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With no quotas or price supports, Kentucky tobacco production moves west

June 2005

By Philip Stith
UK Rural Journalism class

HARDINSBURG, Ky. -- With the end of the federal tobacco program, farmers are expected to grow 25 to 30 percent less burley tobacco than last year, but some Kentucky counties will grow more – signaling a westward shift in the state’s trademark crop.

Burley acreage in Kentucky is expected to fall from 114,800 acres last year to 82,200 acres in 2005, according to United States Department of Agriculture estimates. But in Breckinridge County, agriculture officials predict the county’s 2005 tobacco production will surpass pre-buyout levels, and there are signs elsewhere in near Western Kentucky of higher tobacco production.

To the southwest, in Logan County, the end of the quota and price-support system has opened the door for many large-scale farmers to increase their tobacco production substantially. Among them is Page Barker.

Barker plans to increase his production to 100,000 pounds in 2005, from 72,000 last year. These figures place him in the top 10 percent of Kentucky tobacco farmers in pounds grown.

While the amount of tobacco Barker grows is impressive, the amount of federal quota he had is not. He owned only 1,200 pounds of quota, which meant he rented the right to grow and sell 70,800 pounds. At 70 cents per pound, the going rate in Logan County last year, that’s not cheap.

But with quotas abolished and his land available, Barker will not have to spend a penny for the right to grow tobacco in 2005. The result could be a huge increase in profits for Barker and other growers who were forced to rent the majority of their quota.

“I’m much better off,” said Barker, 40, who raised his first crop of tobacco when he was 16. “I’m $80,000 ahead before I start because I don’t have to borrow the money to rent the quota.”

What allows Barker and other Western Kentucky farmers to increase production so substantially is the landscape where they live. Unlike Eastern Kentucky and the adjoining part of Southern Kentucky, which are hilly and tillable mainly in small tracts, Logan County is 90 percent tillable, Barker says.

It is for such reasons that some observers expect the production of tobacco in the Bluegrass State to shift westward, to areas where larger tracts of land are available and -- unlike in much of Central Kentucky -- relatively cheap.

In 2004, tobacco was grown in 119 of Kentucky’s 120 counties. As recently as 1997, tobacco was grown on 67 percent of all Kentucky farms. That kind of widespread tobacco production will not continue in coming years, but appears likely to become concentrated in counties like Logan and Breckinridge.

Logan County, west of Bowling Green, has long been a major agricultural county. It lies on the Pennyroyal Plain and the somewhat hilly Clifty Area, a transitional zone that forms the outer rim of the West Kentucky Coal Field (but has no coal).

Breckinridge County, bounded by the Ohio and Rough rivers between Louisville and Owensboro, is similarly situated. It is less industrialized than Logan and is one of the Kentucky counties most dependent on agriculture.

Ricky Miller, a Kentucky State University small-farm assistant assigned to work with farmers in Breckinridge County, said he believes its significant increase in tobacco production is directly related to the available agricultural land in the county and the average lease price in recent years.

“A large portion of tobacco in Breckinridge County leased for 80 cents [per pound] last year,” said Miller. “Some tobacco leased for as much as a dollar per pound.”

In 2004, Breckinridge County was the 12th largest burley producing county in Kentucky. Breckinridge County farmers raised 3.6 million pounds or approximately 1,800 acres of tobacco last year.

Breckinridge County Agriculture Extension Agent Carol Hinton estimates that the county will be one of the five largest tobacco producing counties in Kentucky next year at 4.2 million pounds and 2,100 acres.

In fact, Hinton anticipates 2005 will be the first of several years of consistent increases in tobacco production. “We are hoping to double tobacco production in Breckinridge County within the next few years,” she said.

Hinton expects a relatively small percentage of growers to stop production in 2005. “Nearly all of the farmers who aren’t going to continue growing tobacco are older or had sharecropped their 2004 crop,” said Hinton. “Almost everyone left will grow more tobacco in 2005, whether it is 1,000 pounds more or 50,000 pounds more.”

Without the added cost of leasing quota, it is much easier for some farmers to grow more tobacco, perhaps more profitably, but small farmers aren’t ready to jump on the bandwagon just yet, if at all.
Some say that small farmers, who have relied on tobacco as a reliable source of income, will become a smaller part of the industry.

Earl O’Reilly, who lives near Hardinsburg, is reducing, not increasing his production this year – to 5,000 pounds from a relatively modest 8,000. While he believes tobacco will flourish in Breckinridge County in coming years, he doesn’t think farmers of his size will be a part of it.

“Eventually it will become concentrated in the hands of a few large growers,” said O’Reilly. “A perfect example is hog farming; when I was a kid there were hogs on every farm on this road, now there are only six or eight hog farmers left in Breckinridge County.”

As tobacco growers increase production, they must become more efficient, Hinton cautions.
With companies paying about 25 percent less under this year’s contracts than last year’s price-supported auctions or contracts, Hinton advocates smarter farming and close attention on the part of growers to achieve efficiency and maximize profits.

“Farmers will be able to double production without doubling acreage by becoming more efficient,” said Hinton. “In the old system people used the same amount of fertilizer every year; now, farmers will have to lower their expenses to make money at a lower price, so they will watch things more closely.”

Hinton said Breckinridge County farmers likely used enough fertilizer on 3.6 million pounds of tobacco last year to raise five million pounds, which is not very efficient.

Kelly Shultz isn’t concerned that increased efficiency by farmers will hurt his seed, plant and fertilizer business. Shultz, manager of Breckinridge Southern States Cooperative in Hardinsburg, reports a 15 percent increase in sales of tobacco seed, starter soil and Styrofoam float-tray sales this year. He is optimistic those figures will translate to increased profits throughout the growing season.

“We have a lot of good growers that are going to continue to produce a quality product, and [in Breckinridge County] they have a good situation,” said Shultz. “These farmers know how to grow tobacco and they have the infrastructure to expand,” including barn space to air-cure harvested burley.

Shultz hopes these expanding growers will result in increased chemical sales, sprayer rentals and harvesting supplies this year.

While these expectations are still largely speculative, what is certain is that increased production next year is going to mean more plants going in the ground next month, and that is music to the ears of Joey Graham.

For the past eight years, Graham, who lives near Custer, has sold plants to tobacco growers all over Breckinridge County and beyond. Last year Graham raised enough plants in water filled float-beds to set 285 acres of tobacco.

If tobacco is on the way out in Breckinridge County, nobody told Graham. This year he expanded his capacity and is raising enough plants to set 365 acres of tobacco, and still has to turn away customers. During a two-week period this spring when orders were flooding in, Graham added capacity each day just to keep up.

“All 52 float-beds are spoken for already, and I could sell another 20 acres if I had it,” he said.
Graham is not unique among producers of tobacco plants. Steven Hinton, who lives near McQuady in the southern part of the county, said he has also noticed higher-than-usual demand this year.

Unlike Graham, Hinton raises his plants in large hothouses and transfers them to float beds when they are large enough. This year, business is good; all his plants were sold by the first week of February. In fact, he said he was forced to turn away returning customers due to a significant number of his regular customers increasing their acreage.

Tobacco-growing statistics are available from the National Agricultural Statistical Service at this Web site: http://www.nass.usda.gov:81/ipedbcnty/report2.htm.

For a version of this article, published as the lead story in the News-Democrat and Leader of Russellville, Ky., click here.


 

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University of Kentucky
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Last Updated: June 28, 2005