US Tobacco Growers Scramble to Find New Markets

Source from:  CNBC  03/03/2014

In 1964, the U.S. Surgeon General publicly declared the health hazards of smoking.

Since then, smoking rates have been basically cut in half. In 2011, there are approximately 50 million smokers in the United States.

But globally, the number is 1 billion ... and growing.

It's not difficult to reach the conclusion that tobacco's future is outside of North America. That's why both cigarette maker and tobacco farmer are shifting their focus.

"In Eastern Europe, the sales are increasing," said Brian Furnish during a trade show in Krakow, Poland. Furnish is an eighth-generation tobacco farmer who also represents a five-state tobacco cooperative that is trying to sell millions of pounds of burley tobacco all over the world — in Poland, Indonesia, China, Egypt and Serbia, for example.

For the CNBC Original Cigarette Wars, we followed him to Eastern Europe to witness the transition from Kentucky farmer to international salesman.

"We go to the parts of the world where the population is increasing and where the consumption is increasing," he said.

Just a few years ago, Furnish only exported about 15-percent of his crop. In 2011, it's closer to 85-percent. He thinks the U.S. tobacco market does not have a bright future.

"I think the future of it's very bleak," said Furnish. "I think you're going to have to be an export market."

The numbers support Furnish's stance. More people smoke in China (320 million) than there are people in the United States (308 million). India has about 240 million tobacco users, while Eastern Europe and Southeast Asia add another 150 million.

Furnish compartmentalizes the health side of the debate and the criticisms that the tobacco companies — and the growers — are exporting a health crisis.

"We try to stay out of the health side and the smoking ban issues and things like that," said Furnish. "It's still a legal product in the world, and people are gonna consume it.

"We just think they ought to be consuming ours."

Making that happen has been a challenge. Even though American tobacco is considered to be of a higher quality, it's also considered to be at a higher price.

A few years ago, especially since government price supports ended in 2005, that was true. But the price of American tobacco has come down, as overseas prices have risen. It's a huge opportunity, and Furnish is furiously trying to capitalize.

"We have a lot of people depending on us to try to create new markets," said Furnish.

"Tobacco's been the backbone of our economy in Kentucky for agriculture for over 100 years ... There's no replacement for it. If I can be a small piece of creating a better future for that, I want to do that."

But the anti-tobacco movement wants to stop him.

"In the developing world, these populations are, in a sense, much more defenseless than populations are in the United States," said Neil Schluger, a pulmonologist with the World Lung Foundation. "There's much less government regulation. There's probably much more corruption.

"So, the populations there are much more vulnerable to what the tobacco companies are trying to do."

In many ways, the front lines of the "Cigarette Wars" are outside the United States, and it's unclear which side will win.

When CNBC asked farmer Todd Clark whether opponents of tobacco might win this battle, he simply said: "They certainly could. I am not holding my breath."

And unlike Furnish, he is making plans right now for a farming world that does not include tobacco. Enditem