Frankfort, KY – As farming has become a more diverse enterprise over the last decade, many farmers have learned not to put all their eggs in one basket. And in this year of extreme drought, that’s a good thing.
But an increasing number of producers are trying grain production for the first time as traditional tobacco farms are becoming more and more expensive to operate.
Grain prices have reached all-time highs over the last year. Corn in particular has seen a sustained increase. The latest price information shows a slight decline off the record $8 per bushel seen last summer, but the price is still in that $7 to $8 ballpark; a place corn growers want to be.
At those kinds of prices, and given the fact that more farmers are turning to corn production, the question arises, will corn become the new tobacco?
Kentucky has long been known for its tobacco production. It is a tradition for many family farms and was the staple of the agriculture economy for generations. The state still leads the nation in burley production and the industry has stabilized with the demand for quality burley currently on the upswing.
When speaking about total numbers however, corn is the top crop in the state worth more than $700 million annually, more than double that of tobacco. But that’s not an apples-to-apples comparison since corn acres far exceed tobacco acres. But as it becomes increasing difficult to raise a crop of burley, mostly due to a lack of a good labor force, some producers will say it’s plausible to think corn could start to rival tobacco as the crop of choice both from an economic and labor standpoint.
The 2012 corn crop will not be a good gauge in making a case due to the extreme drought experienced across the country but there were pockets of exceptional corn. Mike Spencer, a tobacco producer from Franklin County is one of those who, as he puts it, was really lucky this year.
In 26 seasons of growing tobacco, Spencer tried his hand this year at growing corn for the first time because of the good prices.
“It was planted the 19th of May when everyone else was three or four weeks in front of us but when it was really hot and dry in June, my corn was about chest high and not tasseling,” he said. “I planted with no fertilizer on it because it was so dry. The second week of July, I dropped nitrogen on it and I got an inch and a half of rain the next day.”
Spencer added that in the following 10 days, his crop got an additional six inches of rain making for an excellent crop. He has yet to harvest the corn but his early estimates indicate his yields could be as high as 150 to 180 bushels an acre.
Spencer said with a $21,000 investment in his corn, this crop will prove to be the best turn around he has seen in a long time; this coming from a traditional tobacco farmer who also grew an excellent tobacco crop this year.
He said the big difference between the two crops is labor. Between himself and another grower, they had only a 12 person crew to harvest 300 acres; certainly no easy task. For corn it really is a one or two person endeavor.
Spencer said it is conceivable to think that corn could indeed become more profitable than tobacco with labor being what it is.
“The one thing that is going to push me toward more corn is the labor issue. We have had the worst labor problems this year that we’ve ever had,” he said.
As with all crops, input costs have greatly increased but Spencer said the profit margin for tobacco is way down from what it could have been.
That being the case, a strong tobacco crop will help with the bottom line this year especially for those like Spencer who grew both but did not have the luck he did with his corn.
“You need a pretty high production to make it pay off,” Spencer said. “I would call this year one of the better years in the last five for tobacco.”
He noted that there should be no problems in selling his burley with new markets available this year but he doesn’t think that is a long term thing.
Spencer also said with all things being what they are, his intensions next year will likely be to increase his corn acreage and decrease his tobacco production to a level of being able to handle the labor without having to find a crew and use only his current available barn space.
Will Snell an agriculture economist with the University of Kentucky College of Agriculture, said grain prices are luring not only tobacco farmers, but cattle farmers as well.
“I'm afraid this labor situation for tobacco is not going to get better anytime soon; probably the biggest constraint keeping folks from taking advantage of the short term need for more tobacco,” he said. “It will be interesting to see how the companies respond with price incentives for next year. Most of the grain guys will do okay this year, due to crop insurance. And for those who escaped the drought, they will do really well in this price environment.”
Todd Clark, a farmer from Fayette County grows about 45 acres of tobacco, said there are new markets for the crop this year and a surge in the market seems to be taking place. The question is will it last.
“There seems to be a few new players in the marketplace and things seem to be on an uptick. I hope that whatever is causing this can be maintained and it’s not a one or two year thing and then we’re back in the other direction,” he said.
Clark also said he thinks that while tobacco still remains the most profitable of traditional row crops on a per acre basis, corn is getting close and with little if no labor issues.
He added the single biggest factor in determining how much tobacco will be produced in 2013 with likely be the issue of having enough help.