Tobacco marketing takes on a new look

The “new look” 2005 tobacco marketing season got under way Aug. 15 as flue-cured leaf went on sale at 11 marketing centers operated by the Flue-Cured Tobacco Cooperative.

One of those centers is in Oxford N.C., and sales manager Sam Crews said the first day could definitely have been worse.

“We sold 457,000 pounds, all but about 20,000 of it carryover,” Crews said. “The average price was about $1.39.”

Including the cooperative, there were four buyers, he says: The cooperative, which has changed its name from Flue-Cured Cooperative Stabilization Corp., and three leaf dealers — Universal, Alliance One and Hail & Cotton.

The cooperative got 47 percent of offerings, says Crews, while Universal and Alliance split most of the rest of it.

Almost everything sold. There were just a few lots that failed to attract a bid and had to be carried home, but the great majority of the offerings on opening day were high-quality upper-stalk leaf of the best Old Belt style that found a buyer.

Meanwhile, a good 2005 flue-cured crop is potentially on the way, says Crews.

“This crop was in some jeopardy from an extended hot, dry period. But rains fell toward the end of July through mid-August. We got 4.5 inches in a three week period, and the crop looks very good now.”

He urged growers to let their leaf achieve full maturity before harvesting.

“We have seen already that your tobacco had better be ripe or you will be in trouble. There is no market for green tobacco.”

But even after just one day of sales, Crews was optimistic that little of this season’s leaf would go unpurchased. “I feel that most tobacco offered this year will find a buyer at some price. I just don’t know what that price will be.”

The opening day price was roughly 50 cents a pound on average less than what would have been expected under the old system. Farmers who had been paying that much or more in quota rent will feel the price reduction less than those who were paying less or who were growing only their own quota.

Still, there is a lot less money involved in selling tobacco this year.

“My growers say it is difficult to make money growing tobacco at this price given the current cost of fuel and other inputs,” says Crews. “But we will just have to learn to live with what we can get from the market. If we are going to survive as tobacco farmers, this is the way we are going to have to do it.”

The situation was similar at the other marketing centers. Farmer Richard Jenks of Apex N.C., who attended the opening in Wilson, N.C., said farmers would have to make enough at the sale “to take care of our operating expenses, return some on depreciation and make a little bit of a salary.”

Some of the lower stalk tobacco he saw sold was going in the 50-cents a pound range, and that just isn’t enough.

But Jenks was encouraged to see representatives from a number of traditional buying companies that were not following the sales yet, but were observing the sale. Also, he says, the crop looks very good in his area.

“I think if a man will harvest it ripe and clean and do a good job of preparing it, I think he will do all right this season,” says Jenks.

There is one bright spot on the scene: Some possible new buyers, such as the Chinese. Crews is hopeful that some non-traditional buyers may participate in this market. “The best thing we could do is sell to some customers we haven’t been selling to,” he said.

The grower organization formerly known as Flue-Cured Stabilization has changed its name.

The cooperative, formed in 1946 under the name Flue-Cured Tobacco Cooperative Stabilization Corporation, is now called simply Flue-Cured Tobacco Cooperative.

“We're still a cooperative of tobacco farmers from Florida, Georgia, North Carolina, South Carolina, and Virginia, with a 400-year tradition of tobacco growing learned from our fathers and grandfathers,” states the cooperative’s new mission statement. “But with price supports a thing of the past, full-flavored flue-cured tobacco from the United States is now competitively priced with any full-flavored tobacco in the world.”

The cooperative’s new catchline is “We’re not your typical tobacco company. Perhaps the first clue is the dirt under our fingernails.”

The cooperative has been operating marketing centers since 2001, but this season is clearly different in a number of ways.

In the past, the services of the cooperative, which operated the federal price support program for the federal government, were available to all flue-cured growers.

Starting this season, the right to sell in a cooperative warehouse is available only to farmers who have signed a contract with the organization. More than 3,000 have done this. About half of those are “exclusive” contracts in which the farmer promises to deliver all his tobacco to a marketing center. There will be a guaranteed price for some grades if the cooperative takes them, but any grade can be bought by commercial buyers and go straight to the trade.

“Non exclusive” contracts allow the grower to bring tobacco that isn’t bound to a commercial company to a marketing center late in the season to be auctioned. But there are no guarantees and if the tobacco doesn’t receive a bid, it will have to be taken home.

All of the tobacco offered the first day was from farmers with exclusive contracts with the cooperative.

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