Burley tobacco acreage may slump to record low

(AP:LOUISVILLE, Ky.) For the first time in a half century, Chapel Mastin won’t put out any burley tobacco plants on his northern Kentucky farm this spring, calling it quits after last year’s crop reaped no profit but plenty of frustrations.

No. 1 tobacco company

No. 1 tobacco company

The company that signed up Mastin to deliver 20,000 pounds of burley accepted only a fourth of his drought-stressed 2010 crop. He found buyers for the rest of his tobacco, but some fetched a paltry 59 cents to 70 cents a pound _ far below the expense of raising it.

Asked Thursday why he’s giving up a way of life since his teenage days, he replied: “It’s been good to us. But it’s not now.”

The 68-year-old Harrison County farmer, who credits tobacco money for paying off his farm and putting his four children through college, isn’t alone in exiting the tobacco business _ struggling to cope with smoking bans and competition from abroad.

Farmers in Kentucky and other burley states are preparing to set the fewest burley acres in nearly a century of record-keeping, according to government estimates. The government projections were reported this week by the Messenger-Inquirer of Owensboro. Burley tobacco is a common ingredient in cigarettes.

It’s not all grim for burley farmers. Philip Morris USA, the nation’s No. 1 tobacco company, said it’s not lowering its contract burley volumes this year.

But overall, farmers intend to set 94,750 acres of burley this year, down 3 percent from last year, the National Agricultural Statistics Service said. That would make for the lowest burley acreage on record, dipping beneath the low of 97,500 acres in 2008, it said.

In Kentucky, the traditional leader in burley production, growers intend to set 67,000 acres of the leaf, down 5,000 acres from last year. The record low burley acreage in Kentucky was 70,000 in 2005 and 2008, said Leland E. Brown, director of the agency’s Kentucky office.

Burley production has fallen sharply since the 2004 tobacco buyout, which ushered in a free-market system to replace Depression-era federal production and price controls. Now, burley is mostly grown under contracts between farmers and tobacco companies. Companies can reject tobacco that doesn’t meet quality specifications.

In Harrison County, local agricultural extension agent Gary Carter estimated burley production will drop at least 20 percent this year.

For the most part, area farmers with production contracts last year had the agreements renewed if they stuck with it, Carter said.

The biggest production drop-off is among farmers who grew burley without contracts last year, he said. Their speculative ventures backfired last year, when leaf quality was hurt by a dry curing season that gave tobacco leaves an undesirable color.

Some growers decided there’s too much uncertainty in the market to justify planting another crop, Carter said.

Growing burley tobacco

Growing burley tobacco

“They have to feel comfortable that they can market the crop before they’re going to grow it,” he said. “And they don’t have any confidence in the market right now.”

Philip Morris USA, best known for its iconic Marlboro brand, said its burley contract volumes won’t decline this year compared to a year ago. And some of its contract farmers are being asked to step up production.

“Select burley growers will be provided an opportunity to increase their contracted volume,” company spokesman Ken Garcia said.

As for prices offered its growers, the company “will continue to emphasize high-quality tobacco,” he said.

Tobacco companies won’t reveal specifics about contract volumes or prices, citing competition.

Philip Morris International, another prominent buyer of Kentucky tobacco, said it remains “committed to the region,” but won’t say whether it’s contracting for more or less U.S. burley this year.

Company spokeswoman Monica Montero said it doesn’t expect a change in pricing from last year.

Richmond, Va.-based Altria Group Inc., owner of Philip Morris USA, spun off Philip Morris International in 2008.

Shelby County tobacco grower Paul Hornback said he got a production bump from Philip Morris USA and a cut from Philip Morris International. It balanced out in the end. He’s growing about 90 acres this year, the same as a year ago.

Uncertainty is weighing on tobacco growers as demand fluctuates.

Last year, many burley growers endured production cuts from Philip Morris USA. Now many are being asked to grow more leaf.

“So it’s kind of hard to plan out what you want to do long term when you’re fluctuating that much every year,” Hornback said.

University of Kentucky agricultural economist Will Snell said the U.S. cigarette market continues to slide while export demands for U.S. leaf are sluggish. He said world burley supplies are relatively high compared to demand, but stockpiles of quality leaf are fairly tight due to last year’s subpar crop. That may be prompting some companies to boost contracts with top growers, he said.

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