Not Bailing Yet ; Tobacco Farmer One of Few Still Growing Crop Despite Smaller and Smaller Profits

Source from:  News Sentinel By LARISA BRASS, brass@knews.com  03/24/2006

After his first season without government price supports, tobacco farmer Alan Sasscer is ready to give it another go. "All said and done, I'm going to make some money," he said. "I'll do it again until something else comes along." Sasscer finds himself in shrinking company. Just more than a year after a $10 billion federal buyout ended the government price support system, figures are showing what most experts predicted: A lot of local farmers have gotten out of the tobacco business. Burley tobacco production in Tennessee dropped 26 percent from 46 million pounds in 2004 to 34 million pounds in 2005, the lowest yield since 1928, according to the U.S. Department of Agriculture's National Agricultural Statistics Service. Total tobacco acreage in Tennessee dropped from 24,000 in 2004 to 17,000 in 2005. Sasscer planted 15 acres of tobacco last year and ended up harvesting 12 acres after the loss of a 3-acre field. He said he received about $1.59 per pound for the approximately 31,000 pounds of tobacco he sold this season. Production was good -- averaging nearly 2,600 pounds per acre compared to a state average of 2,000 pounds per acre -- and he got a little better price than he anticipated. Sasscer wouldn't disclose his profit, saying he hadn't run all the numbers yet. But last year's oil price spikes boosted costs for fuel and fertilizer and narrowed his profit margin. Those increased costs, coupled with little change in this year's prices, have been enough to drive even more farmers out of business or at least prompt them to cut back production this year, Sasscer said. "Everybody I've talked to except for one man is getting smaller," he said. "It's getting to be a cutthroat business. The money just ain't there no more." Land shortage Sasscer plans to plant another 15 acres this year if he can find enough land to lease. That's one of several issues tobacco farmers face as they decide whether to stay in business, said Terry Whitson, owner of the Rogersville Tobacco Exchange, which manages contracts and tobacco sales for tobacco companies RJ Reynolds and Alliance One International. Most farmers sell tobacco via contracts with major cigarette manufacturers. To maintain high yields, farmers must rotate their crops, and leasing land has become increasingly difficult as more land is sold for development and values climb, he said. In addition, low prices have discouraged farmers from investing in barns and other facilities used to cure tobacco, Whitson said. "I think most of them are maxed out" in terms of production, he said, and tobacco prices aren't encouraging farmers to expand. The 2006 tobacco crop will bring "a couple cents more (per pound)" than last year's, he said. "To be completely honest, the 2 cents wasn't enough," Whitson said. "I don't think that that incentive is going to excite the farmers as much as the tobacco companies had hoped for." Prices did not rise significantly in spite of the fact that there wasn't enough local burley tobacco to satisfy this year's market, said Kelly Tiller, assistant professor with the University of Tennessee's Agricultural Policy Analysis Center. Bad weather, for both growing and curing burley, hurt production, she said, although Tennessee farmers fared better than those in neighboring states. "This was a real disappointment to a lot of farmers," she said. "The companies would have bought more burley had it been available." Market forces Tiller said tobacco companies are trying to encourage supply -- for instance, buyers have tested growing burley tobacco outside traditional regions of Tennessee, North Carolina, Kentucky and Virginia -- while keeping prices low. "They want to encourage slowly. They want (production) to grow as cheaply as possible," she said. "They only want the ones that are willing to stay in and work hard and do it for the least amount that they're willing to pay." Whitson said buyers are relying on past surpluses to meet this year's demand, and he believes tobacco prices may start to go up as soon as next year. Tiller is less sure. "It's going to take a few years for this to really settle out," she said. Meanwhile, the Burley Stabilization Corp. -- which formerly bought up tobacco under the government price support system -- this year continued to provide an alternative market for farmers. This year the company helped auction about 3 million pounds of tobacco directly to primarily international firms looking to buy up tobacco that's not tied to a contract. The program got a late start, but "we've been fairly pleased so far at the reception by the farmers," said Charlie Finch, managing director of the Burley Stabilization Corp. Finch said while he's hopeful demand for U.S.-grown burley will continue to rise -- China, for example, has shown interest in locally-grown tobacco -- prices do nothing to encourage local tobacco growers to stay in the business. "It's still going to be fairly shaky for another year or two," he said. Sasscer isn't putting all his eggs in one basket. This year he'll diversify by raising some beef cattle with his father and growing squash in a tobacco field to give his ground a rest. And, if tobacco prices decline in the coming years, "I'll probably quit," he said. Business writer Larisa Brass may be reached at 865-342-6318. BACKGROUND * Burley tobacco: Grown primarily in Tennessee and Kentucky, it is air cured (as opposed to flue cured, which involves a heat process) in weather conditions unique to this part of the country. * Tobacco buyout: Passed by Congress in late 2004, the $10 billion federal buyout ended a government price support system in place since the 1930s and moved tobacco growing and buying to a free market system. ON KNOXNEWS.COM See a slide show following Greene County tobacco farmer Alan Sasscer through his first season without federal government price supports and read previous coverage. BY THE NUMBERS * 34 million: pounds