U.S. burley tobacco farmers hopeful for rebound in market demand, prices, due in part to favorable curing conditions after weak 2010 crop; U.S. burley prices this year expected to hit US$1.70/lb. range compared with US$1.50/1b. last year
November 22, 2011
– Having endured a drought-plagued season last fall, burley tobacco farmers in Kentucky hope to be rewarded for their resilience in sticking with the embattled crop — a lynchpin of the region's farm economy until smoking bans, health concerns and social stigma took a toll.
Tobacco experts are upbeat about prospects for a spike in burley prices in the marketing season getting under way, thanks in part to favorable curing conditions that should make the leaf more appealing to cigarette producers.
Ideally, the post-harvest curing process changes long green burley tobacco leaves to a dark reddish brown tint desired by buyers.
After a rainy spring that pushed back the planting season, followed by a summer dry spell, weather conditions have generally cooperated with farmers during the crucial late-summer and fall curing season.
"This is a crop deserving of a profit," said Bob Pearce, a University of Kentucky extension tobacco specialist.
A crop-reporting service said recently that the condition of Kentucky burley being readied for market was 64 percent good, 22 percent fair, 10 percent excellent and 4 percent poor or very poor.
Kentucky leads the nation in burley production, and Pearce ranks this year's crop as the highest quality in the past three or four years. He said farmers are benefiting from a curing season that's been "about as good as we can expect."
It's a big turnaround from last autumn, when a prolonged drought — combined with hot temperatures — caused much of the burley crop to dry too fast in barns. That left much of the leaf with an undesired light tan color.
As a result, market prices generally fell and a portion of the crop grown under contract was rejected outright by the companies.
Burley is mostly grown under production contracts between farmers and tobacco companies. Those agreements allow buyers to reject leaf that doesn't meet quality specifications.
Will Snell, a UK agricultural economist, predicts U.S. burley prices for this year's crop will bounce back to the $1.70 per-pound range. Prices for the 2010 crop averaged about $1.50 per pound, he said, though some drought-stressed leaf fetched less than $1 a pound.
Besides the more desirable leaf color, farmers are benefiting from an improvement in market conditions that in the past contributed to lower demand for their burley, Snell said.
The decline in U.S. cigarette sales slowed in 2011, which could boost domestic demand for American burley, Snell said. U.S. burley exports also stabilized this year as a result of a weak U.S. dollar and limited inventories of quality leaf, he said.
Burley production in Kentucky is forecast at 128 million pounds, down 9 percent from last year, according to the U.S. Department of Agriculture. Per-acre yield is projected at 2,000 pounds, up slightly from a year ago.
Kentucky farmers raised tobacco on an estimated 64,000 acres, down 8,000 acres from 2010, it said.
Nationally, burley production this year is expected to be 173 million pounds.
R.J. Reynolds Tobacco Co., the maker of such brands as Camel and Pall Mall, won't specify how much burley it needs but is upbeat about this year's crop.
"The burley crops in Kentucky and Tennessee this year have been above average," said company spokesman David Howard. "We are pleased with the good quality burley that our contract growers have produced, as they do on a consistent basis."
Philip Morris International, the maker of Marlboro and other cigarette brands for the overseas market, said it plans to open its receiving stations to accept contracted burley on Nov. 29.
"Overall, we believe this year's crop is of better quality than 2010 and we look forward to the buying season," said company spokeswoman Anne Edwards.
Altria Group Inc. in Richmond, Va., owner of Philip Morris USA, spun off Philip Morris International in 2008.
Philip Morris USA, the nation's top cigarette maker, declined to discuss expectations for the new burley marketing season.
The condition of Kentucky's burley depends partly on when it was planted. Earlier-planted burley put on more weight that will pay dividends at market. Steady spring rains delayed planting for some, and much of the later-planted leaf didn't put on as many pounds.
Shelby County farmer Doug Langley eked out a profit from his burley last year despite the worst curing season he'd seen since the early 1980s. He expects higher prices in the next round of marketing, but said this year's crop won't carry as much weight due to the dry summer.
"It should be profitable, but it's not a landslide victory," he said.
And the favorable curing conditions means farmers won't deliver unmarketable leaf, as some did a year ago, Langley said.
Pearce said it would be disheartening for growers if the companies are picky with this year's crop and discount prices.
"It's got reasonably good quality and there's a lot of hard work that goes into tobacco production," he said. "The buyers need to recognize that, and when they have an opportunity like this with a crop that they can use, they need to make sure the growers feel appreciated."
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