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.

Who will plant what in 2012?

The Prospective Plantings Report for 2012 was issued Friday by the National Agricultural Statistical Services, and it shows that the hoped-for increase in flue-cured plantings will apparently not take place. The report, based on a farmer survey conducted in March, indicates that flue-cured plantings be down six percent, down to  194,500 acres. All producing states were down except Virginia, which is projected up eight percent to 21,000 acres. But burley plantings are projected up seven percent, with major relative increases in Tennessee and Virginia.

FLUE-CURED: Georgia--10,000 acres, down 15 percent. N.C.--150,000 acres, down six percent. S.C.--13,500 acres, down 13 percent. Virginia--21,000 acres, up eight percent. All flue-cured--194,500 acres, down six percent.

BURLEY: Kentucky--68,000 acres, up four percent. Tennessee--16,000 acres, up 14 percent. Virginia--2,700 acres, up 35 percent. Pennsylvania--4,400 acres, down 12 percent. N.C.--2,000 acres, down 13 percent. Ohio--1,600 acres, no change. All burley--94,700 acres, up seven percent. 

OTHER TYPES:

--Southern Maryland: Pennsylvania—2,900 acres, down three percent.

--Fire-cured: Kentucky—8,700 acres, down four percent. Tennessee—6,900 acres, no change. Virginia—350 acres, down 12 percent. All fire-cured--15,950 acres, down three percent.

--Dark air-cured: Kentucky--4,000 acres, down nine percent. Tennessee—1,100 acres, no change. All dark air-cured--5,100 acres, down seven percent.

--Cigar types: Pennsylvania (Filler)--2,000 acres, up 18 percent. Connecticut/ Massachusetts (Binder) 2,000 acres, up 12 percent. Connecticut/ Massachusetts (Wrapper)--800 acres, down four percent. All cigar types--4,800 acres, up 11 percent.

See the April issue of Tobacco Farmer Newsletter, out early next week, for more details.

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.