DECLINING TOBACCO INDUSTRY WILL CREATE ECONOMIC-ADJUSTMENT PROBLEMS FOR VIRGINIA'S TOBACCO-GROWING REGIONS
CHARLOTTESVILLE, Va., Dec. 13 -- The future of Virginia's most important cash crop, tobacco, looks increasingly difficult, according to a study released today by a University of Virginia economist.
The declining outlook for the state's tobacco industry will likely create economic adjustment problems especially in the southern and western Virginia tobacco-growing regions, which typically have seen slower economic growth than the state as a whole, said John L. Knapp, economic research director of U.Va.'s Weldon Cooper Center for Public Service.
Knapp's study, "Tobacco In Virginia," was financed by a grant from the Robert Wood Johnson Foundation to provide an objective current appraisal of the industry and its outlook for the future in Virginia.
Among Knapp's findings is that a 1990 study commissioned by the industry's Tobacco Institute far over-estimated the number of tobacco-related jobs currently in the state. The institute's number is high because it does not reflect negative developments since 1990 and it includes many jobs with a tenuous connection with tobacco, Knapp said. And even the industry's figures represent only about 4 percent of state total employment and worker-pay, he said.
However, with a 6.3 percent share of U.S. tobacco production, the state ranks as major producer; and tobacco represents some 49 percent of the value of farm products sold in the major tobacco counties, Knapp said. Furthermore, cash receipts understate the importance of tobacco because the net income per dollar of sales is more than double the average return for all types of agriculture.
Crop-diversification for tobacco farmers isn't easy because net returns from other crops are still far below tobacco at current prices and costs of production, Knapp noted. Also, the tobacco counties have few natural advantages for diversification in terms of topography, soil quality, availability of irrigation and proximity to markets.
Among warning signs Knapp cites for the tobacco industry as a whole:
"As Virginia adjusts to a smaller tobacco industry, the key factor will be the alternative uses of land, labor and capital that were used on tobacco production," Knapp said. "In many areas, small farms that are unviable without tobacco would cease production and their land would be absorbed into larger neighborhood farms or converted to other uses," including residential, commercial, industrial of forestry. As the industry declines, workers in tobacco manufacturing, some of the best paid in the industry, will have difficulty finding comparable-paying jobs. The Johnson Foundation grant is part of a broader grant to the U.Va. School of Medicine's Department of Family Medicine as part of a wider projectled by the U.Va. Health Service's Foundation IQ Health.
December 12, 1995 For additional information or interviews John Knapp may be reached at (804) 982-5604 or knapp@virginia.edu. For further information about the U.Va. health projects contact Rebecca H. Reeve at (804) 979-9355 or rhr5c@virginia.edu.