U.S. tobacco crop rises, but down from a decade ago

U.S. tobacco crop rises, but down from a decade ago

August 27th, 2011 by Associated Press in Local - Breaking News

By BRUCE SCHREINER and MICHAEL FELBERBAUM

Associated Press

SHELBYVILLE, Ky. - It's harvest time in much of the nation's tobacco patches and this year's harvest is expected to be among the smallest in at least a decade.

Farmers are expected to produce 726 million pounds of tobacco, the U.S. Department of Agriculture said. That's up 1 percent from 2010, but down nearly 28 percent from a decade ago when more than 991 million pounds made its way into cigarettes and other products.

Tax hikes, bans, health concerns and social stigma have driven a decline in cigarette sales, but the drop is less stark outside the U.S. Growing markets like Asia are offsetting worldwide declines and contributing greatly to U.S. exports.

Gene Witt's 46th tobacco crop might be his last in a part of the country where the "golden leaf" was once an economic mainstay. The crop that helped build much of the South and was once celebrated at festivals now seems more a vestige of the past.

The third-generation tobacco farmer was upbeat about the prospects for his long, green tobacco leaves hanging in a barn to cure for the fall market. A timely rain the night before promised to sprout more growth in the crop still to be harvested.

But the 62-year-old Witt said he's increasingly worn down by the unpredictability of tobacco farming - from the weather to the tobacco companies that sign up farmers under production contracts to supply them with leaf. The companies can pick and choose what part of a crop they want to buy at market.

"It used to be fun and you made some money," Witt said. "You're not making as much money now and it's not as fun."

U.S. tobacco production has fallen sharply since the 2004 tobacco buyout, which ushered in a free-market system to replace a Depression-era price support program. The venerable program was reeling from steep declines in tobacco demand due to anti-smoking efforts. Some tobacco companies also have set their sights on crops overseas, where tobacco can often be grown less expensively.

In Kentucky, the nation's top producer of burley tobacco - an ingredient in many cigarettes - farmers are expected to bring 126 million pounds to market, down about 11 percent from last year and down nearly 43 percent from 10 years ago.

Agriculture officials expect Tennessee tobacco farmers to produce about 54 million pounds this season, up more than 18 percent from last year. Tennessee is the nation's No. 2-producer of burley, but farmers there also grow fire-cured tobacco used in pipe tobacco, chewing tobacco and snuff.

Paul Denton, professor of plant sciences at the University of Tennessee Institute of Agriculture, said the Tennessee yields might turn out to be disappointing, though, as very dry conditions have hurt fields in the north-central part of the state centered on Macon County.

"I think our yield may slip from what USDA estimated and we may be below it," he said.

Still, the crop is expected to top last year's yield.

"We had a pretty rough year last year," Denton said. "I think we'll have a better yield this year."

Meanwhile, U.S. growers of a lighter variation of the golden leaf called flue-cured tobacco in areas like North Carolina and Virginia are forecast to produce more than 465 million pounds, up about 3 percent from last year.

Increases in flue-cured tobacco production are due to a new purchaser, U.S. Growers Direct, said David Reed from Virginia Tech's Southern Piedmont Agricultural Research and Extension Center. The North Carolina-based company, which contracts with farmers and exports products overseas, would not say which tobacco companies it was working with for its purchases. Reed and others said the tobacco is headed for the Asian cigarette market and exports have played a big role for U.S. tobacco farmers.

However, the upcoming selling season could be crucial in determining how many farmers sign up with tobacco companies to grow another crop next year, said University of Kentucky agricultural economist Will Snell.

Decrease in demand has caused some tobacco farmers not to put much or any money into rehabbing old tobacco barns used to hang and dry their crop - another example of the dwindling industry. And with grain prices high, some farmers might opt to get out of costly tobacco growing and convert that land into corn or soybean production. Others might turn tobacco plots into pastures for beef cattle.

"Growers just can't sustain," Reed said about the costs and uncertainty of being a tobacco farmer. "You just can't keep doing that."

Farmers contract with tobacco companies, which then come to local receiving stations to grade and purchase leaf. But how much they buy depends on the quality.

In the U.S., the largest tobacco manufacturers include Richmond, Va.-based Altria Group Inc., parent company of Marlboro maker Philip Morris USA; Reynolds American Inc., the Winston-Salem, N.C., producer of Camel and Pall Mall cigarettes; and Newport cigarette maker Lorillard Inc., based in Greensboro, N.C.

Witt has a production contract with Philip Morris International Inc., the maker of Marlboro and other cigarette brands for the overseas market. Last year, Witt averaged $1.62 a pound for his tobacco, enabling him to eke out a profit. The year before, he averaged $1.79 to $1.82 a pound. Last year's Kentucky burley crop was hurt by a drought during the curing season that made the leaf less desirable among tobacco companies.

Many farmers last year had at least a part of their crop rejected by their contract buyers, and some growers had big chunks of their crops turned away by the tobacco companies. That leaf ends up at auction, selling for much less than it cost to produce.

"Used to be, when you took your tobacco to market, you were happy to go get your check," Witt said. "Last year, your stomach rolled over because when you took it down there, you didn't know if they were going to take it or not."

When asked how much longer he'll keep growing tobacco, Witt replied, "Maybe not too much longer." Witt has a full-time job as the chief deputy with the Shelby County sheriff's office. He also raises cattle and might opt to increase his herd.

"I think it will be my last big crop," he said. And he's not alone.

There are some younger men raising tobacco in the area, but they are outnumbered by farmers in their 60s who are close to retiring, he said.

Concerns over some countries, like Canada, passing laws banning certain additives in tobacco found in cigarettes may cause more burley growers to quit because that type of tobacco needs certain flavorings to make it more palatable.

"I think tobacco is on the decline," Witt said.

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AP Tobacco Writer Michael Felberbaum reported from Richmond, Va.; Randall Dickerson reported from Nashville, Tenn.