DECEMBER 17, 1997; Page A01

Smoke, Lies & Compromise: Part II

FARMS COULD BE PUT OUT OF BUSINESS BY THE SETTLEMENT NOW BEFORE CONGRESS.

YET GROWERS DID NOT HAVE A VOICE AT THE NEGOTIATING TABLE.

FOR TOBACCO FARMERS,A WAY OF LIFE AT RISK

By Shankar Vedantam

JAVA, Va. -- It's not yet dawn at Lewis Gregory's farm, and the clump of men under the rain shelter work by the glow of three bulbs that hang from the rafters. Outside, in the dark, a steady drizzle is turning acres of soil into reddish slush.

Workers unload bundles of cured tobacco from a barn. Lewis, 74, and his son, David, 42, let the yellowing leaves, each about the length of a forearm, fall through their fingers.

Both work swiftly, bent at the waist. They pull out the inferior green-tinged leaves, and the ones left behind seem to glow goldenly. The air is rich with the smell of tobacco.

The Gregorys sometimes wonder why they take the trouble to screen thousands of pounds of tobacco by hand. Supposedly, the higher quality fetches a better price. But last year, many farmers covered bad leaves with a few good ones, and got the same price as the Gregorys.

Tobacco farming is getting big, even corporate. And with the regulations Washington plans to send barreling down on tobacco, big will certainly outlive better.

But this is Lewis' 66th consecutive crop. He would rather chuck the whole thing than do it any other way.

He knows that when he walks into the tobacco auction in Danville next Tuesday, nobody will pull his tobacco apart to see whether he has hidden green leaves at the bottom.

§

Last spring, as the Gregorys nurtured their soil and planted their crop, a group of high-powered negotiators secretly met in a swanky hotel in the capital's Georgetown area. The deal they would eventually broker would threaten a way of life that had sustained five generations of Gregorys. It would threaten demand for cigarettes by raising prices, by imposing penalties on Big Tobacco if youth smoking rates didn't drop, and by banning icons such as Joe Camel and the Marlboro Man.

Not one of the deal makers represented farmers, who grew the 1.6 billion pounds of tobacco for the 746 billion cigarettes America produced last year. The farmers' concerns were as remote as tobacco fields are from Georgetown's glitzy sidewalks.

The tobacco settlement has yet to be approved by Congress. But it rides a national tide of disdain against smoking.

The costly deal would encourage Big Tobacco to pay farmers less, and could pressure politicians to abandon the price supports that have protected the American tobacco farmer for half a century.

The upheaval could drive many farmers out of business, especially the guys who cultivate less than 10 acres _ and grow three-quarters of America's tobacco.

It all seems inexplicable to Lewis Gregory, who hates the "do-gooders" who think they know what's best for everyone else.

Lewis' father grew tobacco for more than 80 years, and his father and grandfather before him. David's happiest memories of childhood are staying up in barns all night, listening to grown-ups spinning yarns about their work, and curing tobacco by feeding crackling wood fires.

Tobacco money has built hundreds of towns in southern Virginia, the Carolinas and Kentucky. It has helped build churches, and schools such as Duke University. It has built hospitals that have saved countless lives. How can Washington regulators call tobacco a killer?

Economists for the American Medical Association argue that states losing tobacco jobs are better off, because anything that helps reduce smoking will cause fewer people to get sick, and money spent on tobacco can be spent more productively elsewhere.

But as much as their livelihood, farmers like the Gregorys stand to lose a way of life. The golden leaves weave together the farmers' histories and the fabric of their lives.

Around little towns such as Java, rows of shoulder-high tobacco plants stand in September fields like sentinels against a hostile world.

And farmer after farmer will repeat what Aubrey Nuckols, 36, a tobacco farmer from Gretna, Va., tells all visitors:

"If I was born in Kansas, I would be a wheat farmer. Tobacco farming is just what we have done historically. That's very important for an outside person to realize. It is "the" crop. We are not evil."

§

David stops by the rain shelter for a final check on the tobacco before heading home. It is just after midnight. He is curing 3,000 pounds in one of the barns. The barn hums as hot air is pumped through the tightly packed leaves.

Curing tobacco, as with everything else in the business, is like juggling hand grenades. There's always a chance that something will go wrong _ most likely, the equipment or the weather _ and that a crop will be lost.

When the curing is done just right, the leaves come out golden yellow. But without electricity, the air supply stops, and in three or four hours, the trapped heat burns the leaves. The difference _ maybe 15 cents a pound at the auction _ could mean $ 450.

David often says that no Las Vegas gambler plays the kind of odds that most tobacco farmers play every minute of every day for nine months of every year.

And this particular barn carries an extra risk. If the power gets cut even for a minute, the drying doesn't resume when the power goes on again. Someone has to manually switch on the equipment.

David knows he should have invested in better equipment, but he was strapped for cash. By this time, he should have paid for all his chemicals and fertilizer _ $ 12,000. He hadn't started, because the tobacco was ripening late. Then someone had stolen a winch, and it had to be replaced. And he owed $ 5,000 to another farmer.

The risk of an electricity cut was small. His other barns were full and he had only a short window of time to bring the crop in. He would simply have to live with the risk.

Satisfied that all is well for now, David goes home, slips into bed, and falls asleep.

Sometime in the night, he wakes up. It is still dark. What time is it? He glances at the alarm clock beside the bed.

His heart goes cold.

The digits are blinking: 12:00.

Some time during the night, the power had gone off. The barn.

David races out. Driving his truck through dark fields, his headlights bounce with his heart. He strains to hear the sound of the barn's motor above the engine.

He hears nothing.

He shuts off his engine and walks to the barn. It is silent.

Turning the power back on, David prays that the tobacco hasn't burned, that the leaves will come out golden yellow when the curing is completed in five days.

§

Until now, the federal government has been benevolent in protecting the little tobacco farmer through a baroque system of quotas and guarantees.

This year, the Gregorys are allowed to grow 72,000 pounds of tobacco. That's their quota, established by the government.

Each year, the cigarette companies tell the U.S. Department of Agriculture how much tobacco they expect to buy. The USDA estimates how much tobacco can be exported, then fixes the total amount of tobacco that may be grown on the country's 124,000 farms. Each farmer in the cooperative gets a fixed part of the pie, called a quota.

In exchange for not overproducing, the farmers are guaranteed the minimum price, also set each year by the government.

The system protects the little farmer from big growers because the only way a farmer can expand is by buying quota pounds from other farmers. The transaction doesn't involve property, just the right to grow more.

Agriculture experts say tobacco yields $ 4,089 per acre. About $ 1,560 of that is profit, 20 times the return on corn.

But corn requires only four to five hours of work per acre per year, because every aspect of corn farming is mechanized. Tobacco needs an estimated 225 hours per acre each year, because everything is manual.

Lewis Gregory guesses the farm makes about $ 45,000 a year, after expenses. David gets two-thirds. Which is only fair, because he is increasingly running the farm, irrigating the fields till 2 in the morning, plowing till 3, and worrying about whether the financial ends will meet.

§

Lewis Gregory navigates a tractor between rows of tobacco plants. Stretching ahead of him are bundles of blue.

Workers, dressed in identical blue rain slickers, rip the leaves off the plants, making a sound like snapping rubber bands. They straighten with armloads of tobacco over their heads and dump the leaves into the trailer Lewis pulls.

Pulling tobacco leaves is a wet business because the men work the fields at dawn _ bathed in dew and rain. By midmorning, it's usually too hot for this work.

Lewis wants the men to pull the leaves from the bottom of the stalk, two to three leaves each time. It takes four "pullings" spread over six weeks to strip a plant.

The leaves increase in quality with height: The leaves highest on the stalks have the best quality and taste.

The government graders have an elaborate coding system to rate the leaves. As his workers pull the tobacco, Lewis thinks about what grade will be given to the tobacco he will soon sell in Danville. It is from the middle of the stalk, and could be one of two grades.

If the grader gives it a "B3F," Lewis will get at least $ 1.86 a pound. If it's a "C3F," he will get $ 1.73.

One letter, a B or a C, will mean a difference of $ 281 for the week.

Each week, when the Gregorys take their tobacco to auction, they are further protected by the government.

In grading each bale, representatives from the USDA determine the minimum price buyers must pay.

If the tobacco companies don't buy it, a farmers' cooperative pays the minimum price, stores the tobacco, and sells it to the companies when they are ready, later in the season or the following year.

Since the amount of tobacco grown is set ahead of time, based on company expectations, all of the leaves are eventually purchased.

The system is designed not to cost taxpayers money. But sometimes the government tides the cooperative over with a loan that's repaid when the tobacco is sold. Critics say such loans are, in effect, a subsidy.

Since all of this keeps prices inflated, companies are increasingly looking for ways to spend less. They are encouraging growers in Latin America and Africa, providing some with capital and expertise.

As it is, despite the price supports, the farmers make only a few cents from each pack of cigarettes sold.

§

It is evening, and five days since David woke up in the night to find the electricity supply had been interrupted.

Light from the setting sun streams over the farm as the Gregorys head toward the barn to see what damage has been done. The air has a quietness that seems unreal to city ears. A panting dog can be heard 50 feet away. Lewis watches as David opens the barn, hoping to see piles of golden leaves.

The leaves are dark and mottled.

David clenches a handful. He cannot speak.

After months of effort _ planting the seeds, irrigating the fields at crazy hours of the night, pulling leaves at dawn _ losing everything to a freak power failure seems pointless to the point of cruelty.

This is why David doesn't want Adam, his 8-year-old, to get into tobacco- growing. And why Ruth, 39, David's wife, would rather he got out of farming.

David separates the burned leaves from the good ones. A cigarette hangs out of one corner of his mouth, and puffs of smoke billow from the other.

§

For the last two years, as the Clinton administration waged war against tobacco by demanding that the Food and Drug Administration be allowed to regulate it, the government has been in the curious position of hammering away at a product that it goes to elaborate lengths to protect.

But now, tobacco has become dangerous for legislators' political health.

Plans being discussed in Washington call for ending the quota system with a payoff to farmers and incentives to quit farming tobacco. Simultaneously, the government would end price protection.

Prices that the farmers are paid would probably fall steeply.

One plan, advocated by Sen. Richard G. Lugar, R.-Ind., would offer farmers who agree to stop growing tobacco $ 8 per pound of their quota in 1999.

The Gregorys' quota of 72,000 pounds would be worth a one-time $ 576,000. The payoff would require them to stop growing tobacco. If they took the money in installments over three years, they could keep growing but would get paid only the market price. The Gregorys grow wheat, cucumber and broccoli on the side, but they barely make enough money on these crops to make the effort worthwhile.

Lugar said the cost of the plan, including money to help state economies make the transition from tobacco to other crops, would be $ 15 billion. He proposed that the cost be passed on to the tobacco industry, as part of the settlement.

The tobacco industry says it opposes the plan. But it would benefit, too: American tobacco, which has been losing ground to cheaper foreign tobacco, would become more competitive in price.

Lugar's plan might fail to achieve one of the government's major objectives _ to reduce the amount of tobacco America grows.

"I don't think it's clear that production will necessarily decrease," said Steve Isaacs, an agricultural economist at the University of Kentucky in Lexington. "Some folks who have never grown it might say: 'Hey, that's a pretty good crop. I may grow it."'

§

Lewis Gregory sits across the dinner table from his wife, Nancy. David perches on a stool. Lewis massages his temples.

"Why isn't the ACLU here with a battery of lawyers if they want to defend the underdog?" he demands.

Nancy Gregory looks at her husband from across the table. She knows where the dinner conversation is headed.

"Lewis," she says in a low warning voice, "now, don't get all excited."

"There's no one lower than the tobacco farmer in the eyes of the public," Lewis plunges on. "Show me someone more discriminated against, a social outcast."

There is absolute agreement in David's eyes. Nancy agrees, too -- she just doesn't want Lewis to get stirred up.

He hates the Washington "holy fathers," starting with former U.S. Surgeon General C. Everett Koop, who battled against smoking. "I would like to put Dr. Koop in the coop with all the other roosters."

Lewis pulls out three of his patented rebuttals to the critics of smoking:

"I knew two sisters who lived to 107 and 108 and their brother only got to 98. They smoked and chewed tobacco all their lives."

"I once had a cat which got throat cancer, but it never smoked."

"If you had a man who was pointing a gun at you and he had drunk a pint of whiskey or smoked a pack of cigarettes, which would make you more afraid?"

Nancy says: "We've had so many drunken-driver killings here the last few years."

In moderation, smoking isn't dangerous, father and son agree, arbitrarily defining moderation as half a pack a day.

David and his wife each smoke about a pack a day. Earlier this year, they tried to use the nicotine patch to quit, then dropped out of the program because, David says, "the cigarettes were less expensive."

David says: "My brother-in-law had a heart attack and the doctor said, 'You've smoked your last cigarette and drunk your last cup of coffee.' But it may have had to do with diet and exercise."

"But the doctors all jump on smoking," Nancy says.

"I lost two sisters-in-law," Lewis says, referring to his brothers' wives. "They died of lung cancer. They never smoked."

But their husbands did.

Nancy shakes her head sadly. "Now they'll say it was secondhand smoke."

§

Lewis Gregory wakes up before dawn. It is Tuesday, the day of the tobacco auction in Danville. Nancy has his breakfast ready at 5 o'clock. He finishes it and heads to the barn behind the house.

David bursts through the barn door. His face is crumpled in pain. He has an arm over his stomach.

He is in so much pain that he can hardly speak. Finally he gets the words out.

"I'm not going to pull (leaves) today," he says. "I'm sorry."

The pain had erupted the night before, after he had finished separating the burned leaves. It had kept him up all night.

Lewis summons his wife.

Nancy takes one look at David.

"Get in the car," she tells him.

Lewis goes with Nancy and David to the hospital, and then proceeds on his own to the Danville auction. He is worried. This isn't how he wanted the day to go, but, as he often says, you can't get all your squirrels up the same tree.

His tobacco lies on the floor of John Motley's warehouse with thousands of other bales. The warehouse is largely lit by skylights in the sloping roof. Sunlight floods through the doorways. The graders need natural light to gauge the quality of the tobacco.

Lewis' shoulders are hunched. The doctors said that David's pain could mean anything _ gallstones, ulcers, appendicitis, a heart attack. They were running tests.

David told the doctors he had been under a lot of stress. The pain was so bad that, for the first time in 25 years, he cried.

Lewis huddles with two other farmers beside the unloading ramp. They are discussing the government proposal to buy back the farmers' quota.

"If the government were to make this offer, how many farmers in the area would accept it?" Lewis asks.

"If they offered $ 14 a pound of tobacco, 100 percent would sell," says Don Brown.

When Lewis says nothing, Brown asks: "Would you be interested?"

"If David could get a job, I would sell. I will be 75 next year."

Lewis turns to Franklin Shelton. "Would you accept it?"

Shelton nods. "Yes."

Lewis' fingers are splayed on his chin. He has another question:

"What would you do with your time?"

Lewis is standing near his tobacco when an auction-house agent approaches.

They confer for a moment about whether the graders will give it a grade of B3F or the lower C3F.

"Tell them all about it, Frank," he urges the agent. Then, he kids, "Don't tell them the bad, only the good."

Don Brown comes up to them urgently. "Phone, Mr. Gregory."

It is David's wife, calling from the farm. Lewis speaks intently, hoping she has news from the hospital. Then he realizes that she is calling him for the same reason.

He reassures her. The first thing you learn as a farmer is to worry about the things you can help, not the ones you can't.

A few minutes later David arrives at the warehouse with Nancy. He has a cotton swab on his arm, with an adhesive strip over it.

He is smoking a cigarette.

"What did they give you?" Lewis asks. "Castor oil?"

David looks embarrassed. After finding nothing serious, the doctors concluded he was suffering from acute indigestion.

"What did you eat last night?" Lewis asks.

"Pinto beans and turnip salad. I ate my lunch and supper together in 2 minutes."

§

The graders arrive. The auction agent that Lewis had spoken with earlier banters with the officials, who wear USDA badges on armbands.

At a signal, the graders start down different rows. They look at the tobacco, sometimes reaching down to feel its texture. Then they scribble the grade on a piece of paper and toss the paper on the bale.

A grader looking at the Gregorys' tobacco asks, "Is it all the same pile?"

"Yes, all the same," the agent replies, all from the Gregorys.

The grader doesn't bother to check the rest of the tobacco. He gives the bales the same grade.

Lewis runs to the start of the line, picking up the slips of paper, reading the grade and dropping them back. It's B3F.

The brokers who buy tobacco for Philip Morris, R.J. Reynolds, and the other tobacco companies stand to the left of the tobacco row. The auction-house owner, John Motley, stands on the right, with the veteran auctioneer, Walter Wilkerson.

The procession starts off down either side of the row of tobacco. Wilkerson glances down at the slip of paper to determine the minimum price of the bale he is auctioning off, and then swiftly decodes the brokers' various hand signals.

"Dollar eighty-seven, eighty-seven, Taylor!" announcing the name of the broker that has bought the bale.

"Dollar eighty-seven, eighty-six, eighty-six, Co-op!"

Most of the tobacco is bought at the minimum price by the farmers' cooperative. Lewis Gregory doesn't care. He has the grade he wanted.

He steps out of the auction house into the sunlight, puts a foot on the bumper of his truck, and contentedly pops a wad of tobacco in his mouth.

He doesn't smoke. It gives him a headache.

§ § §