Tobacco growers, once among Ontario's most prosperous farmers, are quitting in droves.

The latest blow came in May when more than 120 tobacco farmers sold their tobacco quota rights to the federal government under the $67-million Tobacco Adjustment Assistance Program. With the provincial government's contribution to the program, farmers received a total one-time payment of $1.72 per pound of production quota.

"It is a slow death for Ontario tobacco growers," says Doug Ramsey, chairman of the department of rural development at Manitoba's Brandon University. Ramsey, who picked tobacco as a student, is the author of several research papers on the Ontario tobacco industry.

Over the past four years, more than 40 per cent of Ontario's tobacco growers have abandoned the crop, says Jason Lietaer, general manager of the Ontario Flue-Cured Tobacco Growers' Marketing Board in Tillsonburg.

Photos courtesy of the Ontario Flue-Cured Tobacco Growers' Marketing Board
A farmer operates his harvester on one of Ontario's dwindling number of tobacco farms, above, while workers grade the product following its delivery to the sorting area.

About 650 Ontario farmers will plant tobacco in 2005, down from the approximately 770 who planted last year. In 1998, there were about 1,100 flue-cured tobacco growers in Ontario, while in the early 1990s there were about 1,650. Ontario had more than 4,500 tobacco farms in the 1960s.

The number of Canadian farmers has been falling for years, partly as smaller farms became part of larger, more efficient farming operations. But, the decline among tobacco farmers is sharper because of anti-smoking campaigns, high taxes and the difficulty they have switching to other crops, Ramsey says.

While farmers often face financial hardships, tobacco farmers also face a campaign against their product. "There isn't an anti-corn lobby," Ramsey notes.

Following the May quota buyout, the tobacco marketing board and the tobacco advisory committee - representing the Canadian cigarette manufacturers, exporters and the federal and provincial governments - agreed to a 2005 tobacco crop of 85.3 million pounds, down three per cent from last year's quota of 87.9 million pounds. The overall target price for 2005 also declined to $2.21 per pound from $2.23 in 2004.



Fred Neukmann, chairman of the marketing board, called the 2005 agreement "a difficult deal for the board to ratify" and "a symbol of the difficult times we are facing.”

The board accepted lower tobacco prices and lower volumes this year because of increased volumes of lower-price imports and higher cigarette taxes.

All tobacco grown in Ontario must be sold through the board's auction exchange. The current farm-gate value of the tobacco crop is about $215 million.

The selloff of 51 million pounds of quota represented about 15 per cent of Ontario's potential production quota of 322 million pounds.

"It's not just older farmers who wanted to retire who sold their quotas," Ramsey says. "It was also young farmers who saw this as probably their last chance to get out and start something else.

"I used to think tobacco would always be grown in Ontario - now I'm not sure. It depends on whether the tobacco manufacturers will pay the growers an economic price for their tobacco," Ramsey says.

The quota reductions will also result in fewer jobs in the tobacco-growing communities where thousands of temporary workers help farm the crop. About 11,000 seasonal employees are hired, according to the tobacco growers' association.

A 2001 KPMG study estimated that as much as $500 million flowed into Ontario's tobacco-growing regions every year. "The crop is 40 per cent less than it was five year ago," Lietaer says, resulting in less revenue for the regions.

Ontario is Canada's major tobacco-growing province, producing about 95 per cent of total annual production. Virtually all of the province's farms are in the counties of Brant, Elgin, Norfork and Oxford, near the northern shores of Lake Erie where the sandy soil is suitable for tobacco.

While once tobacco was grown in five Canadian provinces, Ontario is the only one left, Ramsey says.

"Ontario tobacco farmers just want to leave the industry in a way that doesn't ruin them anymore financially," Lietaer says. "But, tobacco production can't be turned off overnight. It's difficult to switch to another crop."

Tobacco farms are small, generally about 50 acres, while other cash crops such as soybeans and sweet corn need a minimum of 500 to 1,000 acres. The sandy soil required to grow tobacco also limits alternatives and means the once sought-after farms are not as easy to sell as in the past.

"The market for fruits and vegetables is already saturated. There isn't any pent-up demand for more asparagus in Toronto," Lietaer says.

Alternative crops for tobacco fields have been tried for decades with mixed success, Ramsey says.

Since the Ontario Liberal government took office two years ago, it has increased tobacco taxes by more than 12 per cent to reduce the health risks caused by smoking. Provincial taxes and federal excise taxes and duties account for about three-quarters of the $65 cost of a carton of 200 cigarettes.

The latest piece of legislation pushing Ontario's tobacco farmers out of the fields is the Smoke-Free Ontario Act that will ban smoking in all indoor public places and workplaces beginning in June 2006, In 2004, about 20 per cent of Canadians, or just more than five million people over the age of 15, smoked. In 1965, 50 per cent of Canadians older than 15 smoked, according to Statistics Canada's tobacco-use monitoring survey.

The growers' association says the government's health and tobacco control policy work at cross-purposes.

The high tobacco tax drives smokers to cheaper contraband and counterfeit cigarettes, Lietaer says. "People are still smoking. When cigarettes become more expensive, customers look for cheaper alternatives."

Within a 45-minute drive of Ontario's tobacco-growing farms, "you can buy a carton of cigarettes for under $20. The same costs $65 in a convenience store," Lietaer says. "The illegal market is running rampant."

Ontario also is losing tax revenue to the illegal sale of cigarettes, mainly through reserves along the U.S. and Canadian border, he says.

Ontario growers are also under pressure to cut their prices because of increases in the amounts of lower-priced tobacco imported from Asia and Brazil. "Tobacco companies are training people in other parts of the world to grow tobacco," Ramsey says.

The amount of imported tobacco has risen to about 10 million pounds from four million over the past five years, according to the marketing board. "We're being prevented from serving the Canadian market," Lietaer says.

China is the world's largest tobacco grower with 2.2 million tons per year. The United States produces about 500 million pounds of tobacco annually.

"The Chinese are where we were in the 1950s; smoking is a sign of affluence," Ramsey says.

(Charles Wyatt can be reached at wyatt@businessedge.ca)