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Tobacco warehouse closings raising serious questions

Around flue-cured country these days, the topic of conversation is the number of tobacco warehouses that have closed up shop. But the big issue may come as early as opening day, as the warehouses still in business strive to sort out how to re-designate non-contract tobacco, says a Clemson University Extension economist.

“The big issue is the warehouses that are going to remain open,” says Russ Sutton, Clemson University Extension economist. “People who don't have contracts could have real issues in getting their tobacco re-designated to sell on the warehouse floor.”

For example, with a cutback in the number of graders and buyers this season, growers who sell their crop the first time this season could have to wait a number of weeks to get another sale. “The selling schedule could pose some real problems for farmers,” Sutton says.

Through the USDA's price-support system, growers must designate where they will sell their crop.

“Given the situation, I wonder if we need to keep designation,” Sutton says. “This is just one example of why we need to start re-thinking the entire marketing system. The FSA has done a yeoman's job in the past, but they'll have their work cut out for them this season.” According to law, the auction process is the only way price support can be offered to farmers for their tobacco.

Approximately 90 flue-cured tobacco warehouses are expected to open for business this season.

That's down from 147 last year and 198 four years ago. In North Carolina, experts are expecting less than 30 warehouses to open for business.

The reason for the decline in the number of warehouses is obvious by now: An estimated 80 percent of the flue-cured crop — from Florida to Virginia — is already under direct contract to tobacco companies. In short, the explosion of contracting marks the end of an era, where warehouses handled virtually all tobacco sales. Few folks are happy with it, especially warehousemen.

But it's something that came on the industry like the heat from an opened barn of flue-cured tobacco. It's still too early to tell what it will actually mean to growers, Stabilization and others in the industry, Sutton says.

“We're still trying to figure out what effect it will have on the entire industry,” Sutton says.


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