Challenges, hope ahead for tobacco industry

CHATHAM — As domestic cigarette consumption and production declines, local farmers hope overseas demand will enable them to grow more tobacco, but they worry if they’ll get the price they need to cover their expenses. About 165 people attended the annual flue-cured tobacco production meeting at Chatham High School on Thursday night.

Many farmers talked about the possibility of a firm contracting 100 million pounds of flue-cured tobacco for China.

Speaker Stanley Duffer, marketing specialist for the Virginia Department of Agriculture and Consumer Services, acknowledged he heard that U.S. Growers Direct, a marketing and distribution commodities company, planned to contract tobacco for China, but he was unsure of its validity and said people have a lot of unanswered questions.

Even so, that amount is more than 20 percent of the crop produced now, he said. U.S. flue-cured production was about 450 million pounds last year.

“The question is, can you get it produced?” Duffer asked.

Farmers apparently grew more tobacco than what they got contracts for last year.

In 2010, the contracted tobacco volume in the United States was down 20 percent, Duffer said. Yet, flue-cured acreage only decreased 6 percent.

Farmers sell the excess tobacco to secondary markets at a reduced price, he said. The downside is this shows tobacco companies that growers can produce at a lower price, especially when the companies have more demand for contracts than they can fill, Duffer said.

Duffer reminded farmers to determine if they are making money when prices stay the same as expenses increase.

Even so, Pittsylvania County flue-cured tobacco acreage remained steady since 2004 and Virginia tended to be the leader in average yields, Duffer said.

More than 12 percent of Virginia’s tobacco sales went to new outlets with 1.6 percent going to auction sales and about 11 percent to Japan Tobacco International, according to estimates based on excise taxes, Duffer said.

Yet, domestic cigarette production declined 34 percent in the past five years as domestic consumption dropped 22 percent, Duffer added. Consumption is expected to decline further because of smoking bans and costs of cigarettes.

Another challenge for farmers will be future Food and Drug Administration regulations, he added.

Additionally, tobacco buyout payments will stop in 2014. Growers who had been using buyout money to help fund their tobacco operation need to be especially conscious of that, Duffer said.

“It just won’t affect tobacco growers,” Duffer said. “It’s going to affect the economy.”

On the positive side, the decline in the value of the dollar helps exports.

“It makes us much more competitive with the Brazilian tobacco,” Duffer said. “And that’s the other high-quality producer out there.”

Attendee Darrell Jackson, a 48-year-old tobacco farmer in Henry County, said many farmers are talking about the firm possibly contracting 100 million pounds of tobacco for China.

Yet, he remains concerned about the prices growers will get for their tobacco. He said this coming year growers will see the same price as they did in 1980, even though fertilizer, diesel and liquefied petroleum gas expenses have continued to climb. Irrigation costs this past season with the hot and dry summer also cut back on his profit margin.

“The only way you can make it farming now is you’ve got to watch every penny you spend,” Jackson said.

That’s why Bobby Wilkerson of Ringgold stopped growing tobacco, he said. Wilkerson wanted less stress.

“It was my livelihood but the income wasn’t enough to offset costs,” he said.

Wilkerson produces hay now and wonders what the future holds for tobacco.

Twelve-year-old Ethan Cundiff of Penhook said he’d see what happens.

He’s been growing five acres of tobacco for a contract for the past two years. Ethan hopes to make a career out of farming, perhaps also becoming an extension agent.

“You’ve got to be thrift about it and careful,” dad David Cundiff said. “But it can be done.”


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