N.C. Tobacco Farmers Trying New Variety in Buyout Market

Source from:  Associated Press RALEIGH, N.C. 01/10/2006

North Carolina's shrinking ranks of tobacco farmers are placing their hopes on new competitiveness from a drop in the price of U.S. flu-cured tobacco and the state's status as a the top producer. Max Denning, 47, a fourth-generation farmer from Benson who grows flue-cured tobacco in five counties including Johnston, Wake, and Harnett, has some advice as tobacco farmers prepare to sign contracts for this year's growing season. For growers bold enough to keep planting leaf in the uncertain world of free-market tobacco farming, he says to get bigger, get better or get out. "The only thing that has viability right now is tobacco, it's the only crop where you can turn a profit," Denning said. "But the only way you're going to make some money is to increase your acreage a bit." The new tobacco economy brings the added ability to plant more leaf without restrictive quotas of the federal tobacco program, which ended last year. That freedom should favor bigger farms in the eastern counties of the state that are able to grow enough to still turn a profit at a lower price. Some of the difficulties include last year's spike in diesel and liquid propane prices, which increased the cost of drying flue-cured tobacco, the dominant variety in North Carolina. That cut into already thin profit margins. Tobacco farmers also face the second year of trying to compete in a global tobacco market, now dominated by Brazil and China, without the protective cushion of a federal price support system. It's demise saw the price of flue-cured drop from about $1.85 a pound to $1.55 or lower. Tobacco experts say this decline reflects the eliminated expense of renting quotas and land under the old tobacco program. This decrease has made higher-quality U.S. flue-cured tobacco more competitive on the global market, where the average price is roughly $1 a pound. Still, it means a lower profit margin. A farmer needs to plant 200 acres of tobacco, not 20 to 50. "Used to be you could grow a family on 10 acres of tobacco, but you can't do that any more," Denning said. The trend favors big growers in eastern North Carolina, where land is cheaper, flatter and friendlier to farm machinery, said Graham Boyd, executive vice president of the Tobacco Growers Association of North Carolina. It's also less pressured by suburban development, he added. Boyd predicts a steady migration of flue-cured production out of the Piedmont and into the Coastal Plain over the next five years, a move to a larger, more efficient operation that should keep the price of U.S. leaf low. But any such migration of flue-cured tobacco to eastern counties will be mitigated by tradition and modern-day risk management, said Blake Brown, a North Carolina State University professor and the state's leading tobacco economist. Manufacturers and merchants will still want some nutrient-rich, flue-cured tobacco from the smaller farms in the Piedmont of North Carolina and Virginia, he said. These farms are also less vulnerable to hurricanes and other coastal storms, Brown said. Piedmont growers are also experimenting with burley tobacco, a smaller-volume but more-lucrative tobacco variety once geographically limited to eight states under the old quota system, including Kentucky, Tennessee and western North Carolina. Growers in the Piedmont can handle 15 to 20 acres instead of the small plots typical of western North Carolina or Kentucky, partly because it's cool enough for burley - a valuable component of American-blend cigarettes. With the exodus of burley farmers in Kentucky, Tennessee and other states, burley is also fetching a higher price than flue-cured - about $1.60 a pound. That makes burley an attractive option for David Hartman of Walnut Cove, in Stokes County. He hopes stepping into burley farming will augment his flu-cured acreage and give him the edge his smaller western Piedmont farm needs to compete in a market that favors bigger farms in the eastern part of the state. "It's a learning experience," said Hartman. "Now, flue-cure I can do that blindfolded. But this is something new. It's been a lot learning this year on burley." Enditem