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Tobacco farmers deal with new realities of growing the leaf

The following story was written by the Rural Journalism class at the University of Kentucky and edited by their instructor, Al Cross. It was reported by students Kyle Hamilton, Phillip Stith, Jeff Fichner, Brittany Johnson, Allison King, Paul Leightty, Sarah Lutz, Lindsey O’Donnell, Lara Pate and LeeWood Pugh.

A fixture on the Kentucky landscape for nearly a century, tobacco will soon begin to disappear from many of the state’s fields, leaving an uncertain economic outlook for both farmers and the tobacco-dependent counties in which many live.

“This is the biggest structural change of our lifetimes,” University of Kentucky farm management specialist Steve Isaacs told a crowd of wary tobacco growers in Shelbyville last month.

The change is the end of the federal program of tobacco quotas and price supports, which for 65 years limited the amount growers could sell but set a minimum price for their leaf.

Now they can grow all they want, but the price will be about 25 percent less – about $1.50 a pound instead of $2. That and other changes in the tobacco market mean that some growers won’t be growing any more.

Many older and smaller growers will simply retire, with the help of what is called “the buyout” – money from cigarette companies, passed through the federal government, as compensation for the quotas that added to the value of their land.

John Stevens of Morehead, who raised a relatively small crop of 1,700 pounds last year, said he plans to quit farming altogether. “At my age, 76, I am too old to grow tobacco anyway,” he said. “The buyout gave me a more attractive way out.”

Hand counts at tobacco growers’ meetings held by UK specialists around the state in February indicated that around half of those who attended the meetings and grew tobacco in 2004 would continue to grow it in 2005. Very few said they planned to increase production, but some of those increases will be large.

Most who plan to increase production appear to be those who grew more than 10,000 pounds last year, according to UK student Phillip Stith’s survey of 41 growers at the Tobacco Farmer Day at the National Farm Machinery Show in Louisville.

With the quota restrictions gone, Nate Barker of Shelbyville said he has contracted with a tobacco company to grow 280,000 pounds, almost double the 150,000 pounds he grew last year – only 8,000 pounds of which was his own quota. The rest “was all the tobacco I could find to lease,” he said.

But Kenneth Richardson of Madison County is cutting back his crop to about 4 acres, from about 9 acres, and may get out of tobacco altogether.

“It has just gotten to the point where I have realized the tobacco market is not a promising industry anymore,” said Richardson. “I don’t want to quit growing, but I really just can’t afford spending the time growing tobacco without turning a profit,” said Richardson.

Because tobacco companies are offering lower prices, Isaacs and UK agricultural economist Will Snell are warning growers that per-acre yield will be critical to their success.

“It’s going to be really tough for those producing seventeen, eighteen, nineteen-hundred pounds per acre to be self-sustaining,” Snell told farmers in Mount Sterling. The traditional average burley yield for Kentucky farmers has been 2,100 pounds per acre.

The specialists also cautioned growers to watch their costs and figure in the cost of their own labor. “If you want to work for nothing, find something easier than tobacco,” Isaacs said at more than one meeting.

At meetings in Somerset and Madison County, very few of the growers said they could go home and lay their hands on a document that would give their cost of production – an illustration of the wrenching nature of the change and tough decisions many face.

John Simpson, a Casey County farmer, said he is not ready to quit farming, and says he can do it profitably by moving his production focus away from tobacco. Simpson, who raised 2,000 pounds of tobacco in 2004, said he will quit growing tobacco next year and raise exclusively beef cattle. “With the rising cost of labor and no government price supports, I can make more money raising cattle,” said Simpson. “Next year I plan to turn my tobacco barn into another cattle barn and increase my herd size.”

The generation gap among growers is illustrated by Chreswell Covington of Madison County, who is getting out of tobacco, and his son Stacey, who is saying in it – while continuing to diversify with cattle, hay and a herd of 150 goats.

“My problem now is that finding good workers who will accept the wages I am able to pay is near impossible,” said Chreswell Covington, 65. Raising burley tobacco requires 200 to 225 hours of labor per acre, UK specialists say.

Covington said his son, 37, operates additional businesses because farmers can no longer live off tobacco alone. It takes about 200 to 225 hours of labor per acre and this includes what is paid for and what is not; every grower has a different cost of production.

Stacey Covington got into goats with money from the national tobacco settlement of 1998. Kentucky earmarked for agricultural diversification half of the money it got in the deal with cigarette companies.

Use of the diversification funds has become even more critical, with the end of the federal program and signals that tobacco production may be shifting from tobacco-dependent counties in the state’s Appalachian areas to Central and Western Kentucky and even out of the state, to areas where larger tracts of land are available -- even, perhaps, large tracts in Illinois.

Isaacs said the one county that appears to be in the middle of a tobacco boom is Breckinridge, which is one of the most farm-dependent counties in Kentucky and has relatively large tracts available for expansion of tobacco production.

“Breckinridge County will increase production substantially,” Isaacs said. “There’s not a barn in the county to lease.” He said farmers there are banking on having high yields.

Snell told the Mount Sterling crowd that he remains hopeful that tobacco can continue to be grown in the counties represented at the meeting – something that depends on how efficient farmers in the area are ar rasing tobacco and the willingness of cogarette companies to sign contracts in the region.

“I don’t think they will leave Montgomery and Bath counties, but they are discussing plans,” Snell said. “Hopefully the price incentives will be enough to keep tobacco growing viable in this part of the state.”

Carroll Burchett of Johnson County, who attended the easternmost growers’ meeting, at Flat Gap, fears his region will lose a significant source of income.

“Many people in my county and surrounding Eastern Kentucky counties are concerned that we are losing an industry that has been vital to our community for many years,” Burchett said. “Tobacco was a crop that people could count on for money and it also helped keep small farms alive.”

Microsoft Excel spreadsheets for determining costs in tobacco production are available on the UK College of Agriculture’s Web site at http://www.uky.edu/Agriculture/TobaccoEcon/mgmt.html.

For the Farm Service Agency's guide to the tobacco buyout, see http://www.fsa.usda.gov/tobacco. To watch the FSA's television commercial explaining how to sign up for the buyout, click here.

Advice to growers: Manage wisely, watch details to succeed

By Laura Skillman, University of Kentucky Agricultural Communications

Prices being offered for tobacco under contract for the upcoming growing season are approximately
45 cents per pound less than in 2004, but tobacco growers can still make decent returns if they are good managers and maintain greater attention to detail to keep yields and quality up.

"It will not be business as usual," said Bob Pearce, a tobacco specialist with the University of Kentucky College of Agriculture.

Quality is a key factor in production but that does not only mean color, it also means producing a product that contains other traits companies want, including leaf free of pesticide residue and low in nitrosamines, said Gary Palmer, UK Extension tobacco specialist.

Producing high-yielding tobacco also will be a key to success in this new marketing era. To be successful growers will need to have ready access to barns and land, average at least 2,300 pounds of tobacco per acre and produce one- and two-quality leaf..

Still, it is important not to focus on yield at all costs, Palmer said. Both quantity and quality are necessary.
One detail growers cannot afford to overlook is to know and understand production restrictions or requirements of their contracts. Many contracts require that tobacco be produced from either screened or low-converter varieties. Tobacco buyers are adamant about this requirement because it has the potential to lower the level of carcinogens in their products, Pearce said.

Timely transplanting young seedlings into the field can improve yield potential, reduce disease incidence and alleviate some curing concerns. Also, it is important to detect and control insect problems before they get out of hand. Disease control can be aided through the use of crop rotation, appropriate variety selection and conservation tillage.

Follow label directions when using pesticides. All the contracts state that only pesticides that are labeled for use on tobacco can be used in the crop and they must be used in the manner in which they are labeled. This is required under federal law for pesticide use. Some contracts state that tobacco will be subject to testing by the buyer to verify compliance with this provision. The detection of residue from unlabeled pesticides could result in the loss of contract and the rejection of current and future sales.

Farmers also need to be aware that some pesticides, even when used according to label instructions, can leave undesirable residue levels. As a result, farmers must be willing to consider other options for some chemicals, and there are other options available, Palmer said.

Several contracts also specify the number of grades used. Grading in four stalk positions has been optional for the past several years but may now be required, depending on contract requirements.

Farmers can follow a few basic steps that will help them be competitive in a post-buyout market. They include being aware of contract obligations and completing operations in a timely manner.

Evaluate production costs, but don't penny-pinch on inputs. Give the crop a chance, because cash costs are about the same for a good crop as for a poor crop. Finally, carefully consider changes to the operation such as appropriate variety selection, rotation and possible new production methods.

"Ultimately, your name is going to be in a database along with the tobacco characteristics you are supplying," Palmer said. "If you plan to continue to do this down the road, you want to have good characteristics associated with your name, and it is certainly doable."


 

Institute for Rural Journalism & Community Issues

University of Kentucky
College of Communications & Information Studies

122 Grehan Building, Lexington, KY 40506-0042

Phone: (859) 257-3744, Fax: (859) 323-9879


Al Cross, interim director , al.cross@uky.edu


Last Updated: March 7, 2004