Southern Ag Today

Author: Will Snell

  • Tobacco Master Settlement Agreement Investment in Diversification of Southern Agriculture

    Tobacco Master Settlement Agreement Investment in Diversification of Southern Agriculture

    Historically, tobacco has been an important crop in several U.S. southern states. However, due to a variety of factors, including health issues surrounding the crop, international competition, and policy/regulatory changes, the U.S. tobacco industry has declined by nearly 70% over the past 25 years.  

    A previous article in Southern Ag Today, highlighted some of the major structural changes following the elimination of the federal tobacco program (better known as the tobacco buyout) in 2004. Another important part of the modern day tobacco story that has not received much attention has been the significant “investment” dollars made available for tobacco farmers and rural communities evolving from tobacco’s  Master Settlement Agreement (MSA). 

    In 1998, 46 state attorney generals signed the MSA with the major U.S. tobacco companies to settle state lawsuits to recover health care costs associated with treating smoking-related illnesses. [1] To date, the MSA represents the largest civil lawsuit settlement in U.S. history.

    Under the MSA, tobacco manufacturers agreed to make annual payments to the settling states into perpetuity, as long as cigarettes are sold in the United States. While encouraged to use these funds for tobacco cessation, tobacco control, and other health-related issues, participating states were given complete control over how to use these settlement funds. Most state governments have used these funds over the past 25 years for at least a portion of public health care expenses, but many states have opted to distribute these funds for other state priorities including funding for education, childhood development, infrastructure investment, and balancing state budgets. Given the significant impact of the MSA on tobacco economies and rural communities, three traditional tobacco-producing states, Kentucky, North Carolina, and Tennessee have elected over the years to use a significant share of their MSA dollars to fund ag diversification in their state’s farm economy.

    During the 1990s, tobacco accounted for 24% of Kentucky ag cash receipts, 16% in North Carolina, and 11% in Tennessee – representing the number one cash crop in each state (Figure 1). Since the 1990s, tobacco cash receipts in Kentucky have declined by 72%, compared to a 66% loss in Tennessee and a 47% loss in North Carolina.  However, ag cash receipts have more than doubled in all three states on a nominal basis since 2000 (Figure 2) and are up around 30% when adjusted for inflation. Tobacco now accounts for only around 3% of ag cash receipts in Kentucky and North Carolina and less than 2% in Tennessee.

    Given the magnitude of the tobacco losses, the growth in ag cash receipts in these historically tobacco-dependent states has been very impressive. Imagine the outcome of any state’s ag economy losing over half of its top ag enterprise such as a mid-western state experiencing a greater than 50% reduction in their grain sales or a Wisconsin losing over half of its dairy receipts. Not only have ag cash receipts increased substantially in North Carolina, Kentucky, and Tennessee over the past 25 years, but ag sales in these three tobacco states have actually increased on a percentage basis more than the aggregate receipts in the remaining eleven states in the Southern region since 2000. Arguably, access to these diversification funds evolving from the MSA (along with tobacco buyout dollars) have contributed greatly to this growth in the ag economies in these major U.S. tobacco states.

    North Carolina has had two entities that have accessed MSA funds over the past 25 years to support agriculture and its tobacco-dependent rural communities —  the North Carolina Tobacco Trust Fund and the Golden LEAF Foundation. The Kentucky Agricultural Development Fund (KADF) also recently celebrated 25 years of existence of providing 50% of their MSA dollars to agriculture, while the Tennessee Agriculture Enhancement Program )TAEP) have utilized a portion of these MSA funds to support ag diversification since 2005. In aggregate, these entities have invested more than one billion dollars of MSA dollars among tobacco producers and their rural communities over the past 25 years, covering more than 100,000 projects. These projects are all over the board, including  funding alternative ag enterprises, farm and rural community infrastructure, programs supporting beginning farmers, improving crop and livestock marketing/management, investing in regional and local food markets, agritourism, food processing,  ag education, workforce development, leadership and ag promotion programs along with a host of other initiatives to help offset  tobacco incomes in tobacco-dependent regions in the South. 

    [1] Florida, Minnesota, Mississippi, and Texas were not signatories to the MSA as they had their own individual settlements with U, S. tobacco companies.  

    Snell, Will. “Tobacco Master Settlement Agreement Investment in Diversification of Southern Agriculture.” Southern Ag Today 5(33.4). August 14, 2025. Permalink

  • Trade’s Importance to Southern Agriculture

    Trade’s Importance to Southern Agriculture

    Agricultural trade has certainly been a major topic among farmers and farm organizations recently amidst declining U.S. ag exports, a new era of ag trade deficits, and disappointment over trade policy. Dating back to colonial days, trade has been a major part of the Southern agricultural economy. Historically, the Southern region has produced, marketed, and shipped various unique southern commodities such as tobacco, rice, cotton and sugar, along with grains, livestock products, fruits, and vegetables to markets around the globe.  

    How important is agricultural trade to various southern states today?  In reality, individual state or regional trade data are difficult to measure since agricultural production, processing, and trade can occur in multiple states and/or regions. For example, a calf born and backgrounded in a southern state, might be finished at a feed lot in the midwest, and proccessed/packaged for export in another state or region.  Which state/region gets credit for this export?

    USDA’s Foreign Agricultural Service (FAS) relies on data from Census where U.S. ag exports by state or region are based on the final origin of movement of the product to the export market. Given a large volume of U.S. grain shipped out of New Orleans, the FAS methodology results in Louisana being the nation’s largest ag exporting state, despite the vast majority of these grains being produced in other states. Thus, FAS export data will generally understate the relative importance of international markets for inland states. Over the past five years (2019-2023), the FAS database ranks the Southern region as the leading ag exporting region with 38% of the value of U.S. agricultural exports, followed by the Western region (31%), Midwestern region (25%) and the Northeastern region (5%).  According to the FAS database, five of the eight largest U.S. agricultual ports by volume are located in the Southern region which accounted for 60% of U.S. ag export volume over the past five years, with New Orleans being the largest ag port accounting for 36% of U.S. ag export volume and 18% of U.S. ag export value.

    Alternatively, USDA’s Economic Research Service (ERS) measures trade data by state based on the state’s share of production value (cash receipts). Using the ERS methodology, within the southern region Texas recorded the largest value of agricultural exports over the past five years, averaging $6.9 billion of ag exports annually (ranks 6th nationally), followed by North Carolina ($3.9 billion), Arkansas (3.5 billion), Florida ($3.4 billion), Georgia ($3.1 billion) and Kentucky ($2.7 billion). Regionally, the ERS database ranks the Midwestern region as the largest exporting region with 48.1% of U.S. ag exports over the past five years, compared to only 23.2% for the Southern region, reflecting a large percentage of the U.S. agriculture initially produced in the Midwest, but exported out of other regions. 

    What about the relative importance of agricultural trade? Adopting the ERS methodolgy, ag exports represents about 1/3 of ag cash receipts in the Southern region. Using this metric, Table 1 illustrates that over the past five years of ERS export data,, Louisiana is the most ag trade-dependent Southern U.S. state with ag exports accounting for nearly one half of the state’s ag cash receipts, followed by Tennessee, Florida, Kentucky, and Mississippi rounding out the top five.

    Table 1: Ag Export Trade Dependency


    Southern U.S. State    		Ag Exports as a Percent of
    Ag Cash Receipts 
    (2018-2022)*
    U.S. Rank
       
    1.   Louisiana49.0%5
    2.  Tennessee44.6%11
    3.   Florida42.8%14
    4 .  Kentucky42.2%16
    5.   Mississippi38.2%22
    6.   Arkansas35.5%25
    7.   South Carolina35.4%26
    8.   Virginia32.6%30
    9.   Georgia32.6%31
    10. Maryland32.4%32
    11. North Carolina31.7%34
    12. Texas29.6%37
    13. Oklahoma27.3%41
    14. Alabama24.5%46
    *Source:  Calculations based on ERS/USDA data

    Snell, Will. “Trade’s Importance to Southern Agriculture.” Southern Ag Today 4(18.4). May 2, 2024. Permalink

  • Census Reveals Tobacco Farms Disappearing from Southern Agriculture

    Census Reveals Tobacco Farms Disappearing from Southern Agriculture

    The southern region in the United States has been well known for several unique crops, including cotton, rice, peanuts, and tobacco.  However, the latest Census data reveal that farms growing tobacco are disappearing from the landscape of southern agriculture. 

    Tobacco has had a storied history in the formation of this nation as it quickly became the most important cash crop in Colonial America, serving as the leading export commodity and a form of currency for the emerging nation.  Over the years, tobacco remained a valuable crop for several Southern states, which enabled many small family farms to survive. 

    A federal tobacco program emerged as part of the New Deal in the 1930s to further protect small tobacco farms consisting of supply controls and eventually price supports.  Increased global competition from lower-cost producers in South America and Africa ultimately led to the demise of the program over time and eventually the 2004 passage of The Fair and Equitable Tobacco Reform Act, or more commonly known as the “tobacco buyout.”

    This act provided nearly $10 billion to purchase tobacco quotas and provide compensation to growers to transition to a market-based economy.  The landmark legislation was expected to result in a significant concentration of tobacco farms, a geographic shift in production to the lowest cost regions, and larger farms to benefit from economies of scale.

    This historic policy action, followed by two decades of increasing cost of labor, heightened government regulation, and declining consumer demand for tobacco products has led to depressed exports, growing imports, and arguably the most significant structural change in the history of U.S. agriculture.

    According to the Ag Census, the number of U.S. farms growing tobacco has declined from 56,977 farms in 2002 to 2,987 farms in 2022 – a loss of more than 95% since the passage of the tobacco buyout twenty years ago.

    While there was speculation that the elimination of tobacco quotas would lead to U.S. tobacco production moving out of the southern region to other areas, nearly 80% of U.S. farms growing tobacco today remain in southern states.

    Kentucky has historically been the state with the largest number of tobacco farms, with nearly 60,000 (of its 90,000) farms growing tobacco in the early 1990s compared to roughly half that number in 2002 and only 984 recorded in the 2022 Ag Census. However, Kentucky’s share has declined from 42% of U.S. tobacco farms in 2017 to 33% in 2022. North Carolina remains number two in tobacco farms, with 822 farms, followed by Pennsylvania (377), Tennessee (241), and Virginia (173). 

    As anticipated, acres of tobacco production per farm following the tobacco buyout has increased significantly – increasing from an average of 7.5 acres in 2002 to 69.5 acres in 2022, with the largest tobacco farms remaining in the flue-cured tobacco regions of North Carolina, Georgia, Virginia and South Carolina where production averages more than 100 tobacco acres per farm.

    The relative importance of tobacco in southern agriculture has declined considerably.  Today, tobacco accounts for less than 3% of Kentucky’s annual ag cash receipts compared to averaging 25% during the 1990s.  For North Carolina, the nation’s second largest tobacco producing state, tobacco has fallen from 15% of ag cash receipts in the 1990s to only 3% today.  

    Table 1. Changes in the Number of Tobacco Farms and Average Size (2022 vs 2002)

    Tobacco Farms% Change Average Size (acres)
    20022022  20022022
    Alabama80-100% 24.9 –
    Florida11514-88% 33.5114.6
    Georgia82244-95% 30.5138.0
    Kentucky29,237984-97% 3.844.9
    Louisiana61-83% 50.2 –
    Mississippi70-100% 22.6 –
    North Carolina7,850822-90% 21.4141.4
    South Carolina87348-95% 34.6119.4
    Tennessee8,206241-97% 4.451.4
    Virginia4,184173-96% 7.273.0
           
    Total Southern States51,3082,327-95% 7.985.6
           
    Other U.S. States5,669660-88% 4.213.0
           
    U.S. Total56,9772,987-95% 7.569.5
    Source:  Ag Census/USDA

    Snell, Will . “Census Reveals Tobacco Farms Disappearing from Southern Agriculture.” Southern Ag Today 4(13.3). March 27, 2024. Permalink