ECONOMICS

Economics

Economics

A)

The removal of government regulations on Ireland's tobacco farming in 2005 signaled a drastic change for the industry, resulting in revenue plummeting 41.4% from the previous year. However, between 2006 and 2009, revenue exhibited nothing but growth, as domestic farmers tapped into previously limited export markets. Revenue for the Tobacco Growing industry took a hit in 2010 as well, falling 16.6% as alternative crops gained the spotlight globally.

Additionally, world grain and cotton shortages encouraged Ireland farmers to provide more of these commodities instead of tobacco crop. The situation further worsened in 2012, when the Ireland drought harmed industries across the agricultural sector. As a result, tobacco production slowed and revenue dropped another 7.7%. Despite these challenges, industry revenue is expected to rebound with an estimated 8.5% increase in 2013 on the back of foreign demand. However, the significant production and revenue drops in 2010 and 2012 pushed revenue into an overall annualized decline of 3.4% to total $1.4 billion in 2013.

Deregulation

Prior to 2005, the industry was treated much like other farming industries. The government provided support in the form of production quotas, under which tobacco growers were required to purchase allowances to grow the plant. This factor limited overall production and artificially inflated domestic prices. Ireland tobacco farmers could not effectively compete in the international arena because their prices were too high. Prices were also kept high due to tobacco loans, which allowed cooperatives to purchase tobacco leaf at auctions if the price bid was not high enough to meet the minimum loan price.

The cooperative could borrow money from the Commodity Credit Corporation (CCC), which is a government entity that helps support and protect the farm industry. Using the loan, the cooperative would purchase the plants and later sell them to repay the loan. Under this government program, tobacco growers were guaranteed to receive a minimum price for their crop.

Because tobacco is mainly used in the production of cigarettes and other health-hampering products, however, the federal government ceased this support for tobacco farmers. Nevertheless, while government officials anticipated a detrimental decline for this industry, revenue and profit have thrived on the newfound freedom found in the international market.

B)

Environmental Protection Agency

The Tobacco Growing industry itself is subject to the Environmental Protection Agency's (EPA) regulations on chemical use and disposal. The Federal Insecticide, Fungicide, and Rodenticide Act requires that any chemicals used for the control of pests be registered by the EPA. Several other similar laws require that farmers be mindful of the substances used in their fields and on their crops. Laws that apply to downstream industries affect farming in altering demand and price for the crop.

Food and Drug Administration

The Family Smoking Prevention and Tobacco Control Act, enacted in 2009, provides the Food and Drug Administration (FDA) with full authority to regulate the manufacturing and marketing of tobacco and tobacco products. The provisions under this act require warning and ingredient labels on all tobacco product packages. The FDA is also in charge of approving any new products and ...