One of the highlights of the N.C. Tobacco Day program on December 5 was the presentation by Blake Brown, N.C. Extension ag economist, outlining the prospects for growth in sales on the world market. The outlook is not cheering.
Here are the factors that Brown thinks should be of most concern to farmers as they plan for 2020 (with a little analysis by the editor):
- The demand for combustible tobacco products continues its accelerated decline.
- There have been an avalanche of new smoking-related technologies in recent years, and unfortunately, all contain less tobacco per unit than do cigarettes.
- Even if the dispute with China were resolved now, we will still have the problem of selling inventories left from 2018. If it is resolved, the resumption of trade with China would positively impact U.S. sales in 2021 (although not likely 2020). But the overall trend is still declining sales.
- Some policy intervention could potentially improve the short-run outlook.
- There is one bright spot on the export scene: the continued growth in the demand for premium cigarette brands continues to grow among Asian consumers. This situation has benefited American cigarettes in the past.
How farmers feel about the coming season--Tobacco Farmer Newsletter took the opportunity to interview several farmers at N.C. Tobacco Day. Here's what some had to say:
What can you count on? At times this season, the connection of quality in tobacco and profitability seemed turned on its head. The market just isn't going to work if that keeps up. Tim Yarbrough of Prospect Hill, N.C., noted, "There has to be some value in quality tobacco that the farmer can count on."
A morale problem: Steve Griffin, a flue-cured grower from Washington, N.C., and president of the Tobacco Growers Association of N.C., said that there is a growing
frustration with the operation of the Tobacco GAP program among farmers, some of whom see no tangible return to the grower who complies with the program. "They see instances of GAP - certified farm-ers who lose their contracts while some farmers who are not compliant with GAP stay in business," he said. Excellence is the goal: It is hard to maintain morale in this situation, he said. "GAP should reward excellence," he added.Bad weather lead to "terrible" yields on the tobacco produced in 2019 at the Oxford (N.C.) research station, said Carl Watson, tobacco research specialist for thestation. "We produced 2,000 pounds per acre, while we normally average 3,000 and 3,200 pounds per acre," he said at Tobacco Day. "This was a year we want to forget."
Time for an upward bounce? Mack Grady, flue-cured grower from Seven Springs, N.C., thought there was reason for a little hope for 2020. "I know agriculture is at a low point now, but maybe things are about to brighten up," he said. "It takes a while for the ball to hit the floor before it bounces, and we are about due."
An award at Tobacco Day: Zane Hedgecock received the "Tobacco Great" award,
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| Hedgecock |
See future issues of TFN for further reporting on other presentations at N.C. Tobacco Day.
OVERSEAS REPORT
Zimbabwe price plummets: The average price on the tobacco market was the lowest in 10 years. A tobacco farmer about 125 miles north of Harare told the Zimbabwean publication Fin 24, "This year I increased my tobacco planting area and spent more money than before, but after selling I have nothing to show for it. I even failed to meet all my debts. Getting back into the field this coming season is going to be a challenge. I see farmers scaling down production or pull[ing] out from tobacco farming altogether."
How one leaf merchant is looking at 2020: The leaf dealer Pyxus (formerly Alliance One) remains focused on maintaining low levels of uncommitted inventory, said Pieter Sikkel, chairman, president and CEO in his company's quarterly report. "While some markets continue to present certain challenges, such as the U.S., which remains impacted by the ongoing trade tensions with China, we are encouraged by other markets," he said.