Sunday, November 28, 1999

Tobacco prices concern farmers

But growers cling to way of life

The Cincinnati Enquirer

        Once upon a time, a teen-aged high school student named Danny Gray grew a patch of burley tobacco. He soon had enough money to purchase a '56 Ford.

        Soon after graduation, the Brown County, Ohio, farmer was growing more of the crop and was able to buy a top-quality two-door, hard-top '63 Ford — once again, from tobacco money.

        Mr. Gray, now 55, of Decatur, acknowledges that these tobacco stories with a fairy-tale ring are long gone. In this year alone, he and other tobacco growers have worried about quota cuts, dry weather conditions and multi-billion dollar tobacco settlements.

        Some are predicting anoth er hit Monday. Burley auction markets are opening throughout the burley belt and prices are expected to be a couple of cents lower than last year's average sale price of $1.90 per pound.

        Dry weather conditions continued throughout the fall — tobacco's curing season. Because of the lack of moisture, much of this year's crop has a bright yellow and tan color instead of a high-quality dark red color.

        While preparing for lower prices, many growers said they're committed to tobacco, no matter what uncertainties the industry may bring. They can't imagine a different way of life.

        “It's not going to be a real good year when you go to settle up,” said Mr. Gray, who will have 10,000 pounds — or about one-fifth of his 1999 crop — up for sale Monday at one of Ripley's two warehouses.

        But “did you ever live on a farm? It's just a way of life. I guess it's just like people who work in the coal mines. If their dad works in the coal mines, they want to work in the coal mines. If I didn't like it, I'd walk away.”

        The burley market normally opens the Monday before Thanksgiving. It is opening a week later than usual because of the hurricanes and floods that ravaged North Carolina this year. The delay is believed to be the only the second in history. The first was when President Kennedy was assassinated on Nov. 22, 1963.

        Last year, 590 million pounds of tobacco sold throughout the burley belt. Kentucky accounted for 74 percent of that market. At the $1.90 per-pound sale price, that meant sales of about $830 million in the Bluegrass State.

        Between 530 and 550 million pounds are expected to be sold this year. Once again, Kentucky, with 17 burley markets, should have a 74 percent market share.

        Ohio has a market in Ripley. It sold 11 million pounds of tobacco last year, also at the $1.90 per-pound price.

        Indiana doesn't have a mar ket, so growers normally flock to the warehouses in Carroll County, Ky.

        Kentucky's General Assembly Tobacco Task Force will be attending opening ceremo nies at Harrison Tobacco Warehouse in Cynthiana.

        Harrison Tobacco Warehouse owner Bob Ammerman was anxious for the markets to open but didn't know what prices to expect.

        “No one really knows,” said Mr. Ammerman of Cynthiana. He grows burley tobacco, too. “There's a lot of confusion with all the lawsuits (and settlements). The companies don't tell us what they're going to pay. It's all going to boil down to (the demand for) cigarettes. (But) tobacco is the only thing you can count on. It's the only thing that's profitable.”

        Tobacco growers say they've seen their profits slip over the years because of rising costs of labor and equipment and cuts in their quota, the amount federal officials say they can grow.

        They took cuts of about 10 percent in 1998 and 30 percent this year. A cut of about 20 percent has been forecast for next year.

        But agricultural officials agree that tobacco still reaps a profit, unlike crops such as corn and soybeans, which rely heavily on price support systems.

        “It's the No. 1 legal cash crop. I don't see that ever changing,” said Danny McKinney, CEO of the Kentucky Burley Tobacco Growers Cooperative in Lexington.

        Growers are especially worried about the billions of dollars that tobacco companies have agreed to pay in the next three decades.

        Over the next 25 years, the companies will pay a total of $206 billion to individual states because of health-related costs of tobacco. Kentucky is receiving a $138 million share this year; $3.45 billion overall.

        There's also a 12-year agreement between tobacco companies and the nation's tobacco quota owners, landowners and tenants. Over the life of the settlement, the companies will pay $5.15 billion to compensate the tobacco industry for the higher prices they expect to put in place because of the larger settlement.

        Kentucky's tobacco-growing industry will receive $112.7 million this year; $1.5 billion for the entire 12-year period.

        Mr. McKinney believes there always will be a demand for cigarettes and tobacco products. He notes that the global population — and marketing possibilities — grow every day.

        “The demand is still there,” he said, sharing a statement that he often gives at speaking engagements. “"There will be more tobacco consumed today than any day in history.'”

        Despite the lower prices expected this year, he believes growers will make up any difference from their share of tobacco settlement money, which is expected to arrive in December, and disaster relief money coming next year because of this summer's drought.

        Tobacco grower Marshall Kinsey, who has special concerns about the quota cuts, is skeptical. He has a 265-acre farm in Grant County and is especially concerned about the quota cuts. Over the years, he has purchased more cattle to supplement his income. He expects that tendency will continue.

        Yet he doesn't think he and his son Mark, who has a college degree in agriculture, will ever give up on tobacco growing.

        “I haven't smoked three cigarettes in my life and Mark doesn't smoke,” he said. “We enjoy raising it. It's been a way of life.”


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