Tobacco Group Offers Help to Growers

Source from:  By: Steve Hartsoe, Associated Press RALEIGH, N.C. 06/17/2005

The cooperative that for decades helped maintain stable tobacco prices under a government support system is plowing new ground, trying to convince growers it can help them survive in a new era. The Flue-Cured Tobacco Cooperative Stabilization Corporation met Friday for the first time since Congress passed a $10.1 billion buyout of the tobacco quota program last fall. A few hundred growers and industry representatives heard pitches during the annual meeting about how the cooperative can help them get the most for the leaf in a declining industry. "These are uncertain times," said Arnold Hamm, general manager of the Raleigh-based cooperative. "We're seeing dramatic shifts." Leaf from other countries is increasingly squeezing more expensive U.S.-grown tobacco out of the market. Cooperative officials said they can still play a major role in helping farmers get good prices. Under the quota system that started in the Depression era, the cooperative removed billions of pounds of farmers' tobacco from the market when it didn't get the government support price at auction. It warehoused the crop until it could be sold to international leaf dealers or cigarette-makers. The group, founded in 1946 and representing farmers from Virginia to Florida, now plans to market tobacco internationally and even make its own cigarettes. "That's a whole new paradigm there that's 180 degrees from what they were doing," said Graham Boyd, executive vice president of the Tobacco Growers Association. "The co-op is going to have to define its own future." The cooperative last year spent $26 million to buy a leaf-processing and cigarette-making plant from Liggett Vector Brands in Timberlake, south of Roxboro, so it could process leaf and produce cigarettes. It's now called the U.S. Flue Cured Tobacco Growers plant. The co-op will continue to run marketing centers to buy leaf from farmers who can't or don't contract to sell their crop to major cigarette-makers or leaf dealers. It also has contracted with New Century Tobacco Group LLC in Miami to distribute its cigarettes, which Hamm described as discount or deep-discount brands. It's own cigarette brand also is in the works, he said. But some critics see the co-op as a bureaucracy that refuses to pay dividends to members from more than $240 million in stockholder equity accumulated over the years. A lawsuit seeking class-action status was filed a few months ago in Wake County Superior Court. "The farmers believe that stabilization has money that belongs to the individual farmers because this is a cooperative association and not your typical company," said Alan Runyan, a lawyer for the plaintiffs in Hampton, S.C. Hamm did not immediately return a call Friday seeking comment on the lawsuit. Richard Jenks, who grows just over 3 acres of tobacco in Wake County, said the cooperative may need dissolving down the road, but it should be given a chance to pursue its new role. "It's easy to tear something down," said Jenks, who contracts exclusively with the cooperative and has grown as much as 50 acres in the past. "Right now we need something." Enditem