Tobacco Growers Consider Nationwide Checkoff

Story from the Southeast Farm Press

A farmer-operated organization with the mission of promoting the export of American leaf of all types may be just a few steps from becoming a reality.

First, a formal proposal to the United States Secretary of Agriculture must be prepared, describing a strategy to provide the funds needed to aggressively target high-potential markets for U.S. tobacco overseas.

Once developed, the proposal will go to the secretary. If he approves, tobacco growers will get a chance to vote in a referendum to indicate it they want to generate funding through a checkoff.

An initial amount of 20 cents per 100 pounds has been suggested for the checkoff, and “U.S. Tobacco Export Council” has been suggested as a name of the organization.

The president of the North Carolina Farm Bureau Federation told farmers in March the referendum could perhaps be held late in 2009 but more likely in 2010.

Larry Wooten said at the annual meeting of Tobacco Associates, an export promotion group for flue-cured growers, that the secretary’s approval is no sure thing. And of course, farmer approval of the referendum is no sure thing either.

A working committee of economists has been formed to flesh out the proposal to the secretary, he said.

“They are taking the points of consensus that farmers have arrived at and putting ‘meat on bones of the skeleton’,” said Wooten.

Participating are Dan Stevens, retired U.S. Department of Agriculture economist; Blake Brown, North Carolina Extension economist; Will Snell, Kentucky Extension economist, and Daniel Green, chief operating officer for Burley Stabilization Corporation and formerly an economist at the University of Tennessee.

If this initiative gets to the point of a referendum, Wooten thinks it might be carried out through Farm Service Agency offices.

He thinks the expense wouldn’t be too much of an obstacle to growers.

“We aren’t talking about much,” Wooten said in a subsequent interview. “At 20 cents per 100 pounds and at a yield of 3,000 pounds per acre, that would come out to about $6 an acre. That isn’t much for a crop that is grossing $4,000 an acre. I believe this export promotion assessment is good value for dollars spent.”

Promoting the quality of American tobacco to potential customers could be a great help to farmers, considering that 60 percent of flue-cured tobacco and 80 percent of burley is exported, he said.

Wooten is cautiously optimistic about the eventual fate of the checkoff. “If leaf tobacco export is going to continue as it has for the last 50 years, we are going to need a joint effort among the different types of tobacco,” he said. “I think the chances are better the farther we go in this direction.

“The organizations that are involved in this are trying to put a package out there and let the growers decide.”

He said he expects tobacco manufacturers and leaf dealers will be solidly behind this. The assessment would probably be collected at the first point of sale which would be the leaf receiving stations.

He expects that growers of all tobacco types — from flue-cured in Florida to cigar leaf in Massachusetts and all in between — will have the opportunity to benefit from promotion efforts if they approve the checkoff.

In another presentation at the Tobacco Associates meeting, leaf dealer Rick Smith of Wilson, N.C., said that this year, the domestic demand has dropped much more dramatically than anticipated by the trade.

“I expect that even though the export buyers may increase a little, the decline in domestic off-take will be more than the increase in exports can absorb,” said Smith, owner of Independent Leaf Tobacco Company, among thriving Wilson real estate. “I look for a net reduction in pounds of perhaps 15 percent instead of the 3 percent or 4 percednt we have been seeing.”

He predicted that 2009 leaf prices will be lower than — but still very close to — last year’s.

“I expect no more than five cents a pound less,” he said. “I believe the 2009 prices are high enough to attract as much production as last year. But the companies don’t seem to want or need (that much),” he said.

There definitely haven’t been enough contract pounds offered to make flue-cured farmers happy this year, said Smith.

As a result, Smith suggests more uncontracted tobacco may be planted this year than in any year since deregulation.

“There might be more flue–cured grown off contract this year than in the past, as farmers bet the companies didn’t contract enough to meet their needs,” he said. “This might also apply to burley, whose growers are much more accustomed to off-contract production.”

The biggest news at the Tobacco Associates meeting was its location: For the first time ever, the annual meeting of Tobacco Associates was held outside of Raleigh, N.C. That’s because the bylaws of the organization had required the meeting be held in the state’s capital.

But those bylaws were recently amended to allow more flexibility in choosing a meeting venue. The Wilson County Agricultural Center was the choice this year, and the results were good.

“Having our meeting in the growing area gave more growers the opportunity to get a chance to participate,” said Charles King, director of state affairs for Tobacco Associates. “It made it more attractive and easy for growers to attend, and getting the farmers there is our objective.”

King said it is a definite possibility the next meeting might be held again in some city in the growing area, either in Wilson or some other location.