Tobacco farmers cautious after buyout, but some still planting

Source from:  The Independent, 06/06/05 06/08/2005

GREENUP As tobacco planting season advances this spring, area burley growers are beginning a new era in farming - one without the ever-familiar quota. "The thing I like about it so far, of course you don't know what will happen at the market with no price supports, but you don't have to worry about leases (of quota), or pay leases up front," said Danny Brown, Greenup County farmer. With quotas, a farmer could wind up with several thousand dollars spent before you even planted, he said. On the other hand, with this first season after the federal government's tobacco buyout that ended Depression era quotas, tobacco economists predict low prices for the farmer, and if the leaf's bad quality "you'll probably be hauling it back home," as Brown says. "When all is said and done, the farmer's not going to wind up with near as much as we thought we would." The buyout, approved by Congress in October, will pay about $10 billion to the nation's tobacco farmers to give up their production quotas and move into a free market. On the quota system farmers had a set amount they could plant, although they could rent more quota "pounds" of tobacco, and it all came with a government-supported price control. Now, you can grow all you want, or as much as you can sell. Large numbers of tobacco growers are expected to exit production this year, according to those in the industry. A survey of 235 produce growers by the University of Kentucky indicated that about one in three of those who grew tobacco in 2004 would not grow it in 2005. Also, among those still growing tobacco, Kentucky production will be lower than in 2004. According to U.S. Department of Agriculture planting intentions reports, 73,000 acres of burley tobacco will be planted this year, compared to 106,000 acres in 2004. U.S. farmers intend to plant a total of 108,000 acres of burley this year, down from 154,650 acres in 2004, according to USDA reports. Without that safety net of price guarantees, experts forecast farmers could get about 50 cents per pound less for their burley. Cash receipts will plummet from $924 million in 1998 to around $300 million for this year's crop, projected Will Snell, a University of Kentucky tobacco economist. About two-thirds of the 30,000 tobacco farms that dotted the Kentucky landscape three years ago could be gone this year, Snell said. "It's kind of a touch-and-go situation," he said. "I think the growers are trying to feel out the companies. And the companies are trying to see who's interested in staying in the game and who can be a low-cost producer." Even before the buyout, a lot of tobacco farmers had already seen reductions in the amount they were allowed to produce because of decreased cigarette production, leading to decreased profits. That relates to at least one reason the buyout came about in the first place - to allow the small growers a still somewhat profitable way to exit tobacco farming while giving big producers the chance to increase production to profitable levels without renting other quota. That's happening here now, Brown said. "Most of the 2,000- to 3,000-pound quota holders have gotten out of it," he said. "Those who raise 50,000, 60,000 or 100,000 pounds are the ones staying in it, of course they were set up to do it. "Those who have got the facilities to handle it, the buyout's a great thing for them, because they can contract the pounds they want directly with the company and not worry about 45 to 50 cents a pound leases for quota." Again, with the buyout's no-limit production comes more worries alongside from the usual weather woes, such as no government price supports in case the market slips or crop yield is down. And the buyout could reduce a farm's property value, because that tobacco base is gone, Brown said. Despite such thoughts, he's planting this spring - 10,000 pounds on 61/2 acres along Raccoon Creek, a little less than the usual 12,000 to 13,000 pounds. Brown's somewhat among the "wait and see" crowd when it comes to the buyout, but that's not the only reason he cut back. "I don't want to move equipment and farm on somebody else, and I can raise that much at home," he said. Besides, he says, he's probably two seasons away from retiring anyway. "Everything, it seems, makes harder all the time." ALLEN BLAIR can be reached at ablair@dailyindependent.com or (606) 326-2657.