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Excerpts from: Tobacco payments cushion losses:
              North Carolina quota holders and growers will get $465 million
              or more this year in federal subsidies and settlement checks
              from cigarette makers.

              By BOB WILLIAMS AND DAVID RAYNOR,  News&Observer [06/25/00]

To read the entire article, click here: newsobserver.com : special report

              An unprecedented flood of money from the federal
              government and cigarette makers is giving a a big boost
              to the incomes of Tar Heel tobacco growers and quota
              owners.

              About $465 million is expected to be paid out this year
              from private and public money, nearly half what the
              state's most profitable crop might bring in a typical
              season. The money isn't tied to crop production
              because it is intended to ease the losses growers and
              quota owners -- those controlling permits to grow and
              sell tobacco -- have had in recent years.

              The government aid represents a sea change in policy
              toward the golden leaf, marking the first time direct
              federal subsidies have been paid to growers and quota
              owners.

              Since the late 1980s, federal law has specifically
              prohibited spending tax dollars on the government
              price-support system for tobacco. But this year,
              tobacco friendly legislators were able to get millions of
              dollars in subsidies for tobacco farmers by promising
              their support of agricultural aid bills coveted by other
              farm state legislators.

             Half of the industry and government payments are earmarked for quota owners,
              the majority of whom don't grow tobacco themselves. Thousands of quota owners
              for North Carolina farms are absentee landlords who live in other states or
              countries.

              But anti-smoking and tax watchdog groups say they are concerned about the
              amount of money flowing to tobacco growers and quota owners.

              "This really borders on criminal activity on the part of the government," said John
              Banzhaf III, who heads a Washington-based anti-smoking organization called
              Action on Smoking or Health. "They are using taxpayer dollars to subsidize the
              production of a crop that kills 400,000 Americans each year."

              Some taxpayer watchdogs agree.

              "That is a ridiculous amount of taxpayer money to be going to subsidize any crop,
              but even more so when you consider it is something as controversial as tobacco,"
              said Don Carrington of the John Locke Foundation, a conservative-leaning think
              tank in Raleigh. "The whole thing is just amazing. The government should not be
              in the tobacco business in any way."

              How the payments work

              Bodenhamer's case illustrates how the payments from the government, and
              cigarette companies, are boosting the income of tobacco growers and quota
              owners this year.

              So far this year, Bodenhamer has collected more than $42,000 in so-called
              Phase Two money. That money was extracted from cigarette companies by
              tobacco-state politicians as part of the national smoking settlement reached in
              late 1998. More than $2 billion in Phase Two money is scheduled to flow to North
              Carolina growers and quota owners over 12 years. The first installment of those
              payments, totaling $135 million, has already gone out. The second installment of
              Phase Two money is scheduled to go out in December.

              In addition to the Phase Two money, Bodenhamer is in line to get nearly $62,000
              in direct crop subsidies from the USDA. The first round of those payments, which
              are expected to total $96 million for tobacco growers and quota owners in North
              Carolina, is being distributed now. A second round of subsidy payments totaling
              about $100 million is expected to go out in October.

              Additional government aid in the works will probably push this year's total aid to
              growers and quota owners higher than $465 million. Farmers whose crops were
              damaged by last year's hurricanes and floods will, in many cases, receive state
              and federal disaster money to ease their losses.

              Congress, meanwhile, is expected to approve $81 million in disaster assistance
              money earmarked to help tobacco grower-owned price support cooperatives.
              Although the language of the legislation allows some of the funds to flow to
              tobacco, cotton and peanut cooperatives, nearly all of the money is expected to
              go to the Flue-Cured Tobacco Stabilization Cooperative in Raleigh.

              The cooperative buys up surplus tobacco that isn't purchased by cigarette
              companies or leaf merchants, paying a minimum price set before the season
              begins by the U.S. Department of Agriculture. The surplus leaf is then processed
              and sold at a later date, presumably when prices will be better. The disposal of
              those surplus stocks would allow North Carolina growers and quota owners to
              produce more tobacco in future seasons, because any unsold leaf must be
              subtracted from the next year's quotas.

              A quota is basically a government license issued to a select group of farms to
              grow a certain amount of tobacco each year. The quotas are tied to anticipated
              demand for tobacco during the coming season as determined by the USDA. The
              system is meant to prop up prices by carefully balancing supply and demand
              each year.

              Keeping farmers afloat

              U.S. Rep. Bob Etheridge, who helped shepherd the tobacco subsidy payment
              legislation through Congress, said the money is crucial to the survival of small
              farmers in North Carolina.

              Etheridge owns a small farm near Lillington and stands to collect more than
              $5,000 in Phase Two and subsidy payments this year.

              Etheridge isn't the only prominent figure getting payments this year. Others
              include:

               Former U.S. Sen. Lauch Faircloth, $33,341.

               N.C. House Minority Leader Leo Daughtry, $26,302.

               Pork magnate Wendell Murphy, $5,180.

              And then there is James S. Rockefeller of Greenwich, Conn., the 96-year-old
              grandson of Standard Oil co-founder William Rockefeller. He stands to get
              payments of nearly $6,000. Rockefeller owns a farm in Cumberland County that
              he says he visits three or four times a year. Employees at the farm grow and sell
              a small allotment of tobacco each year.

              Big checks, little checks

              Those averages are a bit deceptive, however, particularly when it comes to quota
              owners. The bulk of quotas in North Carolina are held by just a few thousand
              owners, many of whom are also growers.

              The numbers are skewed because some quotas have been passed down through
              families so that they are now divided among dozens of heirs. Many are owned by
              people who now live in other states, or may have never set foot in North Carolina.