NC Tobacco Farmers, Already Reeling, Face New Threat From Tariffs

Smoking has been in decline for decades, but tobacco remains a vital crop to much of the Southeast. North Carolina is the nation's largest grower and exporter of tobacco. So when tobacco was included in retaliatory tariffs from China, it hit the state – and its farmers – particularly hard.

On Sue and Brent Leggett's Nash County farm, a series of small barns are arranged neatly like a planned community of tiny houses clad in shiny metal. Inside each one, tobacco is being cured until it's time to be loaded onto a tractor-trailer like this one loaded to the roof for an October delivery.

“This truck is ready to go to market,” Sue Leggett says. “We've got a load of 52 bales of tobacco, ready to be sold.”

In recent years North Carolina tobacco farmers, including the Leggetts, have been growing less of the crop known as “the Golden Leaf.” 

Demand is in decline as smoking wanes worldwide. Major hurricanes have left vast swaths of farmland flooded. A strong dollar has put US growers at a competitive disadvantage against other countries like Zimbabwe and Brazil.

And then the tariffs came, and that has created an unprecedented level of uncertainty for what was once North Carolina's most stable crop. This year the Leggetts planted 25 fewer acres, and Brent Leggett estimates the loss of that crop at $100,000.

“I don't know of a grower in North Carolina who has a plan for next year,” he says. “Survival is the plan right now.”

China Tobacco Incorporated, the Communist country's state-run monopoly, had once bought as much as 80 million pounds of North Carolina tobacco per year. It's been a main ingredient in the premium blends that became popular as China's wealth increased.

The Trump administration announced tariffs on Chinese goods in the spring of 2018. China retaliated with a 25 percent tariff on many US crops, including tobacco. Exports suddenly plummeted. This year, China Tobacco bought virtually no US tobacco. That's an estimated financial blow to North Carolina of a quarter of a billion dollars over the last two years.

Brent Leggett says the effects ripple throughout the community.

“That's money that would have gone into the Sunday offering plate,” he says. “All these churches, local fire departments, community organizations, so many places are being impacted by not having that revenue stream going into their businesses.”

Tobacco is different from most of the other crops hit by the trade war. To mitigate against farmers' losses, the federal government developed the Market Facilitation Program. That's essentially a buyout after the China market eroded for many US agricultural exports. In North Carolina, those payments have covered more than $100 million in losses for crops such as soybeans and cotton.

Because of federal rules set up years ago when anti-smoking efforts hit a fever pitch, tobacco is not among the roughly two dozen crops eligible for the payouts.

Normally, premium tobacco like what the Leggetts grow gets top dollar. Increasingly, though, it's coming to warehouses like this one Kenneth Kelly runs in Wilson, North Carolina. Kelly is the owner of Heritage Ltd. There are more than 800 bales of tobacco in the warehouse, filling a space larger than a football field. Here he describes what makes the best leaf so valuable:

“We have a bale here. It'll weigh in the eight hundred and twenty-five-pound range," he says. "And it's up stalk, which means it came off the top stalk of the tobacco. It's ripe. The color is showing ripeness. It's a deep orange in color. And that's a very desirable bale of tobacco in a normal season.” 

It hasn't been a normal season though. Kelly sells on what's known as the secondary market. It's generally where lesser quality leaf is sold to smaller players in the tobacco business. Now, with supply high and demand low, it's become the last resort for many growers.

“When it flows down to us and when we sell that tobacco, if there's not that much demand, the price drops again. So it's a trickle-down effect for sure, and none of that being positive,” says Kelly. 

As of the summer North Carolina had so much excess tobacco that if the tariff situation resolved immediately there'd still be a year's worth of exports in storage waiting to be sold. And that was before farmers harvested this year's crop.

“The market is very depressed,” says N.C. Agricultural Commissioner Steve Troxler. “So, you know, the question is, 'if I raise it. Is it going to be profitable?' And, you know, if you're not going to turn a profit, then why would you do it?”

Troxler's family has been raising tobacco in the Brown's Summit area since the 1800s.

“We know that farming is a risky business. There's no question," says Troxler. "But I have seen the tears in farmers' eyes and run it down their cheeks that I never thought I would see. Ever.”

Troxler says he doesn't know how the trade war will play out. The Chinese, he notes, are known for playing the long game, which may mean they'll wait for the next election to see who'll they'll negotiate with. By that time, another crop year will have come and gone.

“I've been asked, ‘Did we put all of our eggs in one basket when we courted China Tobacco Inc. and got them into the market over here?' Well, that was the only basket there was when you tried to go worldwide to sell tobacco," says Troxler.

Many in the industry share Troxler's sense of uncertainty. Rob Turner's family has been farming tobacco in Red Oak for more than 100 years. His son, Robert, recently joined the family business. They had contracts to grow for China Tobacco. Now that they've left the market, Turner is not sure they'll ever come back. He says he's not optimistic about his son's prospects of being a tobacco farmer.

“I used to be,” Turner says. “Now it's questionable. Once these tariffs are eliminated or settled, you can talk to me then…I mean, it's hard. It's hard to tell.”

Turner says the two sides in the trade wars are arguing over policies that have nothing to do with agriculture, leaving the farmers paying the price.