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Tobacco farmers swapping crops

October 23rd, 2006 at 07:32 am


Three stories high and a little more than a thousand feet deep, the cavernous tin barn structure standing in Darrell Jackson's backyard is in many ways a symbol of change for the state's tobacco industry in a post-buyout era. Six acres' worth of leafy, rust-colored burley tobacco dangles from its rafters in thick clusters, hanging limply like tattered rags -- a visible departure from the Henry County farmer's usual harvest.

Like many Southside tobacco farmers, Jackson has for years grown flue-cured tobacco, a heat-dried variety used in domestic blend cigarettes, as part of the federal tobacco-quota program.

But now that the program has been eliminated, and with it the geographic boundaries for growing certain types of tobacco, Jackson is switching some of his land over to the burley variety as a way to offset rising fuel costs and bring in some additional income for the farm.

"It beats the devil out of going up the road all the time to go to the factory," said Jackson, 43, who used to work at a furniture manufacturing company during the winter months, a downtime for flue-cured tobacco growers, to keep the cash flow steady.

Burley tobacco is a slightly different plant variety that is harvested once a year and hung out to dry in large, drafty barns for up to four months. Under the federal quota program, burley tobacco was grown only in certain geographic areas, such as in far Southwest Virginia, but those boundaries were lifted during the 2004 buyout, leaving behind an untapped market for tobacco growers in other parts of Virginia.

Seeing a new opportunity emerge for competitive tobacco markets, a handful of Southside tobacco farmers are now are sinking thousands of dollars into building barns for curing burley tobacco and reshuffling the regional boundaries of Virginia's tobacco industry.

The shift is one of many changes resulting from a massive overhaul of the industry in 2004 when Congress approved a $10 billion buyout eliminating a federal tobacco quota program established during the Great Depression to stabilize prices. In efforts to make U.S. tobacco growers more competitive on the world market, the buyout rid the industry of its quota leasing systems, causing market prices to drop and pushing the industry into a new free-enterprise market that allows growers to deal directly with cigarette companies.

So far the prospects of this year's harvest are looking slightly better than last year's, when growers scaled back production and acreage for flue-cured tobacco, the mainstay of central Virginia growers, hit a record low.

Flue-cured tobacco yields are expected to increase this year with about 17,000 acres being harvested statewide, a 21 percent increase over 2005, according to estimates by the U.S. Department of Agriculture, but down 26 percent from 2004.

Tobacco production has yet to rebound completely, and as the market settles, many growers are still finding themselves on wobbly ground and fear being stubbed out by rising fuel and labor expenses.

"The profit margin is real tight," said Stan Duffer, a tobacco specialist with the Virginia Department of Agriculture and Consumer Services, adding that this is a pivotal time for many growers -- and the industry at large in Virginia -- forcing them to think hard about whether they should stick with the business or retire.

One region hit particularly hard in terms of losing production was far Southwest Virginia, where burley tobacco has historically dominated the fields.

Because most burley tobacco farms were small, family-owned operations, the elimination of this federal program was an excuse for some tobacco growers to either retire or quit the business, said Danny Peek, a Virginia Cooperative Extension agent and regional burley tobacco specialist for Southwest Virginia.

Production of burley tobacco dropped by half after the buyout from 5,900 acres in 2004 to 2,800 acres in 2005, and the government estimates that figure will dip to 2,500 acres this year -- although Peek is wary of those predictions and says it is difficult to have reliable numbers at this point. Tobacco farmers are not required to report their acreage and many do not.

"I feel very confident that there are at least 3,200 acres [of burley tobacco] in all Virginia," Peek said, estimating that about 75 percent of that is still being grown in far Southwest Virginia.

Still, companies are scrambling to make up for a loss in burley production. Demand has been so great in some areas that the companies are offering monetary incentives in hopes of persuading farmers to add burley tobacco to their fields.

Johnny Angell, a tobacco farmer in Franklin County, said he split his tobacco crops between burley and flue-cured this year -- both of which are used to produce domestic-blend cigarettes.

Harvesting burley tobacco, he said, is slightly more labor intensive -- each stock must be cut and hung by hand -- but he can get on average 12 to 15 cents more a pound as opposed to selling flue-cured tobacco.

Angell, who has a contract with Richmond-based cigarette giant Philip Morris USA also notes that flue-cured tobacco, which is cured by artificial blasts of heat, requires substantial amounts of natural gas or heating oil. "You're sort of swapping one expense for the other," he added.

A dip in prices for flue-cured tobacco is also causing some farmers to make the switch-over to sowing their fields with burley tobacco.

Connell Macenhimer, a flue-cured tobacco grower in Franklin County, said he's receiving about the same price as he did 25 years ago under his current contract with the Stabilization Co-op, a group of buyers that offers farmers some price supports. He has already cut back his tobacco acreage this year to 55, down from 200 acres before the 2004 buyout, and if production costs continue to rise, he's thinking about cutting out of the business completely. "If I'm not going to make any money, I'm not going to do it," the 54-year-old farmer said, adding that he's had several other colleagues threaten to leave the business next year because of paltry profits made this year.

Some industry observers are skeptical that swapping one variety for another will do much good in solving all cost woes.

"Growers are just trying to do something different to survive but that hasn't been the answer," said Scott Reiter, a Campbell County Cooperative Extension agent. "The cost to produce tobacco has made it extremely tight to make any money this year -- for any of the varieties," he said, adding that the acreage in Campbell County dropped 60 to 70 percent for all varieties in the last two years. The county now has 12 tobacco growers.

Plus, shifting to burley production often means sinking more money into new equipment and building a barn. The cost of a new barn alone can be anywhere from $15,000 to $20,000 depending on the structure's size, Reiter estimated.

"For several years you're just growing tobacco to pay for that barn," Reiter said.

Jackson acknowledges that he is in it for the long haul. The new barn set him back about $30,000 and will take three to four years to pay off. But with energy costs rising, he says he can't afford to double the cost of curing his tobacco. And Phillip Morris USA has already offered to reimburse him for up to $2,500 on the cost of building the new burley barn. "This right here," he said spreading his hand over a wilted, fan-shaped burley tobacco leaf. "There's a heck of demand for it."

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