April 18, 2011
The rapid growth of middle classes in China, India and other countries over the past few years has opened up new markets for Southeastern tobacco.
Health problems associated with tobacco use are well circulated worldwide and making tobacco safer is an ongoing challenge for the tobacco industry.
China is the world leader in tobacco production and a good example of how the tobacco market is likely to go in the near future. As is the case for all developed countries, the growth in demand in China is expected to come from safer tobacco, which is not grown extensively in China or other Asian countries.
China’s State Tobacco Monopoly Association (STMA) has restructured the tobacco market and emphasizes the importance to the country’s tax structure of the 30 leading brands of cigarettes sold in China. This restructuring will likely continue over the next few years and it will make the China tobacco market less fragmented while also giving leading tobacco manufacturers a competitive advantage, if they can produce what is perceived to be tobacco products with fewer health risks to humans.
Despite a number of preventative measures established by the STMA in China, such as a smoking ban in public places and a total ban on tobacco advertising, the tobacco industry is likely to continue its steady value growth over the next decade or so.
Providing the type of tobacco desired by more world markets, particularly ‘safer’ or ‘cleaner’ tobacco products, will play a role in the revitalization of the U.S. tobacco industry.
A particular challenge for U.S. tobacco growers is the management of suckering, which produces vegetative offshoots that compete with the primary leaf for quality tobacco.
Linwood Vick is a second generation tobacco grower in Wilson, N.C., and a good one, having learned how to do things the right way from his father and Vick Family Farms patriarch Jerome Vick. When the Vick’s talk tobacco, growers tend to listen.
When they joined Sante Fe Tobacco Company’s Purity Residue Clean (PRC) program in the early 1990s others followed.
Strict production guidelines
PRC tobacco is grown using only certain fertilizers and pesticides which break down quickly. After the tobacco cures in a barn, sample testing is done to ensure there are no detectable residues of fertilizers or pesticides.
“The cost of production is going to be higher if you don’t use MH (maleic hydrazide), but it can be done. You would sure rather use MH, because it requires less labor and you get a higher yield. But if you have high quality tobacco, SFNTC (Sante Fe National Tobacco Company) gives you a fair price for it. The premium that Santa Fe pays for PRC tobacco makes it profitable for us,” Vick says.
Residue-free production PRC is the way the tobacco industry is headed, says Vick. “The future for U.S. tobacco growers lies with the export market, since taxes make it increasingly more difficult to sell tobacco in the domestic market,” he says.
For North Carolina growers the tax question might get even more challenging, if proposed legislation is passed. A bill was introduced that would add $1 tax on each pack of cigarettes. The current tax, one of the lowest in the country, is 45 cents. Anti-smoking groups contend the tax could raise about $300 million and keep teenagers from smoking and reduce the number of adults who smoke. Republican leaders say they don’t plan on raising taxes on tobacco or alcohol.
“To build export markets, we have to look at growing more PRC-type tobacco. Our competition is not other U.S. growers: It’s with Brazil, Argentina and Canada, countries that don’t use MH,” Vick adds.
The prospect of losing MH was one of the reasons the Vicks got into PRC in the first place. “We thought having some experience in growing a crop without MH would make us better prepared when the rest of the industry goes in that direction,” he says. “And this way we would get paid for it.”
Vick adds, “On our PRC tobacco, we spray five to seven times with contact chemicals which leave no residue,” he says. “We clean out suckers by hand at least three times. If the tobacco stays in the field a long time or if it is over-fertilized or if it gets a lot of rainfall, we might have to clean it out a fourth or even a fifth time. We sure hope not because that means more labor. On our conventional we usually only have to clean it out twice by hand.”
Vick Family Farms, which includes one of North Carolina’s largest sweet potato operations, grew about 200 acres of PRC tobacco last year. They also grew 400 acres of conventional flue-cured tobacco and 50 acres of burley tobacco.
In the Piedmont area of North Carolina, The PRC program has been a boon for small and middle-sized growers , says Ronald Stainback of Middleburg, N.C.
Last year Stainback had 100 of the 285 acres he grows with his sons Rodney and Ronnie in the program. They have participated in the program since 2001.
Gives them way to survive
“Our farmers here were having some trouble staying afloat since the buyout, but PRC has given them a way to survive. The premium on PRC tobacco really helps us out,” Stainback says.
North Carolina was ravaged by record high nighttime temperatures, near record daytime heat and prolonged periods of drought last year. The impact of the bad weather has been widely reported on grain, cotton and peanuts, but it had equally devastating effects on tobacco, Stainback adds.
Despite the bad weather, the 2010 growing season produced some good quality tobacco in the North Carolina Piedmont.
“It was a hot, dry year, and we had to irrigate our tobacco three times, which is a lot,” he says. “But the quality was good. The only problem was a bit too much nicotine (probably due to the dry weather). But it smoked good and looked good,” he adds.
Last year, Stainback used the new organic-certified suckercide O-TAC, which all Santa Fe’s PRC and organic growers must use. Stainback says O-TAC performed well in 2010.
The PRC program was begun by Santa Fe to implement sustainable agricultural practices on conventional farms, says Fielding Daniel, Santa Fe director of leaf. “We pay the farmers a premium to not use certain systemic chemicals that leave residues on the leaf and promote sound cultural practices prescribed by the company.”
“Through the success of this program, we are using more PRC tobacco each year. The program has grown from just a few tobacco farmers when it first began in 1991 to more than 150 now. Most of them are located in North Carolina and southern Virginia. But the company is looking to contract PRC with growers in areas farther away to get additional styles of flue-cured tobacco, Daniel explains.
And more volume may be needed as well. In the nearly 20 years since the beginning of PRC production, SFNTC has gone from using no PRC leaf in its blends to more than 50 percent now, counting all its styles.
Tobacco isn’t the only Southeast-grown crop that has had to change production practices to meet export market demand. The meteoric rise in U.S. cotton production projected for 2011, for example, is a direct result of demands for fiber in China. If U.S. tobacco production is to expand significantly, meeting foreign demands seem certain to be at forefront of this growth.
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