Tobacco is Still Hanging in As Viable Kentucky Crop; State Still Largest Burley Producer in U.S.

Source from:  KyForward.com 04/25/2013

In many circles, tobacco is a dirty word. The medical profession wants it outlawed, the federal government wanted regulatory control over it and got it, and opponents want it banned from every U.S. trade agreement that exists.

But despite declines and efforts against it, the tobacco industry has endured over the last decade and is still important to Kentucky's economy. The state remains the largest burley tobacco producer in the country. Last year state producers grew 148 million pounds of the slightly more than 202 million pounds of U.S. burley tobacco.

While the tobacco sector as a whole once commanded nearly a billion dollars in revenue for this state alone, those revenue dollars have dropped to less than half of that. However, since the federal quota buyout in 2004, the industry has somewhat stabilized monetarily, even though the economic levels reached from tobacco production in the 1990s may never be seen again.

Will Snell, an agriculture economist at the University of Kentucky College of Agriculture, said the 2012 crop brought pre-buyout prices back to growers for the first time in nearly a decade.

"We finally got back to prices that were near if not above pre-buyout prices, and a lot of this was supply driven rather than demand driven," he said.
"We had about a 25 percent reduction in world output in terms of burley for the 2012 crop primarily with a large reduction in Africa, which for the most part is a filler-style, lower quality tobacco. But it is still in pipeline and, as a result, supplies were very tight last year."
 
Add to that several challenging growing seasons in the United States and production in South America that has not rebounded to past levels, tobacco companies felt the crunch in lower supplies even with a dwindling market. Consequently prices were right at the $2 per pound mark; approximately the same level producers were getting before the buyout, according to Snell.
 
He added that with the increase in prices, many producers forgot about the labor headaches they endured during the growing season.

"Tobacco is one of those crops we sell some of it in one calendar year and sell some of it in another calendar year, but if you look at the crop-year basis, the 2012 crop actually exceeded $400 million here in Kentucky," Snell said. "That includes the dark (tobacco) as well as the burley and that is the first time we did over $400 million since the buyout."

The National Agricultural Statistics Service forecast for this year's tobacco crop shows an increase in planted acres. The most recent report noted, "Burley tobacco growers in Kentucky intend to set 78,000 acres for harvest, up 4,000 acres from 2012. For the burley producing states, growers intend to set 103,100 acres, 2 percent above last year."

For dark tobacco, "Producers intend to set 9,500 acres of dark-fired tobacco in Kentucky, up 500 acres from the previous year. Acreage set to dark-air tobacco was estimated at 4,000 acres, down 200 acres from 2012," the report estimated. 

Snell said world-wide production this year should increase as production in Africa rebounds and levels could reach what production was a couple of years ago. But higher quality stocks primarily from the U.S. and South America will likely remain tight.

"As a result, the companies are out here asking growers to put out more acres in 2013 because of that tightness in quality stocks," he said.

Snell added that once again growers will have to go through the equation of looking at how tobacco fares with cattle, soybeans and corn, taking into account all the labor headaches and things like dilapidated barns, as well as the crop insurance regulations that keep tobacco from being grown three years in a row in the same field.

"So there are a lot of complicated issues but I think there is no doubt we'll see more acres," he said. 

Snell said he wasn't too surprised to see planting intentions for Kentucky burley tobacco growers being up. He was somewhat surprised though that burley production in Tennessee expected to decrease by 12 percent. 

That decline is not indicative of the entire burley belt. Planting intentions for the eight-state region show an increase of about two percent, however Snell thinks that could be as high as five percent by the time planting is finished.

Even with ag labor reforms seemingly close to reality in Washington, tobacco growers will still likely base many of their growing decisions on whether they think enough help will be available to get a crop grown. Snell said the labor issue could constrain some of those acres from making it to the barn.

"I think labor is going to continue to be an extremely high-cost component for tobacco," he said. "Obviously the companies as well as university researchers continue to look at ways to minimize those labor hours devoted to tobacco. Up to this point we've gone from hand tying to baling and now the big bale has certainly cut out some of that cost. But we've played around a lot with mechanization over the years with very limited success for the scale of producers that we have. I think the best attempt is to try and reduce labor hours out there and continue to become more and more efficient."

Snell said he knows producers get tired of hearing from university-types that say they must become more efficient but the two most important factors in growing a crop is to get decent yields and do it in the most efficient manner possible. Enditem