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SW “Ohia” | Hello all.
Made the trip to Owensboro yesterday for the annual Burley Growers Co-Op meeting.
Had several good speakers including a tobacco economist from University of Kentucky. Looks like the outlook for next year is a bit up, if not mostly stable. Yields have remained flat which is a source of aggravation for some growers.
Average price per pound for contracted leaf from this previous growing season is hovering around $1.95 or so. For reference, this is the same price that was received in 2004, but is much better than prices received in the 2008 time-range. Tobacco grower fertilizer expenditures have increased by 88% since 2004, while chemical costs have increased 28% in the same time frame. Labor has also increased in price for those that hire external workers. All these issues are putting a squeeze on profits.
Next year appears to be similar and nobody is aware of any contract poundage reductions at this time. Open market sales are down for 2015 compared to 2014, but a poor growing season in the parts of the Ohio Valley are believed to be a contributing factor. Kentucky leads the nation in Burley growers with over 2,000 leaf producers last year. Ohio is second with just under 300, Indiana around 150, and West Virgina had 9. Missouri data wasn't mentioned.
Emphasis was put on four major issues:
1. Wrangling in insurance fraud. Two changes to tobacco insurance were made this year to address fraud. Many in the industry are pushing for major changes including a highly controversial ban on insuring non-contracted tobacco. The Co-Op is researching a two-stage system where non-contracted tobacco can be insured at a lower rate than contracted tobacco.
2. Working to ensure labor compliance. A 60-Minutes report on tobacco labor in North Carolina has put the industry on its ear and growers are being urged to ensure compliance. Burley and Dark growers in the northern tobacco belt (Kentucky, Ohio, Indiana, Missouri, West Virginia) have been in good shape with very few growers out of compliance. FLOC (Farm Labor Organizing Committee) is not present here (yet) but is widespread in regions further south.
3. H2A labor wages are going to be $10.82/hour for this coming growing season. This is a $0.57 increase from last year which surprised many; $0.15 was expected. Growers are urged to respond to USDA labor wage surveys as this is used to set this price. Roughly 200 growers responded last year when they requested 400.
4. Public perception of the industry is extremely important. Labor issues are a major source for bad opinions and growers must address these immediately. However, it can also be a positive for domestic growers; several buyers are looking to end relationships in foreign countries where child labor exists. American farmers are the most regulated when it comes to labor which prevents bad practices by honest growers.
Other issues of note:
-A lack of young farmers in the industry has many at the Co-Op worried. Infrastructure investments by existing growers are very low, many are nervous about the crops future or cannot afford to improve machinery/greenhouses/field conditions.
-Consumer purchases of tobacco products is up 2%, the first increase since the 1990's. This is attributed to lower gas prices which increases disposable income.
-GAP (good agricultural practices) training is becoming more important with the present labor issues. The public is looking to both the companies and growers to solve this, and GAP is viewed as a good avenue for it.
-Tobacco companies are expressing interest in sourcing more tobacco domestically because of stability issues in Brazil and Zimbabwe. American growers continue to produce the highest quality leaf with the lowest buyer-side expenditures. Many growers overseas are financed and supplied by the tobacco buyers; that does not occur here.
Just relaying what was discussed, I do not endorse or have opinions on what was stated. I am sure most in the industry are already aware of these subjects but some may not be. We don't hire any H2A labor but I know most larger growers do, so it is relevant.
We have grown tobacco for at least four generations, and most every other tobacco family has too, so I believe we can weather any storm in the industry. | |
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Tobacco Market Outlook from the Burley Co-Op Meeting
