Wednesday, December 18, 2013

Will the strong demand of 2013 continue?

Buyers debate the value of flue-cured leaf at an auction in Wilson, N.C., last September.


It appears now that there is still an upward trend in demand. "But it is hard to predict how far into the future we will see it continue," said N.C. Extension economist Blake Brown at the N.C. Tobacco Day meeting in Smithfield on December 5. "In the near term, demand from China is very robust. They have been trying to increase their purchases of flue-cured tobacco, [not only] in the U.S. but also in other countries. That upward trend has more than offset declines in consumption in the U.S. and other developed countries."

Prospects for 2014? Brown noted that some companies had already begun signing contracts as of December 5. "That is good news for farmers," said Brown. "It indicates that they haven't been able to solve supply problems with the South American crop." But just this week,Tobacco Farmer Newsletter learned that some companies have slowed down on contracting or have reduced the price. One auction company owner said he fears that some of the 2013 crop may have been sold at a price that just doesn't fit into the Chinese market, and the companies will have to solve that problem before proceeding much farther.

Why 2013 was no windfall for farmers: The yield of the last flue-cured crop was about 2,000 pounds per acre, well below the normal 2,300 to 2,400 pounds per acre. "That is quite a large loss," said Brown. "Farmers also had to spend more money putting nitrogen on to try to compensate for the rain."

Technology could change everything: All of the major cigarette manufacturers in the U.S. and Europe have either purchased an e-cigarette company or are developing their own e- product. "We will just have to see how the technology advances, but it's one factor that could really impact the cigarette market in the future as more and more smokers switch to those kinds of products," said Brown. There seems little reason to think that that the e-cigarette industry, no matter how big, will use much American tobacco.  

After all these years, the flue-cured producers of North Carolina will finally get the chance to vote on whether or not they want a checkoff to fund their growers association. A referendum was recently authorized by the state legislature, and the Tobacco Growers Association of N.C. hopes to hold it sometime in the spring. It will be conducted by mail. TGANC will mail ballots to all active growers it has addresses for, and you can also get a ballot at any GAP meeting or from your county Extension office (and if you still can't get one, call me and I will get one for you). A two thirds vote is needed to pass. Ten cents per hundredweight is proposed, which I am told comes out to about $2.30 an acre and would generate perhaps $300,000 a year in operating income. My editorial opinion: Every N.C. grower should vote for this, to give leaders the stability of support they need to effectively represent them. I was one of the first members of this organization back in 1981, and I was very involved in the effort to obtain a checkoff in 1989. That effort was turned back because the non-producing allotment owners-a powerful group back then-thought it would dilute their influence. Fortunately, the concept of non-producing allotment owner disappeared with the buyout, and I can't think of anyone else who would now oppose such a positive and constructive move. Vote yes!

Endowing an Extension post: An effort has begun to create an endowed chair of tobacco Extension at North Carolina State University in the name of W.K. (Bill) Collins, longtime tobacco agronomist. But funding will be a challenge, and details are still being worked out.

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1 comment:

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