The world's number two leaf dealer, Alliance One International (AOI), has withdrawn from the American burley market, at least for 2018. In a statement provided to Tobacco Farmer Newsletter, the company said,
"With U.S. cigarette sales declining at a rate of 3% per year over the past three years and global cigarette sales following a similar trend, demand for the U.S. burley tobacco crop has declined as well. As a result, we made a difficult decision to not contract any burley tobacco this year. We understand the economic impact of that tobacco has on farmers and their local communities, and this decision was not a reflection of the farmers or their crop quality, but rather the change in global demand."
Excess production, for instance: Daniel Green, c.e.o. of Burley Stabilization Corporation (BSC), notes the current market environment for burley is very challenging. "In spite of the drastic declines in American Blend cigarette sales in recent years, growers have continued to produce burley because of the lack of alternative crops, resulting in oversupply," he says. "Tobacco dealers are generally very averse to holding any more inventories than necessary in the current climate."
And what about several developments on the national level?" Among them are the potential regulatory changes being considered by the FDA that might require tobacco to contain much less nicotine," says Green.
BSC is still working on its 2018 contracts, Green says, and will probably send letters to its members next week. "We will help them as much as we can."
There will definitely be a reduction in burley acreage this year. Will Snell, Kentucky Extension tobacco economist, estimated earlier in the year that the demand for 2018's
It looks that way to Tennessee Extension tobacco specialist Eric Walker as well. "It appears that we are looking at a planting cutback of at least one third, and that might be a conservative estimate," he says. "I am not aware of any buyers that might pick up the slack."
The hardest hit areas will probably be those near Hartsville, Tn., where AOI has operated its burley buying station. That would include Trousdale, Smith and Macon counties, all in Tennessee, and nearby Allen County, Ky. Note: Macon has been America's leading burley-producing county in recent years.
The immediate impact of AOI's exit from burley will be much greater in Tennessee than Kentucky because AOI had already cut back on contracting in the Bluegrass state. "But this is a lessening of demand, so there will be increased competition among growers for the pounds that are out there," says Bob Pearce, Kentucky Extension tobacco specialist.
Farmers should emphasize quality to retain the contracts they have, says Pearce. "Some of the big [quality] concerns this year would be reducing foreign material in cured leaf and keeping pesticide residues in line with industry expectations."
A demonstrated willingness to participate in GAP as much as possible would probably be a good idea. "Getting involved with the GAP Certification program that is being rolled out could help show a commitment to the tobacco industry. But certification may not be feasible for every burley farmer," Pearce says.
In other tobacco news:
As expected, planting has begun in Florida and is expected to begin in Georgia soon after. "Farmers here are preparing for tomato spotted wilt and black shank using all precautions available against them," says J. Michael Moore, Georgia Extension tobacco specialist who also handles tobacco Extension work in Florida.
In the Southside of Virginia, it's been wet and cool, so there has been very limited land preparation, says David Reed, Virginia Extension tobacco specialist. Fumigation has been delayed too, and some greenhouses haven't even been seeded yet. So, he doesn't expect much planting till the end of April or early May.
Virginia flue-cured plantings will definitely be down. "It will be across the board, maybe five percent and probably no more than 10 percent," says Reed.
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