The system was junked in 2004 through a $9.6 billion buyout of tobacco growers and farmers who owned quotas, with tobacco companies funding the payments. Thousands of tobacco farmers, many reaching retirement age, collected their checks and stopped growing the crop. Some farmers planted strawberries or tried to raise catfish in their farm ponds.
In 2005, tobacco acreage dropped 27% from the year earlier, to 297,000 acres. With the government no longer supporting prices, those dropped too, to $1.64 per pound, from $1.98, according to the U.S. Agriculture Department. Cigarette makers worried that they wouldn't have enough supply.
But predictions from some quarters that tobacco farming was headed for extinction inthe U.S.. proved incorrect. Today, farmers can grow as much tobaco as they want, wherever they want. Economies of scale have kicked in.
("U.S. Farmers Rediscover the Allure of Tobacco" by Lauren Etter, p. A1)
The acreage under cultivation is rebounding, according to the article, although it is not back to its 2004 levels, and larger farms are now beginning to be seen. In addition, farms are cropping up in states, like Illinois, that had not seen tobacco cultivation in decades. Tobacco requires a different sort of farming than Illinois farmers are used to -- less mechanized, over a longer season, requiring more intense supervision from the farmer -- but the profits per acre far exceed those for traditional Illinois crops like corn and soybeans: $1800 per acre for tobacco versus $250 per corn. It seems to me that everybody is happy: the farmers are taking home more money (including those who were tobacco farmers before 2004 who had to rent their tobacco quotas), the tobacco companies are getting reliable sources of tobacco, and the taxpayers aren't being hit for subsidies. Well, everyone except the anti-smoking zealots.