Monday, April 16, 2018

What will happen to our Chinese market?

Spreading the word: Steve Troxler (shown here addressing the crowd at the N.C. State Fair a few years ago) and his staff at the N.C. Department of Agriculture worked tirelessly to make China tobacco a presence in N.C. What is he going to do now with leaf sales to China are in jeopardy? See his opinion piece below.


Editor's note: I have received many good opinion pieces on the Chinese proposal to substantially increase tariffs on U.S. tobacco and tobacco products. And a few more on AOI's departure from the U.S. burley market. I have picked six that appear to me to "cover the waterfront." But if you have something to say, feel free to email it to me at the address above. 500 words or less if you can.--Chris Bickers

Market disruption may not last long. 
Commissioner of Agriculture

We worked very, very hard to get China tobacco buyers to come to North Carolina. Now they have become our No. 1 export destination. And quite frankly, that hard work paid off. It stabilized the declining contracts that farmers were getting. The number one agricultural export now from North Carolina to China is tobacco, at $156.3 million. We value the trading relationships we have worked to build over the years, and we want to continue to strengthen these and other trade partnerships. I want to be part of the solution, and I am hopeful that none of this comes to fruition. USDA Ag Secretary Sonny Perdue noted that farmers are patriots--and that is true--but [patriots] still have to pay the bills...The uncertainty is what's driving them [tobacco farmers] nuts. This could not have happened at a worse time for North Carolina farmers, who are still dealing with the aftermath of Hurricane Mathew and low commodity prices. We also have NAFTA negotiations ongoing and a Farm Bill in the works. We know there will likely be disruption for markets, but we hope it will be short-termed. We are going to have to wait it out. Nobody wins when you put a tariff on food.
--Steve Troxler, Commissioner, N.C. Department of Agriculture

Pointing fingers doesn't  help. 
Grower association leader

Agriculture is being dragged into this situation by the Chinese as a means of retaliation to try and assert political pressure. Since farmers and their leadership organizations do not have a direct seat at the table, we are somewhat disadvantaged. We have been relegated to a position in which we can only provide constant and accurate communications to our government leaders about the economic risks. In that process it is important that we maintain proper civility and professionalism in advocating for farmers' interests. Pointing fingers or calling either side bad names does not help advance our goals of emerging from this circumstance with market stability and perhaps even market growth. What matters most is that China represents an important customer and potential growth market for U.S. leaf. We need to be diligent in continuing to build that relationship based on trust and delivery of the worlds best premium tobacco. Our mission is to convince China that it needs our tobacco and to do everything we can to protect this highly valued relationship for the future.
--Graham Boyd, C.E.O., Tobacco Growers Association of N.C.

Is too much being made of this now? 
A flue-cured grower

I am not turning a deaf ear to the possibility that American farmers may suffer because of tariffs that might be imposed on our leaf and manufactured products by the Chinese. But it seems to me that it will be a long way down the road before anything happens, because much negotiations will have to take place first. Too much is being made of this now, and I think it is in part because of opposition to President Trump. Where was this media when the last administration tried to exclude tobacco in the TPP? That would have had as much or more negative impact than the current tariff negotiations. In fact, the previous administration did more than try to exclude. It actually lead the successful effort to carve tobacco out of the TPP agreement.
--Clay Strickland, Tobacco Grower, Salemburg, N.C.

China has far more to lose from a trade war.
A tobacco economist

It is difficult to say how much the tariff increases will impact flue-cured exports to China. At this point they are prospective: They haven't been implemented yet pending the results of high level negotiations underway. Those negotiations need to address some serious trade and investment issues with China that have not been dealt with by prior administrations. Specific industries like flue-cured tobacco may be impacted if the negotiations are unsuccessful. But I believe that China has far more to lose from a trade war than the U.S., particularly if other countries like the Europeans also join in pressuring China on trade.
--Jim Starkey, retired USDA economist

Incentivize companies to use domestic leaf. 
A burley grower

With the current situation and outlook for American leaf, particularly burley, we need to push for great incentives to domestically produced tobacco products using domestic leaf only.  We need a great tax incentive on the domestic tobacco used in the American supply chain, and a higher tariff on imports of leaf and foreign products.  We need to take back our own markets, and the only way we can is if we incentivize the tobacco companies to use domestic leaf to the point it is more competitive against foreign producers.  The quota system on tobacco tariffs needs to be renegotiated as it is highly outdated at this point. Tobacco farmers will have to band together in this and bombard our politicians with mail until we see the changes needed to protect our industry.  We must let all politicians know of the economic impacts if we quit growing tobacco, and how it would also affect the supply and demand balance of other crops as tobacco farmers continue to exit and enter other ventures.  At least this is my opinion.
--R. Wurth, burley grower, Lansing, N.C

China tariffs proposed, not enacted. 
An equipment manufacturer

It is important to point out that, though PRC has "proposed" the tariffs you mention, they are yet to be "enacted." The difference between proposed vs. enacted is an important distinction, as is President Trump's proposal to double down with an additional 100 B of tariffs on Chinese goods. The odds are both sides are blustering

ahead of what may likely be protracted negotiations. It is important to remember that Trump has a long history of making inflammatory statements before actually backing down, or even reversing course, following face-to-face discussions with his avowed "adversaries." The prudent thing for FCV farmers to do appears to be to wait and see, while holding their course. I also have some comments regarding Tom Blair's letter. Tom appears correct in his assessment that demand for FCV remains strong, as well as the fact that companies and leaf merchants will seek to buy tobacco at the best price on the global market. He is also correct in saying it's all about the bottom line. This comes as no surprise. All business people seek the best price, including farmers and agricultural equipment manufacturers. The trick is to balance price versus value. Tobacco company executives routinely tell me their shareholders expect them to buy lesser grades at the best price on the global market. In addition, they say that the United States offers the only reliable supply of the high grades of FCV they must have to make their blends. At LONG, we face the same issue of balancing price and value. When we seek steel products, we solicit quotes from numerous suppliers. We then go with the ones that offer the lowest price. With steel, we are comparing apples to apples. However, when it comes to other barn components (like motors, fans, and burners) we seek single source quotes from only the manufacturers that offer the highest quality of those type components, regardless of price. This way, we can maintain our firm's well-earned reputation for building the highest quality barns. Some farmers go with cheaper barns, some stick with ours. It's like everything in life, one gets what one pays for.

--Robert H. Pope, Sr., Long Equipment Mfg. Co.
In other tobacco news...

There are several new faces in state and Extension tobacco work thanks to recent appointments. Among them:...Jewel Bronaugh has been appointed Virginia  Commissioner of Agriculture by Governor Ralph Northam. Bronaugh comes to the
post from Virginia State University (VSU), where she was Executive Director to VSU's Center for Agricultural Research, Engagement and Outreach. She had earlier been Dean of VSU's College of Agriculture. A native of Petersburg, Bronaugh is a graduate of James Madison and Virginia Tech Universities...Zach Hansen has been named the new Extension plant pathologist for tobacco in Tennessee. Stationed in Knoxville, he is a graduate of Clemson and Cornell universities. His short-term goals are to develop new programs for control of frogeye leafspot and black shank. Besides tobacco, he is also responsible for Extension pathology work on specialty crops....Kaleb Rathbone has been appointed director of the N.C. Department of Agriculture Research Stations Division. Since 2010, he has been superintendent of 
the Mountain Research Station in Waynesville. Rathbone is a native of Haywood County, where he grew up working on his family farm, raising cattle and growing tobacco. He earned his bachelor's degree in soil science and a master's degree in agriculture and natural resources management from the University of Tennessee at nearby Knoxville.  Rathbone began as a summer worker at the Mountain Research Station in 1999. He has served in several different capacities at the station since that time.


  • The Georgia-Florida Tobacco Tour will take place June 11-13. June 11, 7 p.m. Kick-Off Supper at Brown Lantern Restaurant, Live Oak, Florida. June 12, 7:30 a.m. Leave Live Oak, Fl., for farm visits. End in Tifton, Ga. June 13, 7:30 a.m. Leave Tifton, to visit the Bowen Farm of the Coastal Plain Experiment Station, Tifton, and farm locations near Douglas and Blackshear, Ga., ending in the late afternoon.

Saturday, April 7, 2018

Another market crisis: Chinese retaliate with tariffs on U.S. leaf

Worsening outlook for 2018: Workers set out flue-cured plants on the Kenneth Dasher farm near Live Oak, Fla., on March 22. Since then, the odds of a profitable crop have declined exponentially after China announced it may impose new tariffs on leaf imports (mostly flue-cured) from the U.S., just a few weeks after Alliance One International announced it will not buy American burley from this season's crop.

Who's the real casualty in the China/America trade war? Tobacco growers, it appears. On Wednesday, the P.R.C. announced new tariffs on U.S. tobacco and tobacco products. I haven't seen the documents yet, but according to wire reports, tariffs collected on our unmanufactured tobacco would rise from 10 percent to 35 percent, while tariffs on cigarettes and cigars would rise from 25 percent to 50 percent.

The impact of increased Chinese leaf tariffs will be almost entirely on flue-cured. China's leaf purchases from the United States are almost entirely flue-cured. Little if any American burley is purchased, because Chinese cigarettes are almost all British blends, made up entirely of flue-cured tobac-co. Burley isn't needed ex-cept in a few American blend brands that China manu-factures for foreign visitors.

The biggest victim in all this may turn out to be the flue-cured cooperative in Ra-leigh, N.C. The U.S. Tobacco Cooperative has supplied much of the P.R.C.'s needs for American leaf since China first began purchasing leaf here in the mid-2000s. Someone please correct me if I'm wrong, but I would expect that a substantial fall in Chinese sales would be a catastrophe for USTC. But if anyone thinks I am wrong on that, feel free to email at

I will have better information when I come to you again. I spent much of today trying contact my most reliable sources on international leaf trade, but couldn't reach any of them, as if they had all stayed home in shock. I will have more for you on the China question--and on Alliance One's decision to exit the burley market--in my next issue.

In other tobacco news....

Planting is on hold in North Carolina: Matthew Vann, N.C. Extension tobacco specialist, says, "As far as I know, no tobacco has been planted in the state yet, butmany growers are ready. We have had some very cold weather at times and it would be risky to plant until you are sure it is over. I would think it will be around the middle of the month till planting gets go-ing, although there might be a few crops go in before that." The greenhouse sea-son went very well in N.C., and it appears there will be no shortage of plants.

PROSPECTIVE PLANTINGS: On March 29, USDA issued its annual projection of the number of acres of tobacco that will be planted this season. I present the projection below, but it is based on a survey of farmers conducted in early March. That was before the AOI and China developments, which might well affect planting intentions. But we can consider this a starting point.

  • North Carolina--158,000 acres, down three percent.
  • Virginia--23,000 acres, up five percent.
  • South Carolina--13,000 acres, up eight percent.
  • Georgia--13,000 acres, up four percent.
  • All U.S.--207,000 acres, down one percent. 
  • Kentucky-- 57,000 acres, down 10 percent.
  • Tennessee--9,500 acres, down 21 percent.
  • Pennsylvania--4,400 acres, down two percent.
  • Virginia--1,100 acres, no change.
  • North Carolina--900 acres, no change.
  • All U.S--72,900 acres, down 11 percent.
  • Kentucky--12,000 acres, up four percent.
  • Tennessee--7,000 acres, down seven percent.
  • Virginia--280 acres, up four percent.
  • All U.S.--19,280 acres, acres, up slightly.
  • Kentucky--5,000 acres, down 17 percent.
  • Tennessee--1,600 acres. no change.
  • All U.S.--6,600 acres, down 13 percent.
  • Pennsylvania (All)--1,600 acres, down 11 percent.
  • Pennsylvania (All)--2,200 acres, up 22 percent.

Letter to the Editor
A farmer's opinion on why AOI abandoned U.S. burley
I can sympathize with the burley growers. It would be great to know if AOI's international burley purchases intentions are reduced. Like you, I think there is more to it. Just like the flue-cured purchases in the U.S., it is not that the demand is down-it is that it can be bought cheaper elsewhere in the world. Therefore, they do it without regard to the economic impact on U.S. growers. Basically, the tobacco companies and leaf dealers care more about the bottom line than they care about U.S. growers!
--Tom Blair, Farmer, Pittsylvania County, Va. 


  • The Georgia-Florida Tobacco Tour will take place June 11-13. A partial schedule follows-check here for more details as they are available. June 11, 7 p.m. Kick-Off Supper at Brown Lantern Restaurant, Live Oak, Florida. June 12, 7:30 a.m. Leave Live Oak, Fl., for farm visits. End in Tifton, Ga. June 13, 7:30 a.m. Leave Tifton, to visit the Bowen Farm of the Coastal Plain Experiment Station, Tifton, and farm locations near Douglas and Blackshear, Ga., ending in the late afternoon.