Philip Morris Still Seeks to Sign Burley Growers

Source from:  The Associated Press LOUISVILLE, Ky. 05/23/2005

Some farmers say it's no longer profitable to raise the tobacco Clarence Abney would have been quite a catch for a tobacco company. For nearly 40 years, the Bourbon County farmer raised tobacco crops that regularly exceeded yield averages in Kentucky -- the nation's leading burley producer. Yet this spring, Abney spurned any offer to sign up to raise leaf for a cigarette manufacturer, saying he had lost confidence in the tobacco industry. As other Kentucky farmers put in their first tobacco crop without the security blanket of government price supports, Abney is tending cattle and hogs. "It's strictly a business decision," the 53-year-old farmer said. "When they took the profit out of it, you lose the desire to do it." Meanwhile, Philip Morris USA -- the nation's leading cigarette maker -- is trying to sign more growers to production contracts. "It's no secret that they did not get as many pounds signed up, especially in Kentucky, as they wanted to," said Will Snell, a University of Kentucky tobacco economist. "So they've been continuing to seek pounds, not only in Kentucky but other states as well." Philip Morris spokesman Bill Phelps said the company has signed up thousands of Kentucky growers, but the maker of Marlboro and Virginia Slims cigarettes is looking for more. The Henrico County company won't reveal its burley demand or contract prices, but Phelps said, "We believe we have offered a fair price for tobacco based on the free-market system." R.J. Reynolds Tobacco Co. already has commitments for all the burley tobacco it anticipates needing from Kentucky. Company spokesman David Howard said farmers seemed pleased with contracts offered by the maker of Camel and Winston cigarettes. Philip Morris began buying Kentucky burley under contract in 2000, and some of its receiving stations have signed up farmers into summer to satisfy leaf demands, Phelps said. For decades, the federal tobacco program put production in the hands of quota holders. The program ended with the $10.1 billion tobacco buyout passed by Congress last year. Now, with production restrictions gone, some in Kentucky's tobacco sector worry that Philip Morris will look elsewhere if it can't satisfy its appetite for Kentucky burley. The bluegrass state produces nearly three-fourths of U.S. burley used in cigarettes. Already in North Carolina, research is planned on whether burley can be produced and cured in regions known for flue-cured leaf. Abney, who raised tobacco during the past two years for R.J. Reynolds, said his decision to drop out of tobacco was based partly on price. But he also was steamed when the major tobacco companies refused to make a final round of so-called "Phase 2" payments to growers and quota holders to help offset lower demand. A judge in North Carolina ruled in December that cigarette companies didn't have to make the final payment because the 1999 settlement was superseded by passage of the tobacco buyout. The case is now before the Supreme Court in North Carolina. Abney also faced a sharp drop in price. For the 2004 crop, he received nearly $2 a pound, on average. Under the proposed contract for this year's crop, the same burley would have fetched about $1.45 a pound, he said. Enditem