Tobacco Farmers Struggle for ProfitsPrice Drop Means Farms Must Grow

Source from:  The Associated PressRALEIGH, N.C. myrtlebeachonline.com 01/11/2006

North Carolina's shrinking ranks of tobacco farmers are placing their hopes on new competitiveness from a drop in the price of U.S. flue-cured tobacco and the state's status as a top producer. Max Denning, 47, a fourth-generation farmer from Benson, N.C., 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 under 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 a 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. Its 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. The 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 anymore," 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 operation that should keep the price of U.S. leaf low. Enditem