Bids up, mood down at N. Carolina tobacco auctions
WILSON, N.C., Aug 9 (Reuters) - Resignation hung in the air as thick as the sweet smell of freshly cured tobacco on Wednesday as the nation's largest leaf auctions opened in eastern North Carolina, many for the last time.
In the past year, 15 North Carolina auction houses have shut down, and farmers in eastern North Carolina's tobacco belt say they are worried about preserving their way of life. Fewer Americans are smoking, domestic cigarette production is down, and farmers want to cut costs and compete in foreign markets.
``If we keep on like this, there won't be any (tobacco warehouses) left,'' said Donald Winborne, owner of Wainwright's tobacco warehouse in Wilson, home to the nation's largest tobacco auctions. ``We'll have to get out, that's for sure. This could well be our last year.''
Prices were reported strong at upward of $1.70 a pound as bidding opened at Wainwright's, in a corrugated steel warehouse stretching about two city blocks. But after paying costs, farmers will earn only 25-40 cents a pound.
This being an election year, there were as many politicians on hand as there were bidders working their way through bales of golden leaves harvested this summer and darker leaves left over from late last season.
``We have got to get the production of tobacco back to a level that is profitable for the farmers,'' said Republican Steve Troxler, a lifelong farmer running for Agriculture Commissioner.
For generations, farmers have grown tobacco under federal quotas and sold their crop at auctions in the fall. This year, thousands of farmers have committed at least part of their crop to contract production, which reportedly brought more than opening auction prices. Still, many farmers worry that in the future they will have less power to negotiate prices with cigarette companies.
Once North Carolina's largest cash crop, worth more than $1 billion, tobacco now ranks fourth behind hogs, turkeys and greenhouse nurseries. This year's crop should gross about $630 million for North Carolina tobacco farmers, who grow two-thirds of the flue-cured crop used widely in cigarettes.
The state's basic quota has dropped 44 percent from 641.9 million in 1997 to 357.8 million this year. Farmers will pocket as much from tobacco settlements and emergency appropriations as they will from profits from growing the golden leaf.
Of five buyers picking their way between tobacco bales at Wainwright's, four were filling orders from Philip Morris Cos Inc., the largest U.S. tobacco company, Winborne said. R.J. Reynolds Tobacco Holdings Inc., the nation's No. 2 cigarette maker, contracted out production to obtain leaf cured by a process that reduces nitrosamines, a known carcinogen.
``When it comes down to the nitty gritty, Philip Morris will determine what is going on, because they are the big buyer,'' Winborne said.
Randy Harrison, a Brown & Williamson vice president who tracks leaf production worldwide, said the United States must revamp its tobacco support programme to bring production back closer to demand and eliminate an overhang of tobacco from prior years that is holding prices down.
He said the federal government should also scrap its quota system that has allowed farm families to hold tobacco growing rights and lease those rights to working farmers for 35-90 cents a pound -- two to three times what the working farmer pockets in profits from working the fields.
Any proposal to scrap quotas will bring cries of protest in North Carolina from well-connected farming families who have relied on income from the quotas for generations.
``That's got to end if the U.S. is going to be competitive in the international market,'' Harrison said. ``We don't have to get to Zimbabwe prices or Brazil's prices, but we've certainly got to close that gap.''
With smoking on the wane in America, North Carolina tobacco farmers are pushing for a larger share of the international market, especially China, the world's largest consumer market. Political turmoil in Zimbabwe and the lower quality of Brazilian tobacco should help U.S. growers make some headway.
``I think there will be some impact, but I think it will be small in the beginning,'' Harrison said.
Still, farmers remain an optimistic lot.
``There is no question tobacco will survive. I think the English said it was a hardy weed, and it's grown by hardy farmers,'' said Richard Horner, who put himself through college working in tobacco warehouses and is now running for state Senate.