By Tim Thornberry
Special to NKyTribune
Many agriculture commodities have the benefit of check-off programs that raise revenue to go back into the business for marketing, research and other efforts.
The beef industry’s “Beef, It’s What’s for Dinner,” and the pork producers’ “Pork: The Other White Meat” are just two examples of what check-off dollars can fund in the way of marketing campaigns.
Burley tobacco is no different when it comes to having its own program (minus a domestic marketing component), and those dollars are proving to be especially useful at a time when the future of the crop is a bit uncertain.
The Council for Burley Tobacco recently announced an investment of $140,000 in check-off funds that will go to various research and education projects – all to benefit the burley tobacco industry.
Rod Kuegel, CBT board president said those funds are more important now than ever before.
“It’s very important that we maintain our check-off and we try to make sure every dollar of it is spent for the farmers’ good,” he said.
In breaking down where those funds go, 40 percent of collected check-off dollars goes to the Burley Tobacco Growers Cooperative for promotion of tobacco in foreign markets or for research. The co-op is comprised of burley growing members from a five-state area including Kentucky, West Virginia, Ohio, Indiana and Missouri.
The other 60 percent stays with the CBT of which most goes for grant and research efforts at institutions such as the University of Kentucky and Murray State University to improve the efficiency of burley production.
While the money has the potential to make an impact in many areas related to the burley industry, Kuegel said research in plant varieties has had some of the biggest impact.
“Probably the most impact we have directly as growers is the new varieties developed by Dr. (Robert) Miller working with UK and the University of Tennessee that are black shank resistant,” he said. “Those varieties are making up about 50 percent of what we raise in burley.”
In the past, black shank has been one of the most devastating plant diseases tobacco growers have had to face. Most of these recently funded projects are related to making plants better or fighting disease in tobacco plants.
Kuegal said much of the funding for such research from tobacco companies to conduct is drying up.
Will Snell, a UK agriculture economist echoed those sentiments, adding that in the midst of declining research funding and challenging market conditions, it’s vital to have funds to support grower initiatives.
A changing market
Snell also pointed out there is a changing market environment that is affecting burley production, including the growing popularity of electronic smoking devices.
“The demand for U.S. burley beyond 2015 remains very uncertain. One factor that may play a noticeable role will be the rapidly emerging e-cigarette/vaping market,” he said. “Currently, the e-cig/vaping market is only around 2.5 percent of total U.S. tobacco product sales, but some analysts anticipate that it will continue to grow, and could overtake domestic cigarette sales within the next decade.
Snell added that most of these “alternative” nicotine delivery products are presently derived from non-U.S. leaf sources – primarily China.
“While research and production efforts are evolving to see if U.S. tobacco growers can be a part of this market, it remains unclear if U.S. tobacco growers can supply the liquid nicotine at a cost-competitive/profitable level,” he said.
Although navigating this tobacco market is not easy, Kuegel said the tobacco companies have been “very fair” this selling season.
“I think the companies were very fair with the producers in a climate where they may not have needed all of the tobacco they had contracted, so I’m optimistic the companies are going to be fair in the future,” he said.
Snell recently told the Kentucky House Standing Committee on Agriculture and Small Business that tobacco companies only need around 170 to 180 million pounds of the current burley crop while burley producing states have about 213 million pounds to sell.
With more tobacco in the market than needed, most in the business feel like those contracts will take a cut for the coming season. But growers will likely favor a small cut in contracts verses a big cut in prices.
Contracted tobacco is a better bet for producers to remain profitable as tobacco being sold at auction markets is going for much less.
Snell told the committee members that some burley is selling for less than a dollar a pound at auction markets while a production estimate for a good yielding producer is about $1.25 to $1.30 per pound.
Tim Thornberry is a freelance writer and photographer who has covered Kentucky agricultural and rural issues for various publications since 1995. He writes regularly for KyForward.com.