Redux provided compensation to farmers who had left tobacco and financial incentives for other farmers to cease tobacco production. Farmers who retired 50% of their quota and sold the remaining 50% on the open market could get up to $65 000 compensation. By all accounts, the program helped with an orderly downsizing of tobacco farming. Remaining farmers were also in a better position because they were able to grow a higher percentage of their quota. By 1990, Redux had helped about one third of tobacco growers across Canada exit from tobacco production. Of the Ontario farmers who exited, half said they would have exited had there been no program, and a third said the program prompted them to discontinue farming. Many farmers eligible for Redux did not take advantage of the program because they were better off continuing to grow tobacco. Of the Ontario and Quebec farmers who did leave, about 40% were still involved afterward in tobacco growing, typically as employees of other farmers. The Alternative Enterprise Initiative provided financial support for the development of new crops, or the marketing and processing of existing nontobacco crops unless this disrupted crop production by other farmers. However, the program was not very successful. Some of the funds were not used because farmers were reluctant to leave a high-income crop (tobacco) for a riskier low-income activity. Large amounts of money were given to various ventures that often failed. A peanut cooperative, for example, went bankrupt. The Southern Ontario Tomato Cooperative was given money to run a tomato-processing facility, but this was “a very controversial, problem-ridden project,” according to a government evaluation.[8, p. 13] The tomato venture failed. The problem was that farmers did not have the necessary knowledge base or marketing skills to suddenly jump into new big projects. It is often said that the land on which tobacco is grown cannot support crops other than tobacco. This is wrong. In almost every case, tobacco is grown in rotation with other crops: for example, tobacco and rye are grown in alternate years on the same plot. This is proof that the land can support a different crop. It would be fair to say, however, that no other crops can replace the income that tobacco brings. Since the early 1980s, many farmers who once grew tobacco have used their land to produce alternative crops, including ginseng, baby carrots, rhubarb, spanish onions, zucchini, coriander, garlic, melons, early and sweet potatoes, buckwheat, and hay.[267] Government programs have contributed to this diversification, but the biggest factor has been the free market. As the demand for tobacco fell in the 1980s, farmers realized they could make more money by growing something else. According to an Agriculture Canada report, university and government researchers feel that the current tobacco belt will be the horticultural centre of Ontario by the year 2020. The report states that the tobacco region is widely regarded as holding the most potential in the province for horticulture, because of its favourable climate and abundance of water, proximity to large markets, and sandy soil that permits early and late field work.[8, p. 15] Already, urban encroachment is prompting growers from the nearby Niagara Peninsula to move into the tobacco region. These growers bring with them expertise in growing nontobacco crops. By the late 1980s, tobacco farming had stabilized, and the number of farmers exiting from tobacco production slowed to a trickle. As a result, the amount of money needed for diversification initiatives also decreased. The Ontario Tobacco Diversification Program, funded by the federal and Ontario governments, had $6 million available for 1994–96. The program subsidizes projects to help the local economy shift away from its dependence on tobacco. In the short term, tobacco farmers will probably be secure and continue to make good money. The current farmers are getting older, with many approaching retirement. Farmers’ children are much less interested in taking over the family farm than would have been the case two decades ago. The “abuse” directed toward tobacco farmers and the uncertain future of tobacco have prompted the pursuit of other careers. It is expected that retiring tobacco farmers will sell their farms to neighbours. Those remaining will be fewer and wealthier, with more acreage under their direction. The long-term future of tobacco farming may be shaky because of the inefficiency of growing tobacco in Canada compared with other countries, especially low-cost developing countries. If Canadian manufacturers ever change their minds about the current practice of paying farmers prices above world levels and if manufacturers find a suitable raw-leaf substitute for the somewhat unique taste of Canadian tobacco, many Canadian farmers could be in big trouble. Meanwhile, the marketing boards keep the prices of domestic leaf tobacco high. It is ironic that farmers vigorously protest regulation by government, when it is regulation that helps them stay in business and provides them with millions of dollars of extra revenue each year.

guest (Read)(Ottawa) Login Important Notices | Copyright 1995 - 2003 © International Development Research Centre |