Short supply, hot demand damper flue-cured auctions

No auctions of flue-cured tobacco were held as of the first week of September, and the general manager of the growers cooperative that planned to conduct auctions said it was unlikely any would be held.

Arnold Hamm, general manager of the Flue-Cured Tobacco Cooperative in Raleigh, N.C., told Southeast Farm Press in mid-September that a combination of a crop that was shorter than what was expected and a demand that was higher than it appeared at the beginning of the season led to a scramble among buyers for uncommitted leaf.

“Any tobacco we have bought beyond what we need ourselves we will probably be able to sell direct to other buyers without auctions,” says Hamm. “We don't think now we will hold any auctions at all, although if the situation changes, we could still hold auctions later in the season.

“Under the circumstances, deliveries to the cooperative to date have just not been enough to justify auctions.”

The farmers who had delivered to the cooperative's marketing centers to date had been very satisfied with the marketing of their leaf, Hamm says. “I can't recall any complaints about the procedure or the lack of auctions.”

The crop is definitely short in terms of what buyers anticipated, Hamm says, perhaps by as much as 20 percent.

“Tropical Storm Alberto had a lot to do with this,” says Hamm. “Thousands of acres were plowed up after it came through. At the same time, we have an exceptionally high quality crop, maybe the best in 10 or even 15 years. End users of the 2006 U.S. flue-cured crop will not be disappointed with the quality.”

To add to that, demand apparently is higher than it was during the contracting period, he says. “That has made things tighter. Buyers are having to hustle to fit a slipper on Cinderella.”

If no auctions are held this year for flue-cured tobacco in this country, it will be first time since at least 1939, and perhaps farther back than that.

Hamm said in September there is no reason to think auctions have outgrown their usefulness to tobacco growers. But it appears they just won't be needed in 2006. “There will be no problem selling flue-cured tobacco this year” with or without auctions, he says.

Burley growers don't expect any difficulties selling their 2006 production either, but they plan to go ahead with auctions again this season. Charlie Finch, managing director of Burley Stabilization Corp. in Knoxville, Tenn., — in the operation of a number of burley warehouses — says the cooperative has high hopes for a successful auction season.

“From all reports I have heard, we have a good crop, maybe our best in four years,” he says. “The Asheville, N.C., area is said to have some especially good tobacco. But all across the belt, we have very good potential for yield. It looks like it could also be of good quality, but the quality is always very much affected by the curing, so we will have to see.”

Burley curing was in full swing in September.

Finch says he continues to see indications of strong demand for this crop.

The opening dates for the burley auctions had not been set as of the end of the first week of September, but it was expected to be close to Thanksgiving week, the traditional opening date for burley sales.

Fifteen warehouses in 13 markets participated in sales of the 2005 crop, but some may drop out because of the low volume of sales, says Finch. Two markets that will definitely be back in operation are Asheville, N.C., and Danville, Ky. They auctioned by far the largest volume from the 2005 crop of the 13 markets.

There will probably also be a few auction warehouses selling the dark tobacco types in Kentucky and Tennessee this season, says Will E. Clark, general manager of the Western Dark Fired Tobacco Growers Assn. in Murray, Ky.

“There will be auction warehouses operating, and I think all our production will find a home,” he says. “But I don't know what price it will bring.”

The opportunity to sell at auction may be especially critical in this area this year, Clark says. “We have had good rains, and we have a big crop. I expect we will make more than our contracted pounds.”

That will be partly because of good yields and partly because a number of farmers — remembering some recent poor yields — planted more acres than would be needed under normal yields to insure they produced their full contract. Excess tobacco has resulted.

Unlike flue-cured and burley, the three cooperatives for the Kentucky-Tennessee dark types (Types 22-23 and Types 35-36) have never been directly involved in operating auction warehouses. All current warehouses are commercial enterprises.

The cooperative for Virginia dark tobaccos — Virginia dark fired (Type 21) and Virginia sun-cured (Type 37) — owned and operated one warehouse at the end of the program years. But after the buyout, the Virginia Dark Fired Growers Association voted to dissolve, and the warehouse in Farmville was sold. All Type 21 is now grown under contract. Type 37 hasn't been grown since the program ended.

Clark's cooperative, which handled Western dark fired (Type 23) and Western dark air-cured (Type 35), is also in the process of dissolving, as is the Stemming District cooperative, which handled Eastern dark air-cured (Type 36).

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