By TIM THORNBERRY
FRANKFORT, Ky. — Regardless of declines the tobacco industry has endured over the last decade, Kentucky remains the largest burley-producing state in the country. Last year state producers grew 148 million pounds of the slightly more than 202 million pounds of U.S. burley tobacco.
Since the federal quota buyout in 2004, the industry has stabilized somewhat even though the economic levels reached from tobacco production in the 1990s may never be seen again.
Will Snell, an agricultural economist at the University of Kentucky College of Agriculture, said the 2012 crop brought pre-buyout prices back to growers for the first time in nearly a decade.
“We finally got back to prices that were near, if not above, pre-buyout prices and a lot of this was supply-driven rather than demand-driven,” he said. “We had about a 25 percent reduction in world output in terms of burley for the 2012 crop, primarily with a large reduction in Africa, which for the most part is a filler style, lower-quality tobacco but it is still in pipeline and as a result, supplies were very tight last year.”
Add to that several challenging growing seasons in the United States and production in South America that has not rebounded to earlier levels, and tobacco companies were feeling the crunch in lower supplies even with a dwindling market. Consequently, prices were right at the $2 per pound mark – approximately the same level producers were getting before the buyout, according to Snell.
He added with the increase in prices, many producers forgot about the labor headaches they endured during the growing season.
“Tobacco is one of those crops, we sell some of it in one calendar year and sell some of it in another calendar year, but if you look at the crop year basis, the 2012 crop actually exceeded $400 million here in Kentucky,” Snell said. “That includes the dark (tobacco) as well as the burley, and that is the first time we did over $400 million since the buyout.”
The USDA forecast for this year’s tobacco crop shows an increase in planted acres. The most recent report noted: “Burley tobacco growers in Kentucky intend to set 78,000 acres for harvest, up 4,000 acres from 2012. For the burley-producing states, growers intend to set 103,100 acres, 2 percent above last year.”
On dark tobacco: “Producers intend to set 9,500 acres of dark-fired tobacco in Kentucky, up 500 acres from the previous year. Acreage set to dark-air tobacco was estimated at 4,000 acres, down 200 acres from 2012.”
Snell said worldwide production this year should increase as production in Africa rebounds and levels could reach what production was a couple of years ago. But higher-quality stocks primarily from the United States and South America will likely remain tight.
“As a result, the companies are out here asking growers to put out more acres in 2013 because of that tightness in quality stocks,” he said.
Snell added once again, growers will have to go through the equation of looking at how tobacco fares with cattle, soybeans and corn, taking into account all the labor headaches and factors such as dilapidated barns, as well as the crop insurance regulations stating tobacco cannot be grown three years in a row in the same field.
“So there are a lot of complicated issues, but I think there is no doubt we’ll see more acres,” he said.
Snell wasn’t too surprised to see planting intentions for Kentucky burley tobacco growers up, but for their neighbors to the south in Tennessee, production is expected to decrease by 12 percent. All across the Burley Belt, planting intentions show an increase of about 2 percent; however, Snell thinks that could be as high as 5 percent by the time planting is finished.
Even with ag labor reforms seemingly close to reality in Washington, tobacco growers will still likely base many of their growing decisions on whether they think enough help will be available to get a crop grown. Snell said the labor issue could constrain some of those acres from making it to the barn.
“I think labor is going to continue to be an extremely high-cost component for tobacco,” he said. “Obviously the companies, as well as university researchers, continue to look at ways to minimize those labor hours devoted to tobacco. Up to this point we’ve gone from hand-tying to baling and now the big bale has certainly cut out some of that cost.
“But we’ve played around a lot with mechanization over the years, with very limited success for the scale of producers that we have. I think the best attempt is to try and reduce labor hours out there and continue to become more and more efficient.”
Snell said he knows producers get tired of hearing from university types who say they must become more efficient, but the two most important factors in growing a crop is to get decent yields and to do it in the most efficient manner possible.