Tobacco farmers are angry over Ottawa's refusal to help them butt out of the cigarette-making business.

The farmers, whose families have grown the same big-leaf tobacco plant for generations, held several recent protests at select federal MP and provincial politicians' offices in southwestern Ontario, the country's tobacco belt, as part of a push for a $1-billion severance program.

But Prime Minister Stephen Harper's government has not lit up to the idea of incentives to stop growing the product that has been blamed for cancer-related deaths and increased health-care costs.

"We're asking for a package to be provided," says Brian Edwards, president of Tobacco Farmers in Crisis (TFIC). "We've done it in a nice way. We've now escalated to the tractors blocking an individual MP's (and MPP) offices."

Photo courtesy of the Ontario Flue-Cured Tobacco Growers' Marketing Board
A tobacco farmer drives an automatic harvester, which is unique to the tobacco industry.

Farmers sell their crops through the Ontario Flue-Cured Tobacco Growers' Marketing Board.

They are seeking a severance package that would pay $3.30 per pound, based on a total crop of 272 million pounds, and provide $150 million to communities affected by the cessation of tobacco farming.

Edwards says the protests came after two years of failed lobbying for compensation from the federal and provincial governments. He accuses Ottawa of ignoring a World Health Organization treaty that requires governments to compensate farmers who stop growing tobacco.

"Where is the tobacco-specific program in Canada for that to happen?" asks Edwards.

"There is none. We're saying it's time that the federal government lived up to that treaty's obligations. And, we're saying that the exit should happen within the tobacco-generated funds themselves."

Canadian tobacco farmers want the federal government and its provincial counterparts to levy a surcharge on cigarettes to cover the costs of the exit package.

"There's more than $9 billion in (cigarette-related) taxes between the federal and provincial governments," says Edwards.

"There's $1.5 billion in pure company profits. (Cigarette manufacturing) is so profitable that a $1.5-billion illegal economy (created through the sale of smuggled and illegally manufactured smokes) was not being corrected," says Edwards.

"So we're saying: Put a levy on the product. You'll offer an exit to the tobacco producers. Pay for it within tobacco - not the general public. It should never have been in (Federal Agriculture Minister) Chuck Strahl's budget in the first place."

But Strahl isn't prepared to consider a huge buyout, says Conrad Bellehumeur, Strahl's communications director. "What he has asked them to do is come forward with a transition strategy."

"(Tobacco farmers) should look at what the government can do to help them transition to other products or other types of farming."

Fred Neukamm, chairman of the tobacco-marketing board, says the industry is in a logjam.

Neukamm, 42, a third-generation farmer who has infrastructure to grow tobacco on 100 acres of his land in Aylmer, Ont., says farmers no longer have the ability to plan their future.

"Successive governments over the last number of years have declared war on tobacco use," says Neukamm. "As farmers, we are the casualties of that war. We believe that government has a responsibility to help."

He says Ottawa has acknowledged its responsibility by signing the WHO Framework Convention on Tobacco Control. "We have to deal with this problem once and for all," says Neukamm, whose board is part of the Ontario agriculture ministry. "We see our declines as irreversible. We need a way out."

Neukamm adds the situation is different from other agricultural aid programs because farmers are exiting the tobacco industry.

The Ontario government has created a $50-million fund that is designed to help tobacco farmers grow different crops, such as sweet potatoes and beans. But Edwards says the program is massively under-funded.

Researchers are exploring alternative uses for tobacco crops. But Edwards says tobacco can't be used in the production of biofuels, because it does not contain enough biomass or the sugars and other ingredients that are necessary for the fermentation process that creates ethanol.

Strahl told the annual general meeting of the Canadian Federation of Agriculture that the buyout package is not politically sellable. He has urged growers to make another recommendation after Ottawa let pass a farmers' March 1 deadline for an exit plan.

Tobacco farmers were watching the federal budget to see if there was something in it specifically for them.

Ottawa and the provinces have introduced several new anti-smoking laws in recent years that are largely designed to reduce smoking-related health problems - and healthcare expenses.

Still, demand for tobacco remains high and Canada remains among the world's largest producers.

But farmers here face stiff competition from foreign producers who pay lower wages and don't have to meet the same quality-control standards.

Canadian cigarette manufacturers are not legally required to use home-grown tobacco. Ottawa doesn't test imported butts and the quantity of licensed domestic manufacturers has exploded, says Edwards.

"There used to be 10 licences to manufacture cigarettes in Canada," he says. "There are over 75 now. (Ottawa) handed out the licences like water - with no requirements for Canadian content."

The annual tobacco-crop quota negotiated between farmers and cigarette manufacturers was 55 million pounds in 2006 - down from 85 million pounds in 2005.

Tobacco farmers use unique kilns and other specialized equipment not needed in other agricultural sectors and have an average "unserviceable" debt of $400,000 per farm. Growers face foreclosure on their farms and homes because crop quotas are too low, and therefore don't provide enough security for banks, says Edwards.

"We're past crisis," says Edwards. "We're in disaster."

He contends the federal and provincial governments have been waiting for each other to help tobacco farmers. Meanwhile, there have been no negotiations with farmers on a compensation scheme.

"There's been no engagement, either federally or provincially," says Edwards. "We're like a ping-pong ball."

The $1-billion lump-sum exit package would be spread among 1,550 farmers who pooled their quotas together to make individual farms viable.

No national quota has been set for this year, because the tobacco-marketing board won't discuss a new quota until an exit package is in place.

John Williamson, federal director with the Canadian Taxpayers Federation, blames government policy for the farmers' plight. "My argument is that, rather than offering bailouts, the taxes should be cut," says Williamson.

He notes that the former Liberal federal government, under then-prime minister Jean Chretien, lowered cigarette taxes as part of a bid to reduce smuggling, which led to a reduction in the price of legal smokes.

"My sympathy is certainly with the tobacco farmers," says Williamson. "I recognize they are being put out of business because of government policy. I'd prefer to see government policy change."

Ottawa recently helped out some Ontario farmers who are not affiliated with large cigarette manufacturers.

Finance Minister Jim Flaherty introduced legislation that exempts the farmers from a manufacturers' surtax that provides the federal government with $500,000 in revenue.

Williamson says such measures should be extended to all tobacco farmers, not just so-called independents.

Independent farmers now pay the surtax to process, sort and dry-pack their tobacco.

Physicians for a Smoke-Free Canada (PSC) also supports tobacco farmers' request for an exit package.

Neil Collishaw, PSC's research director, says the group agrees with farmers that the exit-package money should come from smokers rather than "ordinary taxpayers" and new taxes, including profit taxes on tobacco manufacturers.

Under the proposals recommended by PSC and TFIC, says Collishaw, the current supply-management system, with growth and sales co-ordinated by the tobacco marketing board, would remain in place as production declined over several years.

Such a system would maintain high prices, which the public health community believes will help reduce smoking.

Today, 18 per cent of Canadian adults smoke, compared to 50 per cent in the mid-1960s. But mortality rates remain high.

Collishaw says one in five deaths per year are smoking-related, while an average of 37,000 people die because of their habit annually.

(Monte Stewart can be reached at monte@businessedge.ca)