Times Change for Tobacco

Source from:  By Janet Patton, The Lexington Herald-Leader, Ky. 11/23/2005

To see how much Kentucky's tobacco industry has changed, you have only to look at Henry West. For the first time in years, he will not be standing in a chilly warehouse on the Monday before Thanksgiving listening to politicians wax lyrical about the state's top crop. Last year, as president of the Burley Tobacco Growers Cooperative Association, he helped win a buyout of the federal price support program, which farmers had relied on since the Depression. This year, he's retired from the co-op board and didn't even grow tobacco. "I couldn't see where there was any profit in it," West, 61, said last week. "I've been working in it all my life. I've always grown tobacco," he said. "I never thought I'd approve any buyout, but times change. The world changes." Now, with price supports gone, he said, the high costs of growing burley, especially in his area around Paint Lick, mean farmers won't break even without a yield of 2,500 pounds an acre. "I just don't think there's enough profit in it even at a 3,000-pound yield to keep people in it for the long haul," he said. This year, because of difficult weather and growing conditions, the USDA estimates the average yield will be down to 1,800 pounds an acre. With the end of the price supports came the end of the quota system that limited how much farmers could grow. But, instead of planting more tobacco, most of the "burley belt" planted much less. The Kentucky crop is forecast to be 135 million pounds, down 35 percent from last year. That would make it the smallest crop since 1927, according to the Kentucky Agricultural Statistics Service. Last year, 106,000 acres were harvested. This year's 75,000 acres will be the smallest on record. The massive decline has occurred in part because many growers simply packed it in after Congress passed the long-awaited buyout that promises to pay former growers and quota holders billions over the next decade. Kentucky farmers have received checks for more than $240 million this year. But even many of those who want to keep growing were reluctant to expand, according to Will Snell, University of Kentucky tobacco market expert. Without a federally mandated price, farmers have no idea what their tobacco will bring on the open market when warehouses hold their first post-buyout sales today. Farmers who sell directly to the cigarette makers have been reporting prices around $1.50 a pound, down about 25 percent from last year's guaranteed price. After the advent a few years ago of contracting, less than 10 percent of the crop is expected to sell at auction this year. But the co-op and the warehouse association are fighting to keep the auctions alive to give farmers something to fall back on if cigarette makers reject their crop or offer them low prices. "Having one more purchaser of burley tobacco is good for all growers," said Roger Quarles, new president of the co-op, in a release. Only 15 warehouses around the state will hold auctions this year. But Quarles said the co-op has commitments from major buyers to be there. And the co-op itself plans to buy some tobacco to resell to foreign buyers such as China and Russia. While exports have been increasing in recent years, American cigarette makers are buying less and less at home. Declining demand, yield and price could cut Kentucky's cash receipts from tobacco from $420 million in 2004 to $270 million this year, Snell estimated. That means a "significant number" of burley growers will probably lose money on this year's crop, he said. But farmers could have one thing in their favor: the short crop. "We will have some success stories at the auction this year because of tight supplies," Snell said. Worldwide, high-quality burley -- the kind needed to create "Marlboro flavor" -- is in short supply. Cigarette makers, faced with a potential shortage, earlier this year tried to recruit growers from new states, largely without success. That could drive buyers back to the auctions and, eventually, force higher prices. "If the price and profit incentives will be there, we will rebound. But the big question is will it be there," Snell said. "A lot of producers are just not going to stay in the business at $1.50 a pound." Enditem