Danville market glutted with tobacco
In a big white warehouse just south of the Centre College campus, there are 1 million pounds of tobacco waiting to be sold. It could be part of one of the best tobacco crops in decades, but one warehouse owner is concerned a flooded tobacco market could be bad news for farmers.
Jerry Rankin, owner of Farmers Tobacco Warehouse in Danville, said the amount of tobacco on the open market this year is abnormally high — he estimates as much as 25 million pounds of the crop is available for anyone to purchase.
Normally, farmers contract with major tobacco companies for a large amount of their tobacco. But in March of this year, a major tobacco company cut many farmers’ contracts by 25 percent, while some growers lost their contracts entirely, Rankin said.
Farmers who already had made decisions about what they were growing went ahead with their tobacco crops, hoping to turn a profit on the open market, he said. Other farmers who had been growing other crops switched to tobacco after seeing their peers make a good profit on tobacco last year.
“The supply is quite a bit more than the demand this year, and there’s a lot of farmers running around trying to find where to go (with their tobacco),” he said.
No more floor space
Last year, Farmers Tobacco Warehouse sold about 4.7 million pounds of tobacco. This year, Rankin expects to sell a lot more — anywhere from 5.5 million to 7 million pounds.
The tobacco sold at the warehouse is auctioned off to the highest bidder. Rankin said it boils down to simple supply and demand.
The warehouse is packed with 1 million pounds of tobacco. Floor Manager W.M. Alford is taking names and numbers of farmers with tobacco because there’s no more space.
The warehouse’s first auction of the year is Monday, which is when the tobacco community will learn just how much the tobacco is going to sell for, he said. Alford said last year tobacco sold for about $1.55 a pound.
About one-third of the current stock is expected to be sold on Monday, with two more auctions scheduled for Nov. 23 and Dec. 3. The warehouse probably won’t be finished selling until sometime in February.
Rankin said it’s potentially an unfortunate situation for farmers because this year’s tobacco crop is outstanding, especially compared to the past two years’ crops, which had too much color and weren’t a good consistency for smoking.
Not since 1982 has Kentucky had as plentiful and high quality a crop, he said.
“The color’s good in it, the moisture’s good in it. It’s fancy tobacco,” he said. “You can drive the wheels off your car, and you won’t find a better crop.”
High-quality crop
Enough rain during the growing season and plentiful humidity during the curing season made for excellent tobacco this year, and many local farmers handled their tobacco professionally, which keeps the quality up and makes it more valuable, Rankin said.
However, while much of this year’s crop is high quality, Rankin said some of the crop was housed in cool weather, got dirty or was left in the field due to rain. As much as 15-20 percent of this year’s crop could be of poor quality.
That could be good news for farmers with high quality crops, because it would shrink the market back to a good size and keep tobacco prices up where they normally would be. But it would be bad news for farmers who are unfortunate enough to have a bad crop this year, because they’ll be left with essentially nothing, Rankin said.
What it comes down to is waiting for Monday, to see what the tobacco sitting in the warehouse sells for.
“I think there’s a lot of tobacco companies and dealers out there that’s seeing a home run, and it’s going to be a situation where the farmers out there will suffer,” Rankin said. “That’s my opinion; I hope I’m wrong.”
Copyright: AMNews.com 2009, By BEN KLEPPINGER
