From Tobacco Info No. 1 - June 2010
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Federal government subsidizes tobacco farming?

$300 million buyout full of loopholes

The federal government offered buyout packages in 2008 to Ontario tobacco producers in order to help farmers exit an industry in decline, without the prospect of losing everything they had. As a matter of fact, many of these farmers have exploited a loophole within the Tobacco Transition Program and have continued farming tobacco.

“The federal Tobacco Transition Program was so riddled with loopholes that you can drive trucks through,” said Neil Collishaw, research director for Physicians for a Smoke-Free Canada (PSC). “By our estimate, at least one in 10 tobacco farmers were able to collect a buyout, but kept on farming, and the amount of tobacco grown in Ontario has not fallen.”

The PSC say they were approached by southwestern Ontario residents who were outraged by the exploitation of the tobacco exit program that they were witnessing. After looking into the issue, the PSC found a number of inconsistencies.

Media outlets, including The National Post and The London Free Press, confirmed the abuse after speaking to several locals. In many cases, the buyout recipients farmed the same land as they had always done after relatives or acquaintances, some with full-time jobs in other places, obtained a licence to grow tobacco.

“We were told that licences have been issued to non-farmers, sometimes living in distant communities, who provide legal cover to tobacco farmers who have been paid to stop growing tobacco,” said Collishaw.

Buyout conditions

On August 1, 2008, federal Agriculture Minister Gerry Ritz announced an exit package of $1.05 per pound of tobacco quota for Ontario’s 1,083 tobacco quota holders. This paved the way for the demise of the supply management of tobacco farming, at a total cost to the government of $286 million.

All but 18 of the province’s tobacco quota holders participated in the Tobacco Transition Program, but there were 118 tobacco growers in Ontario in 2009. This means that 100 tobacco producers found a way to circumvent the program, and the province ended up producing the same size crop in 2009 as it did in 2008.

“By our estimate, this means that $30-60 million of taxpayers’ money went, not to assist tobacco farmers in the transition to other forms of economic activity, but, in fact, to subsidize 100 producers to continue to grow tobacco,” wrote Collishaw in a letter to Minister Ritz in March of 2009. He went on to write that, on top of the loopholes, tobacco farmers were invited in the fall of 2009, after the buyout, to apply for interest-free loans under the federally funded Advance Payments Program.

Transition not viable?

Fred Neukamm, chairperson of the Ontario Flue-Cured Tobacco Grower Marketing Board, said that the buyout wasn’t aimed at eliminating all tobacco production in Canada, and that with major investments in land and specialized equipment, many growers had no viable alternative crop.

“People are stuck with dead and stranded infrastructure, with no viable transitional opportunities, so they are forced to seek alternative forms of employment,” he said.

Health groups argue that this isn’t necessarily the case as farmers in Quebec, who were forced to take the buyout, are producing everything from ginseng, lavender and hemp to asparagus and sweet corn, strawberries and cucumbers.

Minister Ritz, in a letter to The National Post published March 1, 2010, wrote that Agriculture Canada will continue to monitor the situation: “For many producers, tobacco production is the only job they are trained to do and the program does allow them to work for, or rent their land, to a qualified licensee. However, they cannot profit from tobacco sales and any wages or rent they receive must be at fair market value as though they were engaged in any other type of agriculture.”

Ritz also wrote that Agriculture and Agri-Food Canada was scheduled to begin auditing producers in April, to ensure that program requirements are being met, and if the audit process shows any violations, repayment of all the funding will be required, with interest.

– by Joe Strizzi