In the lobby of the Jane S. McKimmon Center on the campus of North Carolina State University, flue-cured tobacco farmers bunch around each other in informal groups, discussing the future.
Off and on, they'll follow the aroma of the university's variety display to listen to Extension experts talk about production in the post-buyout era. But these days, the talk among farmers, in the coffee shops and out in the field, is about the future.
“In my case, I'm 66 and ready to retire,” says Kenneth Jones of Lenoir County, N.C. Along with Jerome Vick of Nash County, Charlie Batte of Johnston County, and Graham Boyd of the Tobacco Growers Association of North Carolina, Jones is thinking out loud as much as anything.
“I feel like Phase II belongs to farmers,” Jones says. “And I haven't seen a contract.”
Vick, as well as the others in the group, counted on the Phase II payments to carry him through until the buyout check comes.
“The contract prices don't entice me to increase acres,” Vick says. “I can't quit, but I can't increase.” Vick laments the cost of inputs. “It isn't so much the price of tobacco, it's our inputs.”
Batte goes into the new year with the intention of growing tobacco. “Whether that is carried out remains to be seen. 99.9 percent of the farmers budgeted the Phase II money to come in.
“We went from a positive with the buyout to the Phase II situation,” Batte says. “I'm in a worse financial positive for the next year than I was this year.”
Blake Brown, North Carolina State University Extension ag economist, calls it a year of transition. When all's said and done, more tobacco could be grown in the U.S. without a program than with a program.
Without a buyout, Brown had projected a 25 percent to a 35 percent cut in quota and a doubling of assessments.
For 2005, he sees a decline in acreage that could be “significant.”
“Many farmers have been waiting for a buyout, so they'll exit production,” Brown says.
He sees consolidation and specialization of farmers into medium-sized units. “This will be a year of farmer selection by companies.”
As far as 2005 prices are concerned, Brown sees an average of between $1.35 to $1.50 per pound for flue-cured. Burley could fetch $1.40 to $1.55 per pound. Companies will provide incentives for quality and upper-stalk leaves. There was some indication at the end of the year that prices could sift out faster than the expected increases in acreage. “Prices have adjusted quickly,” Brown says. The reason? A glut of flue-cured tobacco worldwide.
The equilibrium price could be $1.47 after two to three years.
Brown sees U.S. acreage increasing in the next two to three years because leaf dealers and companies have “become a bit nervous about having so much tobacco produced in such a small area of Brazil. That fact could bring back production to the U.S.” Brazil produces three times the amount of flue-cured tobacco that the U.S. does.
“This is a year of transition,” Brown says. “This is a milestone year where farmers will have to look at their strengths and weaknesses and determine where they go from here.”
Back in the lobby of the McKimmon Center, the talk is serious. “It's not as good as it could have been, but not as bad as what was coming,” says Batte of Johnston County. “Otherwise, it would take a book to answer a question like, ‘What do you think about the buyout and the future?’
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