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Industry Voices - Will Snell - Tobacco Policy Analyst

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After years of declining quotas and growing uncertainty, U.S. tobacco growers from Kentucky to the Carolinas breathed a huge sigh of relief last October when Congress passed the quota buyout. But the uncertainty is far from over. As growers transition into the next era of U.S. leaf production, they must make a number of decisions that will determine their future and the future of the U.S. tobacco industry.

Will Snell, a tobacco policy analyst and professor at the University of Kentucky, is helping growers make the transition as smoothly as possible. He has spent many months meeting with growers to discuss the intricate components of the buyout, advising them on post-buyout management and investment issues. Snell’s insights are highly valued; he spent eight years working with policymakers in Washington, D.C., analyzing their buyout proposals.

Tobacco Farm Quarterly caught up with Snell, who continues to travel the country and meet with growers.

Please provide some background on your life and career. Where did you attend school? What has been your work experience?

I am very proud to be a native Kentuckian, born and raised on a fam-ily farm in Bourbon County, just north of Lexington. My farm background is what I describe as a typical, traditional central Kentucky family farm. I was raised on a 150-acre beef cattle and tobacco farm, which has been in my family for five generations. Like for many kids growing up in Kentucky, tobacco dollars put me through college. I received all three of my college degrees in Agricultural Economics from the University of Kentucky, completing my Ph.D. in 1989 with my dissertation, “Analyzing the Effects of Government Intervention and Product Differentiation on International Burley Tobacco Trade.”

What are your major responsibilities as a tobacco policy analyst?

I work primarily with farmers, county agricultural agents, farm group leaders, policymakers, tobacco company representatives, agribusinesses, health officials, the media and, lately, an increasing number of lawyers on various economic and policy issues related to tobacco.

What do you enjoy most about working in tobacco?

Two items. First and foremost are the people. I recall that when I was debating following in Dr. Shuffett’s footsteps, he told me that the tobacco industry had always had a host of problems, and that those problems and challenges would probably continue to escalate in the future. But he went on to tell me that I would get to work with some of the nicest and greatest individuals that any industry could offer. And that certainly has been the case. I am very proud of my working relationship with our farm group leaders and policymakers. I also value my working relationships with Dr. A. Blake Brown at North Carolina State University and Dr. Kelly Tiller at the University of Tennessee.

Second, I love observing the politics of tobacco. I’ve always enjoyed watching the political process unfold for a number of issues, but the constant political debate over tobacco has created an extremely interesting atmosphere for a tobacco policy analyst. Professionally, it has been very rewarding to be a part of these political debates, offering objective analysis on policy changes that I hope will have a positive economic benefit for our tobacco farmers.

You spent a lot of time in Washington, D.C., during the buyout negotiations. Please discuss your role in the passage of the buyout.

Yes, it was certainly an interesting ride. I started working on the buyout issue in 1997, when Sen. Wendell Ford and Sen. Mitch McConnell offered competing buyout packages as part of Sen. John McCain’s national tobacco settlement legislation. This buyout debate continued over a seven-year period, until its passage in October 2004. Since President Bush signed the legislation that contained the buyout, it has seemed like another seven years with all the discussion and side issues that have evolved. Basically, my role, along with Dr. Brown and Dr. Tiller, was to provide farm group leaders and policymakers objective analyses of the implications of the various buyout bills. Given all the competing interests and viewpoints, it certainly created a very interesting work environment.

What do you predict will be the major impacts of the buyout on the U.S. burley market?

The passage of the tobacco quota buyout is probably the most significant and far-reaching piece of agricultural policy legislation for Kentucky farmers and rural communities since the development of the federal tobacco program in the 1930s. While the debate over the buyout continues here in Kentucky, the bottom line is that the buyout has occurred. It will inject billions of dollars into local and rural tobacco economies for the next 10 years, but will undoubtedly change the landscape of the agricultural economy forever.

The buyout was designed to create more certainty for the growers, but in reality, it has created, at least in the short run, more uncertainty for not only growers, but also buyers worldwide. The most obvious impact will be a significant consolidation of those involved in the tobacco-growing business in the U.S. We expect that more than 75 percent of the former quota owners will exit, and perhaps more than 50 percent of the growers will decide on their own to exit, or they will be forced out simply because they can’t compete in a post-buyout environment.

Based on contract prices, it appears that 2005 U.S. burley prices will fall to around us$1.50 per pound, some 25 percent below the 2004 price. Given these prices and anticipated costs associated with labor, infrastructure and other costs, U.S. burley growers appear reluctant to expand production in the short term in the absence of supply restrictions, despite anticipated expanded demand opportunities evolving from more competitive prices. Consequently, we are hearing that the companies are exploring other production options. But I would like to offer the point that we are in a transition mode in Kentucky and the other tobacco states, and it may take a couple of years before growers have enough confidence in the new environment to consider expanding, assuming of course that profit potential still exists.

How do you expect your role as a tobacco economist to change in the future?

I will be working with a much more concentrated clientele base. It remains to be seen how much interaction I will have with growers in an educational capacity, given the more direct communication the companies have right now via the contracting system. While some U.S. Congress members believe that they are finished with tobacco policy following the buyout, I seriously doubt that will be the case. Thus, the fun will continue.