US: Could New Growers Help Meet Increased Tobacco Demand?

Source from:  Southeast Farm Press 01/06/2013

As contracting for the coming tobacco crop got under way, it was clear buyers were looking for more U.S. leaf and were willing to pay a higher price for it.

Existing growers, however, may have a hard time expanding enough to meet the increased demand. So there may be an opportunity for first-time tobacco growers to begin producing the crop this season.

Any who do face quite a challenge. There have been a number of new growers since deregulation in 2004, and some have had more success than others.

One who is glad he got into tobacco is Kelvin Norris of Princeton, N.C. He first  planted it in 2008 and has just completed his fifth crop.

"I just felt like at that point, to be diversified and successful, we needed to grow something else other than what we had," he remembers. "Flue-cured tobacco is real well suited to the assets we have, so it seemed like a good choice."

A good relationship with a lending institution is a necessity to grow tobacco, he said. "Budgeting is very important. Before we went to see the lender, I put the numbers on paper. I tried to prove that it would work if they gave us the chance. It had to work on paper before it could work anywhere else."

He and his brother-in-law partner had to buy nearly all the machinery they needed all at once, almost all of it used. They concentrated on minimizing labor.

"Labor is the main expense, so to be successful, it is better to be as mechanized as possible," Norris said. "But it is hard to buy a million dollars worth of equipment that you only grow one thing with!"

Most of the machinery they bought was used. Most of the land they work is rented.

Norris has had a positive experience with tobacco, and it has been made a little more positive when they were offered and signed a five-year contract with Philip Morris with delivery in nearby Wilson.

The fact that few multi-year contracts have been available until recently has been one reason why new and even existing farmers have been reluctant to make long-term investments in tobacco.

But Norris is in tobacco for the long-term. "If you grow quality tobacco, I believe, you can grow tobacco forever," he said.

In 2005, the first growing season after the American buyout, Jeremy Rhodes, primarily a sweet potato grower of Four Oaks, N.C., decided to try tobacco production. He grew flue-cured, the dominant type in his area of the Coastal Plain, and he tried it for five crops.

Results not satisfactory

But the results were not satisfactory. It didn't contribute the profit he felt he needed to justify the investment required. So he sold his equipment and got out in 2010, increasing his sweet potato acreage instead.

"I just wasn't making enough money," Rhodes said. "I figured I needed about 60 cents a pound more than I was getting."

The big problem was the cost of curing fuel. It seemed to him that he wound up owing an awful lot to his LP gas provider.

The capital cost was a problem too. "Starting tobacco farming from scratch was very hard. I had to buy all my equipment when I started, and that was very expensive."

Rhodes didn't get into tobacco production completely "off the street," he said.

"I had a little experience myself working for my uncles who had tobacco, but never as an owner and never from a management position," said Rhodes, who also has a logging business. "The main thing at the beginning was I didn't know how to cure it. But I learned."

He tried to exploit a market for a different kind of flue-cured by growing entirely residue-free tobacco for Santa Fe Natural Tobacco. But it didn't give good enough results either.

"The company paid a premium for it, but it wasn't enough to offset the cost of controlling suckers without MH (maleic hydrazide)."

Still, Rhodes hasn't given up on tobacco as a component of his farm, if he can do it without incurring the high cost of curing fuel.

"I am thinking now about getting into burley or dark tobacco," he said. "Both of those are cured in the air, and I have buildings I could rig up to house an air-cured type. I think there may be a little potential for dark, since smokeless tobacco products are on the rise," he said.

"One-year contracts don't give incentive for growers to get into tobacco," said W.K. Collins, retired North Carolina Extension agronomist. "I am glad to see more multi-year contracts seem to be available now."

Nevertheless, tobacco is not going to be an easy sell to new farmers as long as prices for alternative crops like corn, soybeans, cotton and sweet potatoes stay high, he said.

"I am just not optimistic right now about the addition of tobacco to farms where it hasn't been grown recently."

Although organic tobacco didn't work out for Rhodes, Collins said the premium paid for it may get high enough to attract new growers. "Manufacturers of organic tobacco can't get enough to meet their needs, and there is still plenty of need for residue-free leaf," he said. "New farmers could find a niche for themselves producing these products." Enditem