Farmers who took buyout still active in tobacco

LONDON, Ont. — Some Ontario tobacco farmers who raked in an estimated $50 million in federal money to stop growing the crop are still actively involved in the business three years later, a health watchdog says.

Announced in 2008, the $286- million Tobacco Transition Program (TTP) came under fire for loopholes some farmers used to stay in the beleaguered industry, even after they collected buyout money.

Now, Ottawa-based Physicians for a Smoke-Free Canada says it’s laid its hands on documents suggesting more than $50 million went to about 200 tobacco producers still involved in the industry.

The organization also says the $286-million transition program had the hidden objective of “improved viability of remaining and future tobacco producers.”

The group’s statements are based on documents obtained under federal access-to-information law by activist Ken Rubin.

“Taxpayers were never clearly informed by the government that over $50 million of their money would end up in 2011 subsidizing about 200 TTP recipients who continue to be involved in tobacco growing,” said Neil Collishaw, the group’s research director.

Collishaw said Agriculture Minister Gerry Ritz and department officials repeatedly said the TTTP program was about winding down the tobacco industry.

“We have allocated some $286 million to start to move them (growers) out of the tobacco industry and transition into other great crops,” Ritz told Parliament in 2009.

One document obtained is a letter Ontario Agriculture Minister Carol Mitchel sent to Ritz in April 2010.

In the letter, Mitchell, the Huron- Bruce MPP, says “our understanding was that the program was intended to help tobacco producers exit the industry … However, there is a perception that the program is not having the intended effect.”

In his reply, Ritz added an additional objective to the program -to “transition the remaining (tobacco) farmers to operating in a market environment.”

Ritz issued a statement about the issue after being contacted by QMI Agency.

“The goal of the program has always been to remove the federal government’s quota system and move to a provincially-licensed industry and we have succeeded,” he said.

Ritz said it’s up to the provincial government to “reduce or eliminate tobacco production” through the new licensing system.

“We initiated, and continue to operate, a comprehensive audit program to ensure the rules are followed,” he said in the statement.

Tobacco was once a huge industry in southwestern Ontario, but nosedived amid the growing health push to stamp out smoking.

The TTP program wound up the 50-year-old tobacco board marketing system and bought out tobacco quota holders with an average payout of $272,000.

Farmers who took the buyout for their quota weren’t allowed to be licensed in the new system, in which tobacco is grown under direct contract with manufacturers.

But allegations quickly emerged the license system had loopholes allowing farmers who took the buyout to strike a deal with a licensee who could be a friend or relative.

An audit of the program completed for the department of agriculture showed 118 tobacco- growing licenses were issued in 2009. The audit also showed 133 people who had received quota buyouts were employed by licence holders and/or rented their land, buildings or equipment to them.

This year, 193 tobacco-growing licences were issued. Based on the 2009 audit, Collishaw said each licensee likely employed or rented land from at least one farmer who took the buyout.

Based on the average payout of $272,000, that would represent a total of about $50 million paid to farmers still involved in the industry.

Tobacco production has rebounded since hitting a low of 10 million kg in 2009.

Growing the crop is more profitable now, since the cost of quota has been eliminated, Collinshaw said.

He noted the $50 million figure is close to the $60-million “top-up premium” once paid annually by tobacco manufacturers for Canadian tobacco used for the domestic market.

The top-up payments were paid on top of the world price and helped subsidize Canadian farmers, he said.

But he said tobacco companies told analysts back in 2004 they wanted to stop paying the top-up and bypass the tobacco marketing board to deal directly with farmers. He said the federal TTP program helped compensate farmers for the loss of the manufacturers’ top-up payments.

“In effect, private subsidies for tobacco growing in Canada have been replaced by public subsidies,” he said.

Collishaw contends Ottawa has played a role in helping tobacco companies reshape the industry to their advantage.

“The quota system would be shut down, just like the tobacco industry wanted, and no more make-up payments would be made, just like the industry wanted.”


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