FRANKFORT, Ky. — As the burley tobacco season progresses and producers analyze crops for damage from excessive rains this year, the reality of what this tobacco will do at market is setting in. Will Snell, an agricultural economist with the University of Kentucky College of Agriculture, said going into the season prices were expected to be as strong or stronger than last year.

“I think, with expectations of a shorter crop, if we have growers out there with a big crop and quality curing, companies will be very competitive for those pounds, and I wouldn’t be surprised if we didn’t see maybe even contract schedules revised like we did last year,” he said.

The 2012 burley crop finally crossed the $2 per-pound threshold, marking a return to a level not seen since the 2004 federal quota buyout that sent tobacco into a truly free market environment – and prices on the downturn.

How this crop will fare depends greatly on what happens with weather from this point. Generally a burley crop that starts out in wet conditions will require timely precipitation to maintain a weakened root system. The average rainfall for most of Kentucky in July was under 5 inches. Some areas saw more than 9 inches of rain last month, with most of the state already at its yearly average.

Snell said while it remains to be seen how good the quality of this crop will be, tobacco companies were needing more acres to be grown and more pounds to make up for tight burley supplies.

“That’s just not going to materialize, so for those who can survive and have a decent-quality crop it could be a very favorable outcome,” he said. “But we don’t anticipate that prices will offset the loss of yields that many of our folks are going to experience.”

Snell added even for those producers who suffer quality-wise, the market should favorable because of short supplies. Kentucky burley growers were expected to increase production this year by 4,000 acres, but many of those went unplanted due to wet conditions through much of the spring and early summer. Across the entire Burley Belt an increase of only 1 percent was expected and nearly all of those states have experienced a wet year.

In neighboring Tennessee, the second-largest burley-producing state, production is estimated to be down by 3,000 acres.

Snell said 2013 was poised to be a favorable year from a price standpoint for growers and from an inventory replenishment standpoint for tobacco companies. “It’s premature to say, but we may be in the same boat next year. I think the companies will try to entice more acres again next year,” he added.

He said if a significant portion of this crop is lost, companies may have to look to other places like South America – but for U.S. growers the exchange rates remain in their favor. “We don’t want to look too far down the road, but I don’t see this thing turning around abruptly,” he said.

Brian Furnish, a tobacco farmer and president of the International Tobacco Trading Group (ITTG), thinks this year will be a sellers’ market. “We’re already in a situation where we’re in short supply of what is needed,” he said. “With only a 1 percent increase in acreage, really, that is nothing.

“Then you come out with a short crop because of the growing season. From a seller’s standpoint, if you can get it in the barn and cured good and delivered, it ought to be an interesting marketing season for the farmers.”

Furnish said with the demand now, he feels prices will be over the $2.07 mark, which some growers received after Christmas last year, and there could be bidding wars for tobacco.

“As far as I know, every company needs tobacco even more than they have contracts for,” he said. “All inventories of U.S. burley that I’m aware of are depleted. I don’t know of anyone sitting on an inventory right now.”

Furnish, who has served as general manager of the Burley Tobacco Growers Cooperative and now heads his own buying company, and has traveled the world finding markets for U.S. tobacco, said for the first time there seem to be no burley inventories anywhere.

He also said estimating what this might mean for growers in the 2014 growing season is difficult because burley is in a world market now, and the market will be based on what happens in other tobacco-growing countries such as Brazil and Argentina.

“We are competing with the rest of the world, and while all the tobacco is not the same as U.S. tobacco, once it gets into the supply chain it usually finds a home,” he said.

Furnish noted so far, Brazil and Argentina show no signs of increased production, but for U.S. growers the issues of labor, crop insurance and finding acreage and an infrastructure to raise more tobacco are still concerns.

“It’s been interesting dynamics; the change from the tobacco buyout and going through the years where growers were struggling to get contracts,” he said. “Now we’re at a period of time where companies are struggling to get pounds. I don’t know how long this will last and what price it will take to get people back in, so there are a lot of different scenarios to play out.”

Furnish added when prices are high enough, farmers typically will overproduce, but it doesn’t seem to be working that way right now.