FRANKFORT, Ky. — Many agriculture commodities have the benefit of checkoff programs that raise revenue to go back into the business through marketing and research efforts. These funds have been of great value to those commodities.
Burley tobacco is no different, and those dollars are especially needed at a time when the future of the crop is uncertain. The Council for Burley Tobacco (CBT) recently announced an investment of $140,000 in checkoff funds that will go to various research, education and promotion projects all to benefit the burley tobacco industry.
Rod Kuegel, CBT board president, said those funds are more important now than ever. "It’s very important that we maintain our checkoff and we try to make sure every dollar of it is spent for the farmers’ good," he said.
Forty percent of collected checkoff dollars go to the Burley Tobacco Growers Cooperative for promotion of tobacco, such as in foreign markets or for research. The co-op is comprised of burley growing members from a five-state area including Kentucky, West Virginia, Ohio, Indiana and Missouri.
The other 60 percent stays with the CBT, of which most goes for grant and research efforts at institutions such as the University of Kentucky (UK) and Murray State University to improve the efficiency of burley production. While the money has the potential to make an impact in many areas related to the burley industry, Kuegel said research into plant varieties has had some of the biggest impact.
"Probably the most impact we have directly as growers is the new varieties developed by Dr. (Robert) Miller working with UK and the University of Tennessee that are black shank-resistant," he said. "Those varieties are making up about 50 percent of what we raise in burley."
In the past, black shank has been one of the most devastating plant diseases tobacco growers have had to face. Most of these recently funded projects are related to making plants better or fighting disease.
Kuegel said much of the funding for research that has come from tobacco companies to conduct such research is drying up, so the checkoff funds being invested today are critical to the burley industry.
Will Snell, a UK ag economist, echoed those sentiments. He said in the midst of declining research funding and challenging market conditions, it’s vital to have funds to support grower initiatives. He pointed out the changing market environment that is affecting burley production, including the growing popularity of electronic smoking devices.
"The demand for U.S. burley beyond 2015 remains very uncertain. One factor that may play a noticeable role will be the rapidly emerging e-cigarette/vaping market," he said. "Currently, the e-cig/vaping market is only around 2.5 percent of total U.S. tobacco product sales, but some analysts anticipate that it will continue to grow, and could overtake domestic cigarette sales within the next decade."
Snell also said most of these "alternative" nicotine delivery products are presently derived from non-U.S. leaf sources – primarily China. "While research and production efforts are evolving to see if U.S. tobacco growers can be a part of this market, it remains unclear if U.S. tobacco growers can supply the liquid nicotine at a cost-competitive/profitable level," he said.
While navigating this tobacco market is not easy, Kuegel said the tobacco companies have been fair in this selling season.
"I think the companies were very fair with the producers in a climate where they may not have needed all of the tobacco they had contracted, so I’m optimistic the companies are going to be fair in the future," he said.
Most in the business, however, feel those contracts will take a cut for the coming season. But growers will likely favor a small cut in contracts versus a big cut in prices.
