Check-off programs are longtime staples for agriculture commodities, helping to produce research and marketing efforts, including high-profile campaigns such as the beef industry’s “Beef, It’s What’s for Dinner” and pork producers’ “Pork: The Other White Meat.”
Burley tobacco has its own program, and officials say the money it generates is especially needed at a time when the future of the crop is uncertain.
The Council for Burley Tobacco (CBT) recently announced an investment of $140,000 in check-off funds that will go to various research and education projects.
Rod Kuegel, CBT board president, said those funds are more important than ever before.
“It’s very important that we maintain our check-off , and we try to make sure every dollar of it is spent for the farmers’ good,” he said.
Forty percent of the check-off dollars goes to the Burley Tobacco Growers Cooperative (BTGC) for research or the promotion of tobacco, such as in foreign markets. The co-op comprises burley growing members from Kentucky, West Virginia, Ohio, Indiana and Missouri.
The remaining 60 percent of funds stays with the CBT, which then funds grants and research at institutions such as the University of Kentucky and Murray State University to improve the efficiency of burley production.
Pat Raines, a tobacco producer from Ohio, serves as BTGC president. He said the checkoff for burley is still incredibly important to the industry and is used for tobacco promotion and education.
“We use the money to go to trade shows to promote our tobacco, and we also use some of that money to support research and other education opportunities for farmers,” he said.
Those trade shows are valuable tools to producers and grower organizations from the standpoint of education about the industry from tobacco companies and prospects from overseas buyers. Most of the tobacco grown in the U.S. goes toward export markets.
Raines said the BTGC plays an important role in the industry.
Kuegel said aiding research into plant varieties has made a big difference.
“Probably the most impact we have directly as growers is the new varieties developed by Dr. [Robert] Miller working with UK and the University of Tennessee that are black shank resistant,” he said. “Those varieties are making up about 50 percent of what we raise in burley.”
In the past, black shank has been one of the most devastating plant diseases tobacco growers have had to face. Kuegal said the money directed to research also comes as many tobacco company’s invest less in the area.
A changing market
The tobacco market has seen great changes over the past decade, moving from an antiquated system governed by a federal quota structure to a free market system in which quota owners receive “buyout” payments for a 10-year period.
Many of those producers/quota owners decided to stop growing a crop, prompting a huge drop in the number of tobacco farms and changing an industry that had operated in much the same way for generations.
Will Snell, a UK agriculture economist, said that in the midst of challenging market conditions and declining research funding, it’s vital to have funds to support grower initiatives. He noted the growing popularity of smokeless e-cigarette devices is further changing the market.
“The demand for U.S. burley beyond 2015 remains very uncertain. One factor that may play a noticeable role will be the rapidly emerging e-cigarette/vaping market,” he said. “Currently, the e-cig/vaping market is only around 2.5 percent of total U.S. tobacco product sales, but some analysts anticipate that it will continue to grow and could overtake domestic cigarette sales within the next decade.”
Snell added that most of these “alternative” nicotine delivery products are presently derived from non-U.S. leaf sources, primarily from China.
“While research and production efforts are evolving to see if U.S. tobacco growers can be a part of this market, it remains unclear if U.S. tobacco growers can supply the liquid nicotine at a cost-competitive/profitable level,” he said.
Still a fair market
While navigating this changing market is not easy, Kuegel said the tobacco companies have been fair in this selling season.
“I think the companies were very fair with the producers in a climate where they may not have needed all of the tobacco they had contracted, so I’m optimistic the companies are going to be fair in the future,” he said.
Snell recently told the Kentucky House Standing Committee on Agriculture and Small Business that tobacco companies only need around 170 million to 180 million pounds of the current burley crop while burley producing states have about 213 million pounds to sell.
With more tobacco in the market than needed, most in the business feel like those contracts will take a cut for the coming season. But growers will likely favor a small cut in contracts verses a big cut in prices.
Contracted tobacco is a better bet for producers to remain profitable as tobacco being sold at auction markets is going for much less.
Snell told the committee members that some burley is selling for less than a dollar a pound at auction markets while a production estimate for a good yielding producer is about $1.25 to $1.30 per pound.