A budget tool designed for tobacco:

A new web-based tobacco budgeting system will help you generate a budget and much other information on your computer. Called the "Tobacco Budget System", it is now available from the Center for Tobacco Grower Research (CTGR). The system provides an interactive budget tool to calculate current costs of production. It is database driven so you can customize it with access to the prices of common chemicals and machinery. It has applications for burley, dark, flue-cured and cigar wrapper tobacco. Among many other things, it can help you keep records for GAP compliance. Best of all, it's free. For more information, go to http: //tobaccogrowerresearch.com and click on "Tobacco Budget System."

  

No avalanche of increased acreage. There were opportunities for growers to increase acreage this season and perhaps some contracts were left on the table. In the big flue-cured county of Wilson, N.C., plantings will probably be about the same as last year, says Extension agent Norman Harrell. "Some growers have increased their acreage a little, but one large operator stopped growing flue-cured altogether. I am anticipating our flue-cured acreage will be about 9,200 acres, which is what we had last year. Most of our growers are at their capacity and would have to acquire more land or equipment to produce much more tobacco." There will be no increase in burley plantings in Wilson County, he is sure. "We will have 100 acres or less," says Harrell. There was one producer growing dark air cured in Wilson County, but he is not planting it in 2012.

   

After a very good crop last year, burley acreage in western Kentucky and Tennessee is going to be up, says Andy Bailey, Ky.-Tn. Extension tobacco specialist. "I would expect an increase of around five percent, maybe as much as 10 percent. There could be an increase in dark plantings too. That would more likely be fire cured rather than air cured." Growers have just begun seeding their greenhouses. "Transplanting in this area generally starts around May 1," he says. "We had a mild winter. We may not have had enough cold weather to knock off insect populations."

  

What makes up today's cigarette blend? Counting all countries except China, the main elements in the modern cigarette blend is 65 percent flue-cured, 18 percent burley and eight percent oriental, said Herbert Weatherford, Alliance One International, at the recent annual meeting of Tobacco Associates in Wilson, N.C. China, which has traditionally consumed all flue-cured cigarettes, now uses 97 percent flue-cured, 1.5 percent burley and 0.7 percent oriental, he said.

Exports up nine percent. Flue-cured exports totaled over 285.2 million pounds last year, said Kirk Wayne, president of Tobacco Associates. They were valued at over $638 million, a volume increase of almost nine per cent over 2010. "The significance of the export market remains solid and is clearly absorbing over 60 percent of U.S. flue-cured production," he said. "In projecting demand trends, it is undisputed that the export market will be providing the stability and any potential for growth in future sales."

The Brazilian flue-cured crop nearing the end of its marketing season is substantially lower than in 2011, perhaps by as much as 20 percent, says Blake Brown, N.C. Extension agricultural economist. Also, the quality is said to be mediocre. "With a small 2011 U.S. crop and a smaller 2012 Brazil crop, the supply of premium style flue-cured tobacco is substantially reduced. While global supplies of flue-cured tobacco remain large, the portion of this supply that is of premium quality is small. Cautious optimism is warranted for the 2012 crop."

  

World burley supplies are likely ample, but the current Brazilian crop was disappointing, says Will Snell, Ky. Extension Economist. In addition, several recent U.S. crops have been smaller than expected. The net result has been continuing tight supplies of higher quality leaf available to buyers. The continued depressed dollar relative to the Brazilian currency and a more stable environment of domestic use and export demand, set the stage for increased contract offerings earlier this year, at least to some growers. But it is not clear yet how many takers there were, given profitable opportunities in other crops and livestock.

The future of H2As: As more domestic workers find job opportunities in the nonfarm sector, it is likely that more farmers will choose to rely on the H-2A guest worker program. The 2012 Adverse Effect Wage Rate is $9.38 for Kentucky and Tennessee and and $9.70 for North Carolina and Virginia. That is 4.3% higher for N.C. and Virginia, but 1.1% lower for Kentucky and Tennessee. Learn more about how growers are handling the H2A program in the March 2012 newsletter of the Center for Tobacco Grower Research (http://tobaccogrowerresearch.com/budgets.html).

 

Weather favors transplants in Eastern N.C.

A good crop of plants is growing in eastern North Carolina, thanks to very favorable weather. “We had warm weather when we were seeding and had many good seeding days,” says Brent Leggett, flue-cured grower in Nashville, N.C. (below). "Since then, there were just a few days with clouds. Most days the weather was very cooperative.” 

Brent Leggett

What farm leaders think about the coming season

A penny per pack increase in the price of  cigarettes could really help tobacco producers: At least, that's how Craig West (right), a flue-cured grower from Fremont, N.C., figures that a one-cent increase in cigarette prices could rescue the farm economy. "One pound of tobacco makes 20 packs of cigarettes, and the average price of cigarettes now is $5.50 pack. On our farm (he farms with his brother Brad), we grew 900,000 pounds of tobacco last year, so we produced the tobacco for 18 million packs worth $99.9 million. We got $1.70 a pound for it. At that price, a pack has about six cents of tobacco in it. If the companies would add one cent for the farmers, that would equal a 25 cents a pound in the farmer price. You can't quantify what that would do for farmers, and I don't see how one cent a pack would affect consumption much." 


West proposed the price increase at the annual meeting of the Tobacco Growers Association of N.C. on February 3 as he was ending a two-year term as president. The organization elected a new slate of officers: President Brent Leggett of Nashville, Vice President Tim Yarbrough of Prospect Hill, Secretary Clay Strickland of Salemburg and Treasurer Stan Biconish of Fuquay-Varina.

Contracting came early for everybody this year, it appears. As far as West can tell, all flue-cured growers in his area of eastern North Carolina are completely signed. "Most growers are generally pleased," he says. "Some got increases in acreage, but the increase was not a general one. The price was up, generally about five to seven cents a pound."

The contract price paid by US Tobacco Cooperative was also up, says President J.T. "Tommy" Bunn. "The board of directors increase prices based on world demand with the idea of trying to keep farmers in the business of tobacco production," says Bunn. "The cooperative's leaders were very anxious that the price rise enough to reflect the increase in cost of production.They also increased contracted acreage." 

The sales effort went well over the winter. China, Southeast Asia and some markets in Europe were the best customers. Besides stripped leaf, the cooperative had some success exporting its products, though most are sold domestically.

Roughly 80% of the burley crop was sold by February 3, says a cooperative leader. "About 20% is still out there...I hope," says George Marks (right), president of Burley Stabilization Corporation (BSC) and a burley and dark grower from Clarksville, Tn. It was a short crop,Marks says. "The wet spring made it late, then it was very dry from the end of July though August." Fortunately, the curing season was excellent over most of the burley belt, and leaf quality was good. 

Broadening the buy: BSC, located in Springfield, Tn., is expanding its service area. It bought burley in Kentucky the past two seasons, and in 2012 it plans to buy in Pennsylvania, Wisconsin and Missouri, says Daniel Green, BSC's chief executive officer. The cooperative's traditional states have been Tennessee, Virginia and North Carolina.

American growers should change the way they look at the value of their product. Quality, stability of supply and price are still factors, but new concerns based in part on social responsibility, environmental concerns and regulations, says Mike Ligon, vice president for Universal Leaf. Those would include best manufacturing practices, good agricultural practices, wise use of crop-protection agents and elimination of non-tobacco-related materials and TSNAs. "[Production] areas that are able to address the new definition of value and to satisfy other industry demands will gain market share," he says. Ligon was the keynote speaker at the Tobacco Growers Association of N.C. meeting.

   

Projection for 2012: U.S. production up, Brazil down. On February 2, Universal estimated that U.S. flue-cured production will rise substantially in 2012, to 500 million pounds, up about a third from the 372 million pounds produced in hurricane-stricken 2011. Brazil on the other hand, has been projected down by a quarter, from 1.5 million pounds in 2011 to 1.25 million pounds in 2012. American burley production is projected at 187 million pounds in 2012, up seven percent from the 174 million pounds of 2011. That would put it 11 million pounds over Brazilian burley production for 2012, projected by Universal at 176 million pounds, down 27 percent from the 244 million pounds Brazil produced in 2011.

How much can you spend on new equipment? Bob Pope of Long Tobacco Barn Company LLC says, "It's hard to consistently produce the quality that companies demand now if you are using old barns. I see farmers renovating old barns, and you may be able to do that for $4,000 to $5,000. But that leaves you curing in a barn an old heat exchanger, worn boxes and leaks." A tight new barn can be obtained for a price in the mid $30s, he says. Long Tobacco Barn Company is the relatively new entity that has taken over manufacture of Long barns. New innovations include reinforced box backs, 30 percent more insulation, a tobacco viewing door and a re-designed control panel. The factory and sales office remain at Tarboro, N.C. The phone number is 252 641 4796.

 Upgrading agricultural skills: A group of young Tar Heel tobacco growers and young agriculture professionals participated in the "Skills for Tobacco Growers" short course in Raleigh. "Since our industry continues to face continuous change, we need to make sure our younger farmers are able to focus on how to attain efficient, quality tobacco production," says Bill Collins, a retired N.C. State tobacco extension specialist who coordinates the short course program. The course was designed to help reach that goal. Participants were introduced at the TGANC meeting. Farmer participants were: Steven Lawrence of Colerain,  Justin Murphy of Albertson, Kevin Mitchell of Bunn, Travis Nelms of Louisburg, Jason Harris of Kittrell, Mick Harris of Butner, Alex Watkins of Creedmoor, Taylor Caudle of Farmville, Luke Blizzard of Snow Hill, Royce Mitchell Boyette of Clayton, Cliff Cobb of McLeansville, Shepard Barbour of Angier, Caroline Hines of Selma, Jamie Lanier of Wendell, Robert Glover of Bailey, Randy Willliams of Nashville, Nicholas Perry, Josh Robbins and Dale Winstead, all of Spring Hope, Isaac and Jacob Draughn of Mt. Airy, Jason of Walstonburg, Ryan Beamon of Stantonsburg, Gerald Jr. and Donny Tyner, both of Elm City, Adam Speaks of Traphill, Alan Williams of Oxford, Mitchell Bryner of Greenville, and Rod Dickerson of Oxford.  The remaining eight participants were Grady Hartley and Delvin Jones of the USDA/Risk Management Agency; County Extension agents Ray Thagard of Greene Co. and Charles Mitchell of Franklin Co., consultants Hill Homewood and Zach Horvath of Carolina Precision Consultants, Dianne Farrer, NCDA&CS agronomist and Jeremy Wyche of the Warren Co. FSA Office.

THE ECONOMIC OUTLOOK FOR 2012

Good news, bad news from Brazil: It is becoming clear that the Brazilian flue-cured crop now coming to market was grown on about 20% less acreage than the previous one, says Blake Brown, N.C. Extension economist. Production is thought to be in the area of 1.2 billion pounds, he said, compared   to   the   very   large  1.5-billion-pound crop of a year ago. The bad news is that there is still plenty left of Brazilian leaf left from previous crops at various points in the distribution chain. No information on the Brazilian burley crop yet, but the previous crop was estimated at the very high level of 2.57 million pounds.

Fast start for flue contracting. "Companies are being much more proactive about lining up contracts than in the past [in the U.S.]," says Brown. "My impression is that a significant amount of this year's crop has been signed for already. Prices seem to be at least as high as last year."  If it hadn't been for the storm, there would have been a big problem of excessive supply of flue-cured. "The supply is still very high right now," says Brown. But as he told Tobacco Farmer Newsletter last fall, "There is plenty of mediocre tobacco out there, but no excess of high quality premium tobacco. There might even be a shortage." He understands that so far, the tobacco from the 2011 U.S. crop has moved extremely well. "And if we can grow a good crop this season, there is definitely room for it on the world market."

Burley growers are upbeat after a much better season than the one before. "The aggregate world burley supply is good, but better quality burley is in tight supply," says Will Snell, Kentucky Extension economist. "It seems likely there will be contract offers to growers to increase production. They may not be across the board but instead just to the better growers." But will there be takers? "There are options now, thanks in part to increased demand for biofuel. Grains and livestock may seem like better opportunities to some growers." But marketing was continuing as the year began, and the good prices of December generally held up, with $1.75 to $1.80 still roughly the range per pound and $1.80 per pound for the best. But it may not hold to the end. "We will likely have some lower quality burley to hit the market later in the season which might bring down some prices," says Snell.

Economical yields are still a concern for burley. "It is very puzzling," says Snell. "We are still below 2,000 pounds an acre, even in Kentucky. You're barely covering variable costs at that level. It is not enough to cover all expenses. You must eventually have a return to labor and management." Under the current price structure, 2,200 pounds an acre would be the minimum a grower would need to compete with $6 corn. "Without additional price incentives, burley yields really need to be in excess of 2,400 pounds per acre to compete with prices for other ag alternatives, to cover increasing labor expenses, and to allow for adequate investment incentives for burley tobacco infrastructure," says Snell.

Dark tobacco prices have held up as snuff consumption keeps increasing. "We might see a little more poundage this year," says Snell. "Most farmers will grow dark rather than burley if they can." Last year, snuff production was up 6.5% and increased another 4.4% during the first seven months of 2011, says Brown. Smoking restrictions, successful marketing of traditional snuff products and the introduction of new products, along with perceived lower health risks, have collectively benefited the smokeless sector in recent years. Following two straight years of supply adjustment, it appears that the industry once again is close to an acceptable supply/demand balance, says Brown. Look for dark tobacco prices to remain near recent levels ($2.25 per pound for dark air-cured and $2.50 per pound for dark fire-cured) for the 2011-2012 marketing year, he says.

Visit our booth at the Southern Farm Show, Feb. 1 - 3. Booth # 3714.

More on the marketing of this tobacco crop

Dark tobacco awaits harvest near Springfield, Tn. The best quality dark air- and fire-cured crop in Ken-tucky and Tennessee since 2006 is making its way to delivery stations, says Andy Bailey, Extension dark tobacco specialist. "So far, weights look good. I haven't heard of a 4,000-pound yield yet, but I know of some fire-cured yields in the 3,800 to 3,900 pound range and some air-cured yields of 3,400 pounds." Quality appears to be good, he says. "I have heard no major complaints from the buyers." Over two thirds of the two types have been received, says Bailey. "We will still be delivering in January and February." Kenneth Smith, leader of the Eastern Dark Fired Tobacco Growers Association, says it is "a good useable crop, one of the best we have had in a while. But it is not huge. I have heard that the companies are taking excess tobacco when they see it and it looks like all is going find a home." There is some concern about moisture, says Smith. "We have had a lot of rain since November 1. Farmers have been stripping as fast as they can." The weather has been good for taking fire-cured tobacco down but some of the air-cured tobacco has been too wet to take down and strip." Receiving began the first week of October for the second year, he says. The opening date used to take place in November, but the companies helped relieve some of delivery pressure by going to an earlier start in 2010. A note on the burley in the area: A leaf dealer who buys in middle Tennessee and western Kentucky says the burley crop there is coming in unusually slow. "I have never seen anything like this," he says. "It is an above average crop and its selling good but it is coming off the farm very slow." Bailey tells Tobacco Farmer Newsletter that the slow delivery is probably just an effect of high moisture. "Growers are having to wait on stripping until moisture levels go down even though curing has been complete for several weeks."

What would you grow if you didn't grow tobacco? A recent survey conducted by the Center for Tobacco Grower Research (CTGR) asked farmers what enterprise would most likely be the substitute if they had to replace tobacco. Cows and calves ranked number one with burley farmers while grains were said to have the most potential by flue-cured and dark tobacco production. Extension specialist moves to research: Sandy Stewart, who has served since January of 2010 as an Extension tobacco specialist in N.C., will become the director of the Research Stations division of the N.C. Department of Agriculture on December 19. He will succeed Eddie Pitzer, who retired in September. Despite tight budgets, sources at N.C. State University tell TFN that there is a very good chance that this position will be re-filled, since industry support will be used to fund it. But the next individual who fills it may be a research associate rather than a specialist. A longtime county Extension agent joins seed company: Scott Shoulars, formerly director of the Rockingham County (N.C.) Extension office, now serves as field agronomist for Cross Creek Seed in Raeford, N.C. He operates out of his home in Reidsville, N.C. To reach him, call 336 601 9512.   Tar Heel tobacco growers: N.C. State will hold another Tobacco Short Course starting January 30, and ending February 3. Thanks to the N.C. Tobacco Trust Fund, the course is free. See your county Extension agent for details.

Most of the information in this segment is derived from the December issue of Tobacco Farmer Newsletter, edited by Chris Bickers, 903-9 Shellbrook Ct., Raleigh, N.C. To receive the newsletter in your email, call 919 789 4631 or email chrisbickers@ gmail.com.

The burley market has been “extraordinary” so far

That is the only way to describe it, says Roger Quarles, a grower in Georgetown, Ky. “The price actually seems to be going up at this time. Most years, that is not the case.” Another thing that is not usually the case: Prices at auctions have at times been higher than contract prices. Some of the demand on the auction market has come from farmers trying to buy other farmers’ tobacco to fill out their contracts, says Quarles. Some in fact seem to have a strategy of filling any underproduction from auctions rather than planting so much that overproduction is likely. But there wasn’t any overproduction this season. “We are going to be really short on weight,” says Brian Furnish of the Burley Tobacco Growers Cooperative Association. “We didn’t have any serious weather problems. The weight is just short compared to recent years.” The quality is better than the last two years, he says. Furnish estimates that prices have averaged $1.75 per pound to $1.80 per pound for most of the crop, with the best bringing $1.82 to $1.82 per pound.

For growers who had flue-cured to sell, this turned out to be a good market, says Rick Smith, leaf dealer from Wilson, N.C. Volume is still unclear, but he thinks about 380 million pounds entered the trade, at an average of perhaps $1.78 to $1.80 per pound. “We would have hoped to average a little more,” he says. “That is not going to be enough to keep some farmers viable. Insurance won’t make them whole either.”

Any shortfall in U.S. flue-cured has been more than made up by the big crop in Brazil, estimated by Universal Leaf at over 1.5 billion pounds.  This is the largest Brazilian crop since 2005. It is 200 million pounds higher than initial forecasts. Burley production in Brazil is up 30 percent, Universal says.

The above material is derived from the Tobacco Farmer Newsletter, scheduled for mailing December 12. If you are not already on the email list to receive the newsletter, send your name, email address, postal address what tobacco type you grow (if any) to chrisbickers@gmail.com.