U.S. Growers Direct plans a press conference soon

I received the following letter--slightly shortened--this morning from a spokesperson for  U. S. Growers Direct. I will keep you informed of developments as they take place:

I am contacting you on the behalf of U. S. Growers Direct to inform you that it is our intention to have a press conference in approximately a week. We will contact you in advance to this meeting with the press. U.S. Growers Direct is in the process of finalizing and working out final details for the 2012 Tobacco Season.
 

Nakisha Fox

Executive Assistant

U. S. Growers Direct

 

Can U.S. Growers Direct make a comeback?

You don't expect leaf companies to rise from the grave, but it looks like one is doing it, or at least trying to. As of Friday, U.S. Growers Direct, the company that launched an abortive attempt to contract 100 million pounds last season, was taking the last corporate steps needed to offer current-crop contracts to flue-cured farmers. It is expected to complete this process in a matter or days and has already begun discussions with interested growers with the hope of signing contracts soon. No matter how soon, it is obviously going to be very late to contract tobacco for 2012. But USGD vice president Jimmy Lee told me Friday he is confident the company will be able to acquire enough leaf to have an impact on the market this season. One wonders where. Transplanting is just beginning in Southside Virginia and that area might be the best possibility. But Extension specialist David Reed says there will be no great surplus of plants left once the crop currently committed is planted. At the other end of the flue-cured belt, transplanting in Florida and Georgia is substantially complete. It might be agronomically possible to grow a crop there this late, but Extension specialist J. Michael Moore says that in the current economic climate, he is very dubious that anyone would want to try. The experienced leaf man Bill Barker of Virginia will operate the buying stations on a day-to-day basis USGD through his company USA Leaf. Farmers will have more contact with USAL than USGD, I am told. Other developments:

• The company's efforts will be more limited than last year. It will operate only two delivery points--Louisburg, N.C., and Douglas, Ga.--instead of the six of 2011.  The company is not exactly a leaf dealer but will definitely be oriented to foreign markets.
• Its primary target market will still be China. That explains why only flue-cured is being contracted: Chinese consumers almost exclusively smoke 100-percent flue-cured cigarettes.

The question to be asked is: Can any state accommodate a substantially larger planted acreage this late in the game?Because Georgia farmers responded so vigorously to USGD contract offers last year, they might seem like good candidates. But setting of the previously contracted crop ended this past weekend, except for a few stragglers, and there are very few plants remaining. "I expect we will plant all the plants we have and then we will be finished," he says. Florida is well past transplanting. The crop is up now and looks very good, says Moore. At the northern end of flue-cured production, transplanting in Virginia, has begun on just a few flue-cured farms. Reed expects transplanting to get going in earnest Monday. Despite quite a few diseases in the greenhouses, Virginia plants were satisfactory in quality, he says, but the supply is tight.

Correction

The projection below for flue-cured production for the crop now being marketed in Brazil should be 1.3 billion pounds rather than million.

Brazilian tobacco crop headed for a major bust?

A leaf dealer with significant involvement in Brazilian tobacco trade thinks the flue-cured crop produced in 2011 and now being marketed will be only about 1.3 million pounds, although that figure is fluid and the actual volume may turn out 15 percent higher or lower. The burley crop is roughly projected at 150 million to 175 million pounds, he says. "Both crops are very high in nicotine, which reflects bad weather in the field," he says. "Curing conditions weren't good either and there was considerable quick-cured burley leaf." This certainly presents a marketing opportunity for U.S. growers, since there will a decided shortage of premium Brazilian leaf of both types. Another leaf dealer said the flue-cured in Brazil is useable at best. "Some of the burley crop might not be marketable at all." Marketing of both types is running behind and will continue for some time.

Planting season gets off to an early start

In the Deep South, planting is well under way. In Florida, says J. Michael Moore, Extension specialist, about two thirds of the crop has been planted. Some has been out for three weeks, he says. Georgia farmers are ahead of schedule as well. There was a big upswing in transplanting in Georgia the last week of March. By the week after Easter, half or more of the plantings will be in the field in Georgia. Floridians may be finished by then. This relatively early planting season may affect tomato spotted wilt infestations. "There is an abundance of thrips now," says Moore. "They are finding their way to tobacco fields soon after transplanting. But pecan trees are leafing out and there are plenty of plants that are green right now, so perhaps that will decrease the thrips in tobacco"...About five percent of the S.C. crop had reportedly been set out by late March. Extension specialist Dewitt Gooden says that the first week of April would be the big week for transplanting, although a few farmers will wait till the week after Easter out of tradition.

From this point on, greenhouse management becomes very important. "Clip so that the plants are not overgrown and to enure adequate air movement in the canopy." Moore says. "We have had enough disease so that the plant supply is rather tight. We may have to transport plants from N.C." The performance of plants in the greenhouse in S.C. has been very mixed, but Gooden thinks there will be enough to go around.

In North Carolina, a good greenhouse season: A flue-cured grower in Oxford, N.C., told Tobacco Farmer Newsletter that he decided not to grow tobacco this year and instead is now selling plants. It has worked out well so far. The plant season has been good in the Old Belt, and he expects to mow for the last time in early April and be ready to move his plants out at the end of April. He doesn't rule out getting back into leaf production. "But the companies are not paying us enough to produce the tobacco they need. I might reenter the business if the pay gets better." He thinks $3 a pound might bring him back in. He sold his 2011 crop for $1.84.

Specialists respond to the April Prospective Plantings Report

For South Carolina and Georgia, USDA planting figures may be about right, say Extension specialists in those states. "We see farmers getting out and others cutting back," says Dewitt Gooden of South Carolina. "Some fairly significant growers have quit tobacco over the winter. So that estimate (-13 percent) might be close to what we plant." In Georgia and Florida, it is hard to pinpoint, but J. Michael Moore, the specialist for both those states, says, "The NASS estimate is about as good a guess as I can come up with." He noted that the loss of the U.S. Grower Direct contracts [eventually taken over by Alliance One] accounts for much of the lost acreage. "This time a year ago, there were 13 million pounds under contract in these states to that company, and only a few were picked up by other companies."

In Tennessee, a big increase is projected for burley, but that may be misleading, says Extension specialist Paul Denton, because of the extensive abandonment of planted acreage last season. He thinks that the 16,000 acres that NASS projects for state plantings is about what growers meant to harvest last season but weren't able to. Nevertheless, he thinks that a much bigger Volunteer burley crop could be on the way if weather is anywhere near normal and an average level of abandonment occurs. Note: Denton reports that Altria has closed its delivery station in Midway, Tn. (near Greeneville). Some of its customers will now deliver to Danville, Ky., but Denton expects some have signed with Burley Stabilization Corporation, which has a fairly new receiving station in Greeneville, and other buyers with closer delivery stations.

For Virginia, the 35 percent increase projected for burley may be a little misleading also, says Extension specialist Danny Peek. "The 2,700 acres that NASS projects is about right. But the agency has been underestimating our plantings for several years, and it looks like it has made a correction." But southwest Virginia plantings will definitely be up this year, says Peek, perhaps by 10 percent or more, and further increases could be in the cards. "With our burley all grown on good soils now and with good curing weather most years, we should be able to grow premium burley most years," he says. One possible obstacle: Burley operations have not been profitable enough in recent years to justify investment in infrastructure such as barns.  "This will catch up with us eventually," he says.