The mood was somber when the Tobacco Growers Association of North Carolina held its annual meeting in Raleigh, N.C., on Feb. 6 in conjunction with the Southern Farm Show.
Nearly every grower in attendance, it seemed, had received news that the pounds he could contract to produce had been reduced from 2014, said the association’s president Tim Yarbrough of Prospect Hill, N.C.
“Every conversation among growers is about a bleak forecast in terms of real leaf demand,” he said. “It isn’t easy to understand how we seemingly find ourselves in this oversupply situation all of a sudden.”
But some of the factors involved are not hard to identify, he said:
--Overproduction in Brazil in 2014.
--Too big of a crop in Brazil and other South American producing countries in 2015 (that tobacco is just now coming to market).
--A high volume of Chinese tobacco – primarily of filler style quality – that has been offered to world buyers at a very low price.
--The U.S. flue-cured crop in 2014 was in excess of 500 million pounds, and that definitely was more than the demand.
In Kentucky, some burley was selling for less than a dollar a pound at auction when Kentucky Extension economist Will Snell addressed a legislative committee in Frankfort, Ky., on Feb. 4.
“It’s a situation where we’ve gone from somewhat of a seller’s market…to more of a buyer’s market in terms of excess supplies,” he said. “As a result, we’ve seen a lot of volatility in our prices this last growing season.”
Burley prices hovered around $2 per pound in recent years but now are probably averaging around $1.40 per pound or less at current auction, he said at the hearing.
Tobacco companies only need around 170 to 180 million pounds of burley leaf from this past season, while the nation’s burley belt has around 213 million pounds to sell, according to the USDA, said Snell. Meanwhile, worldwide production is on the rise, Snell said. Worldwide burley production has grown 35 percent in the past three years while consumption fell.
Though the current burley crop may well prove to be smaller than the USDA projection, 2014 U.S. burley production will still likely be greater than anticipated use, and that has lead to more critical grading and prices retreating from their record high of $2.06 per pound for the 2013 crop.
Massive flooding in Malawi in recent months could mean a better outlook for U.S. burley, said Snell, depending on how much of that nation’s tobacco crop has been damaged. A reliable estimate is not yet available.
Another negative factor for U.S. tobacco growers is the “e-cigarette,” or vaping, market which Snell said typically uses poor quality tobacco in products that sell at a higher price per unit than traditional tobacco products. Because e-cigarettes are not covered by the Master Settlement Agreement and have a higher price point, they are attractive to tobacco companies, Snell said.
Tobacco production in Kentucky is expected to reap $300 million to $350 million overall in 2015, said Snell. At one time, burley was a $1 billion crop for the state.
Tobacco got a little good publicity last summer when it arose that tobacco plants were being used in greenhouses to help propagate the basic material for the experimental Ebola virus vaccine. That raised some hopes that a new use for tobacco might result. But Snell told the legislators that tobacco grown for medicinal reasons apparently is grown in such small amounts that it would not likely benefit large growers.
In other tobacco developments:
--Is organic growing? A company in Switzerland has reportedly contracted for a million or more pounds of American organic flue-cured and burley from the 2015 crop.
--A new face in Washington for N.C.--Thom Tillis, North Carolina’s new Senator and new member of the Senate Agriculture Committee, spoke to the association in his first appearance before an agricultural group since taking office. He admitted he didn’t grow up on a farm. “I grew up in a trailer park next to a farm,” he said. “But I lived in the country until I was 13 or 14 years old and always had family involved in agriculture. The business of North Carolina agriculture is enormous, he said. “It is $80 billion and has the greatest potential for growth. So if you look at it from a business perspective, it just makes a lot of sense that anyone serving (N.C.) in Congress would understand agriculture and understand that regulations either help farmers or hurt them.”