Tobacco has long been associated with North Carolina agriculture, and plays an important role in the economic activity of the state. We will examine two facets of this role. In the first week, we will consider the decision-making of Randy Smith, a tobacco farmer from Deep Run, NC. In the second week, we will explore the workings of the Flue-Cured Cooperative Stabilization Corporation.

The story of Randy Smith describes the factors affecting the decision to grow tobacco (as opposed to other crops) and highlights the role of government-defined quotas in that decision. We will also find useful the description of tobacco production made available by NC State agricultural extension economists.

The 1998 Tobacco Settlement has greatly changed the way tobacco farmers (and the NC state government) operate.

• In 1998 the attorneys general of the US states signed a Master Settlement Agreement with cigarette manufacturers. The manufacturers agreed to pay the states $246 billion over 25 years to compensate for Medicaid costs due to smoking. In return, the cigarette manufacturers were guaranteed that the states would file no further court suits pursuing these claims; they also gained limited immunity from other possible state-government claims. The Impact Study by the NC Rural Economic Development Center provides a description of the Agreement and its potential impact on North Carolina.

• The state of North Carolina anticipated receiving $4.6 billion of this total over the 25 years. It agreed to divide the funds into three parts. Half was designated for easing the transition of tobacco communities to new products. The Golden LEAF Foundation was established to receive these funds and invest them in appropriate transition activities. One-quarter was designated for improving health care and for tobacco-use prevention. The final quarter was set aside to support the tobacco farmers threatened with shrinking markets for their products. The Tobacco Trust Fund Commission was established to oversee this.

The 2004 US Tobacco Buyout brought an end to the original quota system. The NC State Agricultural Extension economists provide a nice summary of its implications. For a different perspective, listen to the discussion on the State of Things.

The flooding from Hurricane Floyd affected agricultural workers throughout the Eastern counties, and tobacco growers were among those.  For perspective on the disaster and its relief, see

• A Knockout Blow for Farmers

During the quota system, the Flue-Cured Tobacco Cooperative Stabilization Corporation, or "Stabilization" for short, administered the price support program. With the end of this system, the cooperative has re-invented itself as the Flue-Cured Tobacco Cooperative. It is now a processing agency for its members. Check its web site at the link above to view its current activities.

The problem set required for this case study will be due on 19 September at the beginning of class.

  Enjoy!