Farmers' share of dollar shrinking ?
Minnesota farmers could easily
buy the headline, "Carolina to
bacco growers ride gold-plated tra
ctors. It's easy to believe consid
ering Minnesota ns pay 38 cents in
excise taxes for a pack of ciga
rettes.
But a recent USD\ report shows
tobacco farmers aren't necessarily
getting rich by raising the flue
cured and burley plant.
In fact, since 1980 the farmer
share of each dollar spent m to
bacco products has shrunk from
seven to four cents. That amounts
to lost farm value of $100 million
between 1980 and 1987.
Meanwhile, cigarette prices
have risen like fanned smoke. The
Department of Agriculture says
spending has doubled in the past 10
years while consumption of to
bacco has dropped 10 percent since
1981.
Not many businesses could
match this economic feat of stack
ing greater profits on a base of
dwindling demand; but not many
businesses are like the tobacco in
dustry.
If we dismiss the gold-plated tra
ctor theory, who is profiting from
the $33.5 billion spent on cigarettes
each year? According to the USDA
report, the manufacturer and
wholesale arena has profited by in
stituting big price increases. Hikes
in Federal, state and local taxes
are responsible for the balance of
higher prices.
USDA Economist Verner Grise
writes, "Wholesale prices of filter
tipped cigarettes (excluding excise
taxes) rose about 135 percent from
mid-1960 to mid-1987. Beside cov
ering added manufacturing costs,
large price increases were able to
match and even expand industry
profits in the face of falling sales.
Unlike other consumer products,
a boost in cigarette prices does not
generally hinder sales and often re
sults in more profits.
Spiraling increases between 1960
ana 1987 raised manufacturer
share of the tobacco dollar from 35
to 44 percent, but failed to translate
into a greater share for growers.
As mentioned, farmer dollar share
even shrank by three percent dur
ing this time period.
Other profiteers in cigarette
sales included Federal, state and
local governments. While total
taxes increased 47 percent between
80' and 87', Federl taxes accounted
for 49 percent of the total. Like
wise, 51 percent of the annual $9.7
billion in tax revenue went to state
and local governments.
Even though Federal excise
taxes doubled in 1983, govern
ment's share of the cigarette dollar
dropped from 34 to 29 percent by
1987. Crise writes, "While tax rec
eipts rose during this period, the
marketing bill rose faster, making
taxes a smaller share.
Reduced cigarette production
has meant slower movement of
leaf from Carolina tobacco barns
Increased manufacturer use of for
eign flue-cured and burley tobac
cos has also impacted on American
growers.
In summation, a trend seems to
be settling in for the rest of this
century, according to the USDA re
port. Grise says, "Manufacturers
will face falling domestic volume
and will need to raise prices to
maintain profits. State and local
government tax rates will undoubt
edly continue to rise."
He mentions that farmers will
also see more income from tobacco
sales, but does not predict whether
their share of the tobacco dollar
will rebound. To be on the safe
side, North Carolina tobacco farm
ers might want to hold back on the
purchase of gold-plated farm ma
chinery; at least for a while.
Motley honored
Officials from Martin Commu
nity College in Williamston an
nounced this week that Carl Regi
nald Motley of Hertford was
among the 51 students named to
the institution's academic lists for
winter quarter. Motley, an Air Con
ditioning, Heating and Refrigera
tion student, was among the 25 stu
dents named to the Dean's List
which is reserved for students who
made a 4.00 (All A's) grade-point
average.
Highway workers on the causeway project have drilled huge holes in the old road bed. Steel pilings are
being driven through them to anchor the new road.
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