Centers provide tobacco sales option

They may be in the minority, but the roughly 20 percent of tobacco farmers taking their crop to the Flue-Cured Stabilization's Marketing Centers are happy with how things look now.

One county agent believes farmers feel that the auction warehouse acts as a “checks and balances” on the contracting system. Both growers and the co-op feel there's a place for a dual system of contracting and auctions, but it still remains to be seen if prices at the auctions will compete with contracting.

“At least with this system, you've got five different buyers competing for your tobacco,” said Dick Boswell of Kenly, N.C. He was selling his tobacco at the Liberty Warehouse in Wilson, N.C.

The market is one of 14 marketing centers operating this season under the supervision of the co-op. Stabilization doesn't charge commission on auction sales.

“I think the farmers feel the auction warehouse helps keep the checks and balances,” says Norman Harrell, Wilson County, N.C., Extension tobacco agent.

At mid-August, the second full week of sales, prices for the largely carryover crop were ranging up to $1.94 per hundredweight. Tobacco graded B3K was fetching $1.94. But a little more than a third of the carryover crop was going into the loan.

So far in 2002, 35 percent of the crop has gone into the loan, compared with 5 percent the same time last year. That's a concern the general manager of the co-op doesn't quite know how to answer.

“This carryover tobacco was selling very good at the end of last season,” says Lionel Edwards, Stabilization general manager. “We don't know just the reason for the decline in demand.”

Kenneth Kelly, who serves as sales manager for Stabilization at the Liberty Warehouse, says prices were holding pretty steady for “anything that was pretty good tobacco.

“About 95 percent of the tobacco the first week was carryover,” Kelly says. “One-ninety-four is tops and it can go down from there, depending on what you have. For anything that was pretty good tobacco, it's been holding pretty tight in the 194 range.”

Kelly led buyers from five companies down the aisles of tobacco sheets and one short row of baled tobacco on Aug. 12. The market was in a transition period between the carryover period and the new-crop tobacco when Southeast Farm Press visited Wilson. Stabilization operates the marketing centers in the traditional format of the auction. The only exception: they don't charge commissions. A group of warehousemen is appealing a judge's ruling that said Stabilization could operate the marketing centers.

So far, farmers are viewing the centers in a “good, but cautious” light, Kelly says. In the first week, the market showed some weakening, creating concern among farmers. “I think they're cautiously optimistic in comparing the contracting prices with the auction prices. The price for down-stalk tobacco is something they'll be interested in.”

Liberty Warehouse was “wall-to-wall” in its first week of sales in early August. Interest among farmers has been high. As late as March, farmers who didn't contract part of their crop “came back to the auction.”

Dewey Davis of Lucama, N.C., is a long-time tobacco farmer who dropped by the marketing center “to see about bringing some tobacco this afternoon.

“I'm impressed,” Davis says. He has reduced his crop to four acres and considers himself “semi-retired.” A good working relationship with Kelly over the years contributed heavily to his decision. “I like the auction center. I don't think we just need a contract deal. I think we need both.”

Hugh Council of Pinetops, N.C., brought the first primings of his 2002 crop to the warehouse. The first primings graded from $1.50 to $1.56. “That's about as good as you can expect,” Council said, sitting on a sheet of tobacco. “I prefer to sell my tobacco like this,” he said. Council grows 16.5 acres.

Because some 80 percent of flue-cured tobacco is now marketed through contracts, Edwards says Stabilization did the proper thing in offering farmers an alternative. “We really think there's a place for the marketing system in the future as long as we have a program and the price support is available.

“It's our intent to level the playing field for those farmers who are not offered contracts or who don't want to contract,” Edwards says.

“As long as I can bring it here and the price stays right with the contracting, I'll take it here,” Council said. “With this system, if I don't get what I'd like to see, I can bring it back to the sale another day.”

Despite all his preferences for the auction system, Dick Boswell of Kenly says the “free-market in tobacco like this is on its way out. For the short-term, it may get better, but if it all goes to contracting, prices will fall and farmers will lose their independence — you'll just be an employee.

“The light at the end of the tunnel ain't the sun — it's the train,” says Boswell, who's grown tobacco for 44 years.

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