Tobacco contract cuts hurt Stokes County farmers

Staff reports

Tobacco buyers cut several contracts in Stokes and Surry counties this year, delivering a blow to the industry with local farmers taking the brunt.

Tim Hambrick, a cooperative extension agent, estimated that about 15 farmers from Stokes and Surry counties had been affected as of Friday afternoon.

“I suspect that number will swell a little bit,” he said. “I suspect the number of people who lost contracts will be bigger than what we know right now.”

While some contracts were reduced, many were cut entirely, leaving those growers with no place to sell their crop.

“The way things look right now they might be out of business,” Hambrick said. “It’s a lot of lost income for the area, and certainly for the growers.”

Flue-cured tobacco was once the lead field crop in the county and is still at near the top of the list, with 2,400 acres produced in 2014, according to North Carolina Department of Agriculture data. Statistics from 2015 were not available.

Hambrick estimated that the 2016 cuts resulted in a loss of about 500 acres of tobacco produced and sold in the county, which calculates to a loss of about $2 million, at an average price of $2 per pound and average production at 2,000 pounds per acre.

Growers whose contracts were yanked are left with few options.

There’s no severance, no unemployment, nothing.

Hambrick said several factors have contributed to decreased demand for tobacco of the past couple of years, including anti-smoking campaigns and high taxes.

The majority of the demand comes from exports, which with the high value of the U.S. dollar has become increasingly difficult not just for tobacco but crops such as corn and wheat, he said.

At the same time, Brazil produces three times more tobacco than is grown domestically. “Their currency is in a free fall,” Hambrick said. “Ours is really high, there’s is really cheap. Worldwide people are going to go to Brazil,” he said, adding that China has also decreased imports.

An Alliance One spokesperson provided the same reasoning.

“Demand for U.S. tobacco is based on its competitiveness versus other global tobacco crops. Based on recent strengthening of the U.S. dollar, some demand for U.S. grown tobacco has shifted temporarily to other full flavor markets,” stated Jennifer Bailey, communications and compliance manager. “We do not expect the current decline in demand to be permanent.”

In 2015, cuts were prevalent as well, with R.J. Reynolds Tobacco Company making a 25 percent reduction across the board and Alliance One cutting about 60 contracts, Hambrick said.

Those cuts were spread across a more widespread region, while this year’s contracts were more concentrated locally.

“I think it seems worse this year than last year,” Hambrick said. “The ones I’ve heard from this year are all Surry and Stokes County.”

Hambrick said U.S. Tobacco Cooperative may also have cut some local contracts.

“Alliance One is probably the one who had the most acreage in our area,” he said. “I don’t think Reynolds cut anybody.”

Simply getting out of the tobacco game is easier said than done, Hambrick said.

“There’s no crop that produces the income tobacco does,” he said, noting that prices for almost all crops have dropped dramaticallyin recent years. “The general feeling among farmers is not good. Cattle prices have dropped way low and a lot of tobacco farms also do cattle production so it is kind of a snowball effect.”

He said expected many farmers, if they decided to contue farming at all, would transition to grain production in the short term, but said there is not really a crop that can compete with the revenue tobacco brought.

Hambrick explained that an acre of soybeans might bring about $800 compared to $4,000 for tobacco.

“I suspect some will retire or add chicken houses,” he said. “There won’t be anything that replaces it. It’ll be a hodgepodge of different things.”

He said some farmers may consider biofuel crops like canola, but noted those were tied to the price of oil which is steep decline as well.

“Most biofuels cannot even begin to compete with gas where it is right now,” he said.

“We have traditionally been a tobacco first area becasue our soils are more suited to tobacoc than to grain,” he added.

Hambrick said the cut in contracts would not just impact farmers, but could have a ripple effect through the entire local ecconomy.

“There are a lot of trickle down dollars that are not going to be spent now,” he said. “There will be farmers who will have to tighten thier belts and not buy parts or supplies or a snack at the gas station. The trickle down impact probably moves futher than any of us understand.

“I want the general public to know that agriculture is struggling and struggling hard right now,” he added. “With everything we grow the price has declined quite a bit over the last couple of years and it still costs the same amount to produce it. Landowners need to understand that the rent they are recieveing will probably have to come down a little bit.”

Staff reports

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