Companies & Industries

Tobacco’s quiet revival

Ottawa tried to kill the crop—but it’s back.

Steven Martin/CP

Steven Martin/CP

Giving up smoking is tough, but quitting the tobacco industry may prove even harder. The federal government has waged a very public war against smoking. Billion-dollar lawsuits, in-your-face anti-smoking campaigns and rigid marketing restrictions have reduced the number of smokers to six million. But there remained one glaring incongruity with its policy: allowing farmers to grow tobacco while urging consumers to quit.

In 2008, Ottawa saw its chance to get out of the industry for good. High taxes and increased contraband had already sapped demand for Canadian-grown tobacco. As a result, there were simply too many tobacco farmers with quotas to fill and not enough buyers. Armed with a $1.1-billion settlement from Imperial Tobacco and Rothman’s Benson & Hedges, the feds killed the quota system and announced a $300-million program to transition tobacco farmers into other crops. The catch: anyone who takes the money can’t return to tobacco farming.

Growth in Canada’s tobacco production since the Tobacco Transition Program was launched in 2008

It seemed to work. By some estimates, 90% of the farmers took up the offer. But then something interesting happened. Production in the years since increased 144%, while the number of acres devoted to the crop doubled.

Although Ottawa never explicitly said the Tobacco Transition Program was designed to phase out Canada’s tobacco industry, many took it to be the case. In 2012, the Canadian Taxpayers Federation gave special mention to the program, in part for failing to lower production.

The federation also noted that farmers had figured out a way around the conditions in the transition program. By signing control of his farm to relatives or acquaintances, a farmer could resume growing tobacco. You don’t have to look long to figure out why.

“It’s still the most lucrative cash crop you can grow per acre,” says Dennis Travale, the mayor of Norfolk County, in the heart of the Ontario tobacco belt. Travale knows the industry well. He worked in the tobacco fields at age 11 and still knows which leaves to pick and how to cure them. But the back-breaking work in the tobacco fields, as described in the “Tillsonburg” song by the late, great Stompin’ Tom Connors, is largely gone.

With new high-tech equipment and larger fields, and without the worry of splitting quotas, farmers are now availed of economies of scale. “Instead of having 1,000 families living off a 22-million-pound crop, we have 200 families living off a crop that is 54 million pounds,” says Fred Neukamm, chair of Ontario Flue-Cured Tobacco Growers’ Marketing Board.

This year Neukamm says about 250 farmers will be licensed to grow the crop. It’s a slight increase over 2012, but he doesn’t expect the number to grow much higher. Many of the farmers who took the buyout sold their equipment and kilns to American growers. “Now that it’s rebounded, there is a shortage of the curing infrastructure,” he says. Farmers are reluctant to invest in new equipment without long-term contracts from buyers.

Companies like Grand River Enterprises, a cigarette manufacturer and tobacco processor based in Six Nations, Ont., would like to change that. “China wants everything we can grow,” says company president Steve Williams. Currently, Grand River has a contract to ship about 12 million pounds of tobacco to China, but Williams says customers there could take 20 times that amount.

The Tobacco Transition Program created a more diverse agricultural base in the growing area, says Travale. But he thinks even more would switch back to tobacco if they could.

“Four years ago, you really had to drive around to find a tobacco field,” he says. “Now they are out there, and you don’t have to drive so far to see them.”