Prices encourage contracting for Kentucky's tobacco farmers

SPRINGFIELD, Ky. -- As farmers scanned the prices on their burley tobacco at the Washington County Co-operative Warehouse, one grower cautioned a farm wife not to expect too much for Christmas.

"You can forget about that fur coat," said Edward Hill, drawing laughter from farmers shadowing a bevy of tobacco buyers and a singsong auctioneer, an autumn tradition at burley warehouses across the South.

But for the few dozen farmers gathered this week for the opening of burley sales, the prices offered by tobacco buyers for the rust-colored leaf were no laughing matter.

Prices generally ran a penny or two above the price support amount, dimming already-low expectations for a sales season overshadowed by the spread of contracting, in which farmers bypass the burley auctions and sell leaf directly to tobacco companies.

Farmers' frustration was deepened by the realization they could have made about a dime more per pound if they had sold their burley under contract -- a big difference for growers selling thousands of pounds of leaf.

Eddie Hill, a grower from Lebanon, leaned on a bale of choice tobacco that brought $1.96 per pound. A year ago, he received $2.10 a pound for a similar bale that was no better in quality, Hill said.

"It's like they want to hang the ones who aren't supporting the contracting," he said. "They are punishing us. All of us think that way after today."

Brian Furnish, who works for the Burley Tobacco Growers Co-operative Association, said he could sense the apprehension as farmers watched buyers walk past long rows of baled leaf.

"It used to be the best day of the year," he said of opening sales day. "Everybody looked forward to it. Now there's not much excitement. There's so much uncertainty."

Adding auction fees

Will Snell, a University of Kentucky tobacco economist, said the average price for contracted burley tobacco has hovered close to $2 per pound. Burley sold at auction will average around $1.90, he predicted. The price difference widens once farmers selling at auction pay warehouse fees, a cost avoided by contract growers.

With improving worldwide demand for burley, the overall market price is expected to match or exceed last year's record price of $1.95 a pound, Snell said.

Nearly 65 percent of this year's burley belt crop is expected to sell under contract to cigarette manufacturers and leaf dealers, Snell said. That's more than double a year ago, when only industry giant Philip Morris U.S.A. contracted with growers.

He said the quality of the crop is generally good across the burley belt, which includes Kentucky and parts of Indiana, Ohio, Missouri, West Virginia, Tennessee, Virginia and North Carolina.