Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, March 8, 1994 TAG: 9403080097
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
SOURCE: MICHAEL STOWE
DATELINE: LENGTH: Medium
The decision opens a legal loophole that could mean millions of lost dollars for burley and flue-cured tobacco farmers across the state, said one agricultural economist.
"It may reasonably be expected that tobacco warehouses in other areas of Virginia will seek to follow the precedent established," said Paxton Marshall, extension economist at Virginia Tech.
The auction warehouses - in Scott, Lee and Washington counties - applied for the federal permits in an effort to avoid a 47-year-old state law that limits the amount of commission they can charge tobacco farmers.
Unlike Virginia licenses, the federal permits allow operators to charge a flat storage fee based on the weight of tobacco, rather than a 3 percent commission on its selling price.
Under the federal permit, warehouses charged a flat rate of $7 to $7.20 for each 100 pounds of tobacco during auctions earlier this year. The fee increase cut farmers' profits about $372,000 this year, according a motion filed with the court.
State officials contended, however, that the warehouses never should have been given federal permits because their purpose is selling, not storing, tobacco.
But U.S. District Judge James Turk said in the opinion filed late last week the state must file an appeal with the U.S. Department of Agriculture before asking the court to decided if the permits are illegal.
Rep. Rick Boucher, D-Abingdon, said he's not sure the burley warehouses should qualify for the federal permits.
"I have some very real questions as to whether this is the proper use of the federal law," he said.
Greg Hicks, spokesman for the Virginia Farm Bureau, said tobacco farmers around the state could be "devastated," if more warehouse firms apply for federal permits.
Only Virginia and North Carolina regulate the amount of commission burley warehouses can charge, but every state regulates the profits of flue-cured warehouses. Virginia restricts flue-cured warehouse commissions to 2 1/2 percent.
Flue-cured tobacco, cured in heated barns, is the dominant type harvested in Virginia. Burley, which is grown in far Southwest Virginia, is air-dried.
The Virginia Farm Bureau Federation has been joined by the North Carolina Farm Bureau and the American Farm Bureau in opposing the granting of federal permits.
There are 210 flue-cured tobacco warehouses in the South, and if they are allowed to set their own prices, the loss to farmers could exceed $22 million a year, according to a brief filed by the Farm Bureau.
"We obviously hope it doesn't happen, but, yes, it's something we have to fear," Hicks said.
by CNB