Hello All. Take a moment to introduce myself.

[lawnphysics]

lawnphysics

I would check on contracts before planning a bigger crop . Contract cuts are probably coming .
Plus Phillip Morris is doing away with contracts all together . They are having other contractors buy their tobacco starting next year .
RJ Reynolds is still buying but cutting contracts down in size to eliminating some all together .

That being said , there is NO place else to get a decent price for tobacco .

My contract is good. I already have my 2015 contract. I can sell 25,000 pounds next year. I only am going to deliver about 10,000 pounds this year. I keep trying not to invest anything financially, but we are breaking down and building a new curing barn this Spring. It helps I can cut my own timber, so the only thing I will have invested in it this year is about $4700 in roof or so, nails, fuel, and personal labor. If the Tobacco Companies screw me over, converting everything to hay and buying more Angus steers will be easy. The new barn will be converted to a new hay storage and cattle feeding barn. If it's one thing I have learned about farming, always have a contingency and build everything duel use.

I heard about the non-sense going on at PMI. They keep sticking it to the growers, and one day there will not be any more growers. I can't recall the name of the company that is going to start buying PMI tobacco on their behalf. I personally think this is a liability/legal issue to help prevent PMI from getting sued, if something goes bad with tobacco they get from their contract company, they can just reference the lawyers to them and blame it on them.

Apparently some of the Asian countries are getting together and building a huge processing plant somewhere in Africa this year that will be able to process 50 million or so pounds per year. I have yet to see any substantial documented evidence for this, but it came from a very good source that hasn't been wrong yet.

I also heard through another grower in my area that the Chinese set up shop somewhere in Kentucky and are starting to buy tobacco directly from growers, so that sounds promising. They were paying about .14 cents more per pound than American Market Average, but that isn't saying much this year.

I look for next year to be hard on growers without contracts, and anything sold before January 1st, 2017 to be a bad sell without contracts. However, I think there is a rosy future coming for American Tobacco Growers in the next 24-36 months. Specifically the 2018 Crop Year and forward. Matriculation is going to kick in, a lot of farmers are starting to throw in the towl (and I understand why, some of them are really being screwed by PMI, and some other companies in the Kentucky area). I heard one rumor that Bailey called farmers in September and told them farmers that their tobacco wasn't needed, which is just dirty. Other growers are just retired and done with it after the way this year has been. I am no where near retirement age so I plan on sticking it out four more years to see what happens. I think the overseas demand is going to sky-rocket. The average this year so far on tobacco delivered is $2.02 from my farm. I look for that average to be down overall on my last delivery to around $1.98 or so because of some curing issues I had in an over-crowded barn. Mainly house burn.

HB4488 does not seem to be holding it's own well. Seemed like a promising variety, but it just don't beat my 14xL8 here. I can get around 2100 pounds per acre with 14xL8 every year absent a severe weather event, drought/hail. I loved the 4488 plant in the greenhouse, loved the plant in the field, and enjoyed topping it and cutting it, but it's grading bad. Most of it is getting tossed into the green or house burn bails. This could be do to a late harvest and early freeze we had here, but I had some 14xL8 in the same field that was cut and hung at the same time and it came out perfect. So I just don't know what to make of the 4488 yet. I may try another acre or two next year. I would say the 4488 is weighing over 2500 pounds per acre, so that kind of has my attention, but it's not going to bring anything on a per pound basis, so I won't really gain anything but hauling around more tobacco weight. I will know more by the end of next week how the 4488 performs at market for me, I will let ya know how it goes if you want.

That is a good looking field of Organic Tobacco, who are you selling it to? RJ Reynolds for their American Spirit Organic Blends?

LawnPhysics

 

[BigBonner]

Bailey still buys but looks for cheap tobacco whether here or over seas .
Chinese walked off last year .
The co-op called a lot of farmers and canceled contracts . The co-op needs to be done away with and farmers money divided up and sent back .
Auction is a joke .

Africa , Argentina ,Zimbabwe , Brazil and other places is taking over the tobacco market , even the seeds come from other countries . When their crops fail , that's when they come looking for USA tobacco .

Good Agricultural Practices (GAP) training of tobacco farmers keeps the liability issue off big tobacco's backs and places it on the farmers .

I used to grow 55 to 60 acres but with low prices and what I have to put in a crop , the figure does not add up . If you figure time , labor , diesel , equipment and all expenses you will go in the hole on profits .
Last year I grew 25 acres , this year 15 acres . Next year probably no burley , except for my other tobacco I grow .

10 head of cattle will make you $12000 and 5 acres of tobacco will make you $21210 ( if the weight is good ) . Now whittle the expenses out of that , labor ,supplies, fertilize , chemicals , equipment ,use of land , etc .

With labor and having to file taxes on each workhand is another whole story . Taking out taxes and filing them is pretty much a no , no as workhands won't work in tobacco .
If you can't write off labor , it shows up as income and you have to pay taxes on money that as income .
It is hard to find laborers here to work . Bigger farmers have gone to using H2A workers .

But to run a good size farm , profits has to be there or a farmer is just wasting his time . Hopes of next year being a good year is disappearing in the tobacco industry . Will I have a good crop and weight ? Will I have a contract ? Will they buy my tobacco ? Will I get a fair price ? Will they cancel my contract after planting ? Or take what they want and just shove farmers crops out the door like in 2010 and 2014 .
My tobacco has always sold good , but I have watched crops get passed over that was better than my crop was .

The tobacco buyout was something I did not want .Some farmers stayed growing tobacco and a lot quit . Tobacco prices drastically dropped and there was no price support to back up tobacco farmers . This left the tobacco companies to pay as little as they wanted to for our crops . We are still getting paid what we did over 10 years ago .

With the new LC variety of tobacco it is hard to get a good weight . Most farmers is getting from 1500 pounds per acre to 1800 pounds per acre . When in the past before the LC tobacco , I was getting anywhere from 2000 to upwards of 3600 pounds of tobacco per acre . Farmers keep hoping for the old weight to come back , but it is my opinion that the LC variety will never weigh like tobacco did before the LC tobacco came out .

I say if you are making a profit , keep at it but be very careful of working hours for little pay . Assign yourself a hourly wage for each stage of growing and keep records of it and see how you come out .

 

[lawnphysics]

I did not want the tobacco buyout either, but I have never owned quota, it was always owned by my Grandpa. It was gone before I started having to take over for myself. However, I did sell 5 years on my Grandfathers to keep him from losing the quota till the buyout occurred.

GAP training is not going the way the tobacco companies want it to anyway. According to an attorney I talked to (yes I did talk to an attorney when this GAP stuff came out because I was worried about the liability issues). After that tobacco is out of my sight. I have lost chain of custody to it, you can no longer hold me liable for it. Unless you want to blend my tobacco into single packs and slap my GAP QR code on it, you can not hold me personally liable in any shape or form. If they mix that tobacco with auction tobacco, with no GAP training, which they do, then how can they prove it was my tobacco that caused the issue. The truth is, they can't! Unless they individually package ALL of my cigarettes into a single batch or lot, of cigarettes, to prove my tobacco was involved in the making of that specific pack. Will it come to that, yeah, more than likely, but that IS when I am out. Logistically, however, that is probably a decade or more off from happening. You raise tobacco, your GAP QR code will be stamped on every pack of cigarettes your tobacco is in. Bam, chain of custody.

Also tobacco is my supplemental income, I am hoping a good outcome for it, but I am just dumping it into savings. My primary income is lawn maintenance. If I could raise 100 acres of tobacco and sell it, I would, and I want too, if the market ever comes back I will.

I also don't understand how farmers are only getting 1800 pounds per acre, last year was the only year in the raising tobacco history of this farm we have ever produced less than 2000 pound per acre. Now if tobacco did get below 1800 pounds per acre on this farm I would probably throw my hands up and be done, because that extra 200-400 pounds is $400-$800 difference per acre of tobacco produced. Consistently raising less than 1800 pounds per acre would put any farmer in the hole. I rotate fields every other year, we always have on this farm, and I think that is why the pounds have stayed high per acre for me. I am using the same Conservation Practices my grandfather won numerous awards on in the 80's and 90's. So I think that is one benefiting factor in production for me.

I know I am making a profit, or I wouldn't be doing it. I can promise you that. I have an extensive business background as well. I have worksheets on top of worksheets for profit and loss margins, labor percentages, ect. I make more money per hour put into tobacco on my profit margin than the lawn care business does.

 

[Boboro]

I hate to jump in to something I know nuttin about .... But there is a Japanese Co. JTI That is tearin a part a hookah tobacco co. Realy goin after the mid east an African tobacco markets.

 

[lawnphysics]

Yeah, JTI is who I have my contracts through. They have been really respectful to me and extremely helpful. Other than the tobacco market in Danville, KY. I just like how both places have treated me over the past few years.

BigBonner,

I don't want anything I say to be confrontational either. I just re-read my post and it sort of came out that way at the end, and that is not my intention. I do believe all tobacco farmers are getting royally screwed by Big Tobacco right now, and that the entire system is literally screwed up.

Tobacco should be a realistic $3 + per pound right now, but it's not. I think one thing that would help is if tobacco ends up listed on the Commodities Market. It is basically a commodity now, if it would become an Ag Commodity, it would allow for informational exchange world-wide on crop losses in other countries, tobacco deficits and surplus, ect.

I consider myself fairly well educated in tobacco. I was lucky enough to learn from what I call the Tobacco Greats of my area. Basically retired and passed away tobacco farmers that I wish were still around to get their opinion of this mess it is in. One thing several of them always told me was to stick at it, keep a positive attitude. So that is what I try to do.

Do I think there is a day coming when tobacco won't be worth anything anymore to grow in the U.S?

Unfortunately, yes I do, but I believe that is still a decade plus out. Till then the only thing I am trying to do is build my retirement account with tobacco money. So far it is working well, but if it tanks, and I start losing money two years back to back, then I will bail, just like the generation before me after that buy-out. If not the first year I lose money. That is just business smart.

 

[BigBonner]

I have grown tobacco personally for over 30 years now and worked in tobacco all my life . It is a hard life to have to quit .

Gap is more for chemical use / training and most important for farmers pertaining to labor issues . This is big tobacco's way of telling certain groups that " hey we train and tell the farmers how to treat workers and it is the farmers responsibility to follow our rules " .
Too much blame on the farmer who are supposedly using slave labor or child labor . I have seen no labor problems but there are groups claiming that some farmers are using child labor and some farmers who are not paying their hired help . From what I hear it does exist in other countries , but it is my belief there is little to none here in the USA .

Added
Gap numbers also stay with the tobacco until processed . Crops are tested and if the test come back bad or nested with lower quality tobacco , then the companies can identify the farmer who sold them the tobacco .
Then they make the farmer pay them back for bad tested tobacco and shipped back to the farmer at the farmers expense .

 

[DGBAMA]

I have nothing to add, but am enjoying reading the insights and conversation about the commercial side if tobacco.

 

[leverhead]

I think it's a great conversation to read. I can't fathom how you squeeze a profit out of $2 a pound, maybe some day I will.

 

[lawnphysics]

I think it's a great conversation to read. I can't fathom how you squeeze a profit out of $2 a pound, maybe some day I will.

Basically I have figured out that as long as I keep my production above 2,000 pounds per acre I can turn a fairly nice profit. The only year I didn't turn a profit on this farm so far was last year, which was just a bad year all together. I was down to under 1800 pounds. I am not sure exactly what caused it. I think it was the weather mostly. Very aggravating situation.

BigBonner] is right though, all those questions haunt me every year.

Will I have a good crop and weight ? Will I have a contract ? Will they buy my tobacco ? Will I get a fair price ? Will they cancel my contract after planting ?

I try to mitigate all those as much as I can, and honestly, it hasn't changed much from the quota system. In the old system there was still a chance tobacco could be rejected, although no where near as a high chance as it is now. You at least knew you had a share of the market with the quota system, because they could not reject your tobacco for just any reason. There are no tobacco meetings here anymore, where the farmers would get together once a month and discuss political topics, new chemicals, new agricultural practices. Even politicians would show up to discuss our concerns with the industry. I don't know if Kentucky, Tennessee, and other Burley states have lost those as well. I would honestly love to see some type of quota system come back to the tobacco industry here in America, but it never will.

 

[BigBonner]

2014 is the last year of tobacco buy out payments . I just wonder what big tobacco will do with that extra money that they are making now that they do not have to make those payments any more to farmers .
Cigarettes and chewing tobacco prices will not drop at the stores . In my opinion this will allow people in charge of the companies to collect themselves a larger pay check . Farmers won't see any increase in our pay checks , but will be left to take what big tobacco will hand us .

The buy out also allowed tobacco companies to purchase as much tobacco from any where in the world that they wanted to . Before , tobacco companies was only allowed to import 20% of their tobacco into the USA . By only allowing the companies to import a limited amount of tobacco into the USA . This made the companies have to use USA grown tobacco .


The quota system and the farmers co-op was what kept tobacco companies from out right robbing farmers .
With the government grading system our tobacco was graded at auction ( at that time there was no contracts only the auction system ) . A price was placed by grade on each basket and tobacco companies either paid one cent more per pound or it went to the pool ( Pool = Co-op holding the tobacco and farmers was still paid a fair graded price ) .

 

[Chicken]

Do you use a propane drying barn...??

And it would seem that with the price of store bought ciggs...that thier would be a boom on farMers selling thier bacca on the internet

 

[MarcL]

Welcome to Fair Trade Tobacco.

 

[Gmac]

My contract is good. I already have my 2015 contract. I can sell 25,000 pounds next year. I only am going to deliver about 10,000 pounds this year. I keep trying not to invest anything financially, but we are breaking down and building a new curing barn this Spring. It helps I can cut my own timber, so the only thing I will have invested in it this year is about $4700 in roof or so, nails, fuel, and personal labor. If the Tobacco Companies screw me over, converting everything to hay and buying more Angus steers will be easy. The new barn will be converted to a new hay storage and cattle feeding barn. If it's one thing I have learned about farming, always have a contingency and build everything duel use.

I heard about the non-sense going on at PMI. They keep sticking it to the growers, and one day there will not be any more growers. I can't recall the name of the company that is going to start buying PMI tobacco on their behalf. I personally think this is a liability/legal issue to help prevent PMI from getting sued, if something goes bad with tobacco they get from their contract company, they can just reference the lawyers to them and blame it on them.

Apparently some of the Asian countries are getting together and building a huge processing plant somewhere in Africa this year that will be able to process 50 million or so pounds per year. I have yet to see any substantial documented evidence for this, but it came from a very good source that hasn't been wrong yet.

I also heard through another grower in my area that the Chinese set up shop somewhere in Kentucky and are starting to buy tobacco directly from growers, so that sounds promising. They were paying about .14 cents more per pound than American Market Average, but that isn't saying much this year.

I look for next year to be hard on growers without contracts, and anything sold before January 1st, 2017 to be a bad sell without contracts. However, I think there is a rosy future coming for American Tobacco Growers in the next 24-36 months. Specifically the 2018 Crop Year and forward. Matriculation is going to kick in, a lot of farmers are starting to throw in the towl (and I understand why, some of them are really being screwed by PMI, and some other companies in the Kentucky area). I heard one rumor that Bailey called farmers in September and told them farmers that their tobacco wasn't needed, which is just dirty. Other growers are just retired and done with it after the way this year has been. I am no where near retirement age so I plan on sticking it out four more years to see what happens. I think the overseas demand is going to sky-rocket. The average this year so far on tobacco delivered is $2.02 from my farm. I look for that average to be down overall on my last delivery to around $1.98 or so because of some curing issues I had in an over-crowded barn. Mainly house burn.

HB4488 does not seem to be holding it's own well. Seemed like a promising variety, but it just don't beat my 14xL8 here. I can get around 2100 pounds per acre with 14xL8 every year absent a severe weather event, drought/hail. I loved the 4488 plant in the greenhouse, loved the plant in the field, and enjoyed topping it and cutting it, but it's grading bad. Most of it is getting tossed into the green or house burn bails. This could be do to a late harvest and early freeze we had here, but I had some 14xL8 in the same field that was cut and hung at the same time and it came out perfect. So I just don't know what to make of the 4488 yet. I may try another acre or two next year. I would say the 4488 is weighing over 2500 pounds per acre, so that kind of has my attention, but it's not going to bring anything on a per pound basis, so I won't really gain anything but hauling around more tobacco weight. I will know more by the end of next week how the 4488 performs at market for me, I will let ya know how it goes if you want.

That is a good looking field of Organic Tobacco, who are you selling it to? RJ Reynolds for their American Spirit Organic Blends?

LawnPhysics

Have ya'll checked out and read the IFTA(Internatational Fair Trade Agreement) If not you need to. I think it is the culprit behind a lot of the downfalls in this country!![Kissing A****+ our wonderful eggheads in Washington have no Working Knowledge of anything on earth; Just Book Knowledge, which want plow the Mule. Plus farmers need to get oganized, a coalition, union, Something,
Gmac

 

[lawnphysics]

I just wonder what big tobacco will do with that extra money that they are making now that they do not have to make those payments any more to farmers .
Cigarettes and chewing tobacco prices will not drop at the stores . In my opinion this will allow people in charge of the companies to collect themselves a larger pay check . Farmers won't see any increase in our pay checks , but will be left to take what big tobacco will hand us .

The buy out also allowed tobacco companies to purchase as much tobacco from any where in the world that they wanted to . Before , tobacco companies was only allowed to import 20% of their tobacco into the USA . By only allowing the companies to import a limited amount of tobacco into the USA . This made the companies have to use USA grown tobacco.

Around ten years ago I was talking to a buyer from RJ Reynolds, with my Grandfather, he was one of the guys that followed the auctioneer at the auctions in the big black trench coats with a top hat. I am positive that both the quota system and the (at the time) new contract system, were going simultaneously, but I can not be sure.

He told my Grandfather then, that if the tobacco companies would just put a .03-.05 cents price increase per pack of cigarettes, and call it something like "farmer sustainability," that they could increase the payment per pound by over .50 cents per pound. He was an elderly man, probably nearing retirement when he made the comment, but it was an interesting conversation. He basically told us that for every penny they add to the retail cost of cigarettes above and beyond current prices and taxes, would increase tobacco per pound payments to farmers to a little over .10 cents per pound for every penny represented in the retail price.

I always found that interesting Bonner, basically they are just stealing the tobacco from people like you and me, and it would disturb sales little, if any, if they would increase the price of a pack by .05 cents. Which if tobacco was bringing somewhere around $2.50-$3 per pound, you and me with all our experience, wouldn't only be making money, we could invest into smarter operations and equipment to keep producing the high quality burley tobacco they demand.

You would think, and this is what gets me, is that tobacco companies would sign 3-7 year purchase guarantee contracts if you produce quality tobacco. In order to allow determined farmers to invest wisely into their production quotas. If I knew for a fact that tobacco companies were going to purchase my tobacco, in writing, for the next five years. I would build two barns, not just one, maintain a H2-A agreements for extra labor or hire a couple permanent summer farm hands, and jump up to 25 acres this year, as well as purchase a big baler, a new tractor, ect. Yet, they expect us to operate in an extreme "What If" environment.

I, like yourself, do not want to give up my living in tobacco, and I wish there was something you and me could actually do about it, but now that the representation is gone with the quota system, I am not sure if there is anything we can do but sit back, wait, and hope everything levels out.

I remember buying Urea for $100 per ton, Sulfate of Potash for around $250 per ton, now according to the local feed store, Urea this year will be around $500 per ton, and Sulfate of Potash will be well over $1000 per ton. Basically, the cost of maintaining a crop is through the roof, and contract prices are still the same as the quota guarantee prices for high quality tobacco over ten years ago. Heck I remember diesel under $1 per gallon for off road for that matter.

I understand the prices for farming operations are going to increase, but the problem is the prices have kept going up over the past ten years, and tobacco prices keep going way down on the market. Last year, without a contract, prices per pound just had started to recover to pre-buyout purchases per pound, and this year they are going in reverse if you don't have a contract.

I understand world trade has a lot to do with it, and that's why I would like to see tobacco listed as a commodity. Go to any Ag Commodity website to look at cattle prices, grain prices, ect, and tobacco have listed right there right under soybeans. Tobacco is basically being bought and traded like a commodity now, so lets make it one, I guess that would force the tobacco companies to be realistic to farmers about the current sale and trade prices for tobacco on the global market, and they do not want us to know what is going on. Imagine if grain was not a commodity, or live cattle sales, or cotton. Without a global commodity trade they would just make excuses and pay farmers whatever they want, just like they are doing with tobacco.

If I knew a way to actually start impacting this, start a grassroots movement, organize farmers to fight back, believe me, I would. I don't even know for sure if you could even get an audience with a local Representative in Congress or The Senate to discuss tobacco. Basically the topic of tobacco is political suicide anymore.

Oh well, all that would mean they might have to pay more some years, so they wouldn't do all that. Just a thought though. Give dedicated, serious farmers an intelligent and smart business plan to work with, and they would always have all the quality tobacco they would need right here in the USA.

http://www.bloomberg.com/markets/commodities/futures/agriculture/

 

[BigBonner]

Big tobacco would not have to charge more for cig's to pay farmers extra . It could come out of their big profits .
If I am not mistaken in the last quarter PMI's was $2.32 Billion . Share holder was some where $1.30 a share .

I remember buyers showing up at warehouses with their fancy cars , hats and clothes .They were fed by the warehouse and treated like royalty .Farmers would stand and wait for the buyers to get up off their but and decided to have the auction .

There is a smaller market for USA tobacco as there have been four big companies that I know of that disappeared completely .

Most farmers have a mortgage and have to sell to pay debts and then turn around and borrow more in hope of a better cash crop next year .

Back in early 1900 there was night riders who would burn barn's, Warehouses , destroy crops and kill people who did not hold tobacco or keep from growing tobacco because tobacco companies was price fixing tobacco . The night riders was trying to push the prices of tobacco up .
My wife had family killed by the night riders because he put out tobacco beds .
A tobacco warehouse below my house on a small river was burned with a lot of tobacco in it .

Here is a link to info on Night Riders http://en.wikipedia.org/wiki/The_Night_Riders

 

[DonH]

All I can say is hang in there, Lawnphysics and BigBonner. Globalization may not go on forever. If the dollar crashes (when it's no longer the world's reserve currency, which could happen in the near future for a number of reasons) all of a sudden tobacco grown in other countries will be much more expensive. And since so many tobacco farmers have been driven out, prices could go way up for you.