Changes pressuring tobacco growers

Billy Carter is feeling a little disconnected from his own thought process these days. It's as if the issues he's looking at are completely right or completely wrong — at the same time. He's likely not alone.

While he won't presume on fellow growers by saying he speaks for all of them, he does think the ambiguity and confusion he feels is representative of what a number of growers are feeling these days.

Speaking at the 50th Tobacco Workers Conference in Pinehurst, N.C., the Moore County, N.C., tobacco producer says this dichotomy of thought exists across the whole range of issues facing the tobacco industry today. These issues include contracting versus auction, genetically modified tobacco, FDA regulation of tobacco and the general competitiveness of the industry.

Like his fellow growers, Carter chose to contract about 80 percent of his 2001 production. And in asking growers how they liked the setup, almost to a man he hears a positive response.

“You hear comments about the ease of delivery, the speed of payment, the recognition of a meritorious crop, the development of a relationship that allows for interaction, and the price differential particularly on downstalk tobacco,” Carter says.

“But as the conversation draws to a close, there's an almost ubiquitous disclaimer,” Carter says. Growers, he says, are concerned that the current contracting situation is a honeymoon “to sell us on direct sales.”

And that's where the ambiguity enters the picture.

“I'm worried if the auction system fails that there will be no price discovery upon which to base my pricing for contractual sales,” Carter says. “What happens if direct purchasers get tired of too many lugs or cutters or sun-baked or hail-beat?” he almost wonders out loud.

“I am uneasy about a future where a viable auction market appears a challenge to maintain,” Carter says.

“I feel that most growers agree that it is necessary to have an auction sale with price support administered in order to establish a baseline for prices that are offered for contractually purchased tobacco,” Carter says. Yet, the majority of growers exited the auction system.

There again, the ambiguity between two approaches to the same idea.

The over-riding factor leading to contracting was the chance to realize more net income. A net difference of four cents to six cents per pound is enough to turn even the head of the most rock-ribbed supporters of the auction, Carter told the group at the Tobacco Workers Conference.

The debate is also being played out regarding Flue-Cured Stabilization's plan to open 14 marketing centers. It is commonly acknowledged that it was their role to attempt to offer an alternative to contractual sales and a market for export customers, “yet you find many people who sold contractually are opposed to the use of Stabilization funds for this purpose…They question the long-term financial sustainability of operating so many facilities.”

While the contracting versus auction debate is causing ambiguity, the appearance of genetically modified tobacco for use in cigarettes is causing schizophrenia for growers, Carter says.

“We all understand at this point in time the risk that cross-contamination poses to all our tobacco trade, particularly our export trade,” Carter says. “Growers have risen up in arms about the audacity of Vector Tobacco Company to threaten our livelihood and our overall good for the sake of their desire to grab headlines and sell a few more cigarettes.

“And rightfully so,” Carter says, “but I can assure you that more than one grower has entertained the thought that $1.50 per pound with no quota costs or program constraints does not sound half bad.”

There's also the concern that one day some major player will conclude that Vector “had it right after all.” The other concern is that GMO tobacco could offer production cost savings.

It's much the same two-sided debate in relation to FDA regulation. For years, the manufacturers spoke with a unified voice opposing FDA regulation. “Like good soldiers, growers adopted the party position and if we did not carry that message to Washington, we at least plastered our pickups with “Keep FDA off the Farm” stickers,” Carter says. “Now the industry is all over the board on this issue and growers are seriously concerned that FDA could end up on the farm. But they are also willing to support FDA regulation if it could be parlayed into support for a quota buyout.”

Despite the ambiguity, the U.S. tobacco industry has the most efficient infrastructure. “We are the safest, most consistent and most politically stable producers of tobacco in the world,” Carter says.

He believes industry leaders should focus on turning these inherent advantages to our benefit. “Our most dire needs are not the ones I've been talking about,” Carter says. “Our real problem is competitiveness. The uncertainty associated with these issues is the byproduct of dramatic changes in a short amount of time and can most likely be solved to some degree with adequate time.”

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