RICHLANDS, N.C. (Reuters) - North Carolina tobacco farmers will begin hauling their freshly cured crop to auction this week amid growing concerns that production cuts and a steady rise in contract farming threaten a way of life in rural communities throug

Tobacco warehouses, which for generations have been the lifeblood of farming communities by selling off the crop at auction, are shutting down at a record pace as government quotas slash tobacco production and more farmers agree to sell leaf directly to cigarette makers, bypassing the auction process completely. ``I think tobacco farming will be on contract within two years,'' said lifelong farmer Ronnie Cox, who this year for the first time is growing about a quarter of his crop under contract with tobacco giant R.J. Reynolds Tobacco Co., the nation's second-largest cigarette maker. ``It's got to be better than what we're facing right now,'' he said. ``You don't have as many variables if you're under contract. More than anything else, you would have a price you could count on.'' In recent years, about the only thing U.S. tobacco farmers could count on was yearly cuts in the federal production quota on tobacco. The national flue-cured tobacco production quota has been cut by 53 percent over the past three years. In North Carolina, which grows two-thirds of the flue-cured crop used most widely in cigarettes and where tobacco ranks as the top cash crop, the basic quota has fallen to 357.8 million pounds this year from 641.9 million pounds in 1997. For Cox, who works a family farm in Richlands, in eastern North Carolina, production cuts have slashed his tobacco production by more than 100,000 pounds over the past three years, costing him about $175,000 in gross income. ``You just can't make that up,'' said Cox, who also raises chickens, corn, soybeans and cotton, but depends on tobacco for half of his income. ``I don't know how we're doing it .... It's been a losing proposition but we're just hanging on.'' With Big Tobacco under fire from federal regulators and ill smokers, thousands of farmers have not been able to hang on. In 1997, the latest figures available, there were about 13,000 farmers growing tobacco in North Carolina, down from about 22,000 10 years earlier. Bringing In A Healthy Crop But the news isn't all bad this summer. While Florida and Georgia farmers have been hit with searing summer temperatures that hurt their tobacco crop, farmers in North Carolina say they are bringing in a healthy crop of the golden leaf for the opening auctions. Farmers in eastern North Carolina have harvested about 10 percent of the tobacco crop so far, bringing off the larger lower leaves that typically fetch lower prices at market. The upper leaves, the most valuable part of the plant, typically are harvested later in the summer. ``It will be a strong market relative to sales and price of tobacco sold,'' said Graham Boyd, who heads the Raleigh-based North Carolina Tobacco Growers Association. ``We've had a good growing season in North Carolina.'' Dwindling Revenues And Uncertain Future Still, that is little consolation to tobacco warehouse operators facing dwindling revenues and uncertain futures as tobacco demand wanes. This year, 15 tobacco warehouses shut down across North Carolina, leaving 89 active warehouses to handle the shrinking crop up for auction, the lowest number in half a century. In years past, the sprawling warehouses in the first weeks of August would be filled with the sweet smell of freshly cured leaves, and politicians would swarm to the auctions to mingle with the crowds in the festive atmosphere of the season's first leaf sales. These days, many auction houses open with little fanfare, and only a handful of bidders make their way through rows of tobacco bales covering barely a corner of the floor on the opening day of the auction season, which runs through early November. Although by most estimates less than 10 percent of this year's crop was sold under contract directly to leaf dealers or tobacco companies, that percentage is expected to rise steadily in the coming years. Contract farming eliminates concerns about the price tobacco will fetch at auction, and allows farmers to sell before the auctions.

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