In July 2004, U.S. Senator for North Carolina Elisabeth Dole delivered a speech at the White House advocating a tobacco buyout in North Carolina. Senator Dole had severe words to describe the situation of tobacco growers. “Every week my office continues to receive numerous calls from tobacco farm families in desperation,” she argued. “There is a deep feeling of helplessness” (2004a). Most tobacco farmers are at retirement age:
Just hanging on a little while longer in hopes of being able to pay off their debts. They have hung on and continued to produce in hopes that things would get better – knowing that if they got out now they would have to sell their farm and liquidate other assets to settle up with their lenders. … And all they can do is get on their knees and pray that those of us who have been given the privilege of serving in Congress will act (Dole, 2004a).
Senator Dole was arguing for a tobacco buyout: an opportunity, as she described it, for the growers to pay off their debts, and for those who want to retire to do so “with dignity.” “If nothing happens this year, these farmers will be forced to give up all that they have.” The situation is critical, she continued:
There will be no holding out for just a while longer. This may sound like rhetoric to some, but it is the precise truth for countless thousands of farm families. I’ve been there to see it and I could not be more dead serious about this. Status quo is simply not an option. … It is either now – or never. These rural families are barely hanging on for their very survival (Dole, 2004a).
In 2004, the situation in North Carolina was no different from what was happening across the United States. In the past decades, the value of all agribusiness-related production and distribution has continued to increase while farm commodity prices fell. Especially in the tobacco industry, so important for the state economy, the situation was critical. Since 1938, the tobacco industry operated within a system of quotas. Elaborated as a result of the financial difficulties that tobacco farmers faced during the Great Depression, quotas were intended to act as a price support mechanism by restricting the amount of tobacco in the market. People in North Carolina and other tobacco growing states invested in tobacco quota: under the quota system, farmers could not sell tobacco unless they owned, leased, or rented quota, which included constraints on the number of pounds of tobacco that a farmer could grow (Penkava, 2004; Rice, 2004). Farmers used to buy quotas to either grow tobacco, lease them or rent them to small farmers. This system was to the great advantage of large farmers, who generally used the money from renting out their quotas to pay property taxes and insurance on their land. At the same time, it assured a minimum price for tobacco and it guaranteed a buyer, thus serving like a “guaranteed minimum wage” for farmers making up a substantial portion of their balance sheets (Halich and Snell, 2007). From 1989 to 1996, tobacco farmers experienced seven years of stable quota payments. In 1997, quota increased 12 percent, leading many farmers to expand their investments; farmers bought barns to cure more tobacco and new equipment to replace the old one (Brown, 2005). In a tobacco industry that was growing globally, borrowing significant amounts of money for these investments was necessary to adapt their farms to the necessities of global competition. But between 1997 and 2004, quota dropped almost 60 percent (Dole, 2004a). The reduction in quota payments came at a time when the international demand for cigarettes and tobacco had declined, while tobacco imports from Brazil and Turkey had increased. Tobacco farmers found themselves with low prices and no market for their crops, while they still had loans to pay back. While their crisis increased in inverse proportion to the plummeting tobacco price, the government was faced with the increasing costs of quota assistance and for seven years it gradually reduced its payments (Steinberg, 1998; Robertson, 2006; Rice 2004). By the time Senator Dole spoke before President Bush in 2004, the situation was bad.