Farmers planted less tobacco this growing season in Nash County in response to a reduction in domestic consumer demand, growers said.
They blame increasing taxes and government regulation for the decline in consumption, and said that could have a negative effect on the local economy.
But the news is not all bad. Generally speaking, the quality of the crop was better than last year due to weather, growers said. There also is a burgeoning market in the cigarette export business that local growers believe will eventually help compensate for the loss of domestic business.
Growers are harvesting 8,500 acres of tobacco crop compared to 9,400 acres last year, said Charlie Tyson, Nash County Cooperative Extension director.
“Farmers plant what they think they can sell during winter months. They contract with tobacco buyers,” Tyson said. “I think this reduction reflects less demand by domestic (buyers).”
On April 1, the federal cigarette tax went up 62 cents to $1.01 per pack. A majority of cigarette wholesalers raised their rates by a comparable amount on March 9.
The tax outraged customers and agitated business owners. On Sept. 1, a new state tax adding 10 cents to a pack of cigarettes kicked in.
Brent Leggett, who operates a tobacco farm south of Nashville, said his crop size was not reduced this year. But, generally speaking, Nash farmers received fewer contracts to sell to the domestic market as a result of new taxes and regulations.
Leggett said the local economy suffers when this happens, as growers cut back on employees’ hours and farming supplies.
Future crop orders could be reduced by the tax increases and by federal legislation that was passed in June that potentially will enable the federal Food and Drug Administration to impose strict new controls on the making and marketing of tobacco products.
The Congressional Budget Office has estimated the new federal law will reduce youth smoking by 11 percent and adult smoking by 2 percent over the next decade in addition to reductions already achieved through other actions such as higher taxes and smoke-free indoor space laws.
“In the long term, I think our market is going to be the export crop,” Leggett said.
Generally speaking, the quality of this year’s tobacco crop is excellent, which can possibly help farmers sell above their contracted amounts.
“I think it’s a whole lot easier to sell a good crop than an inferior crop. There’s always a home for tobacco of good quality,” he said.
The weather also has cooperated this year.
“We’ve had very good rainfall this year,” Leggett said “We’ve had adequate rainfall in most places. But there are some very dry spots. Overall, it’s a good crop.”
The same could not be said of last year’s crop.
“Last year, the weather was a problem. Early on, it was very dry. There was a lot of rain on the tail end of season,” he said.
Analysts for tobacco companies estimate that the federal tax increase would cut domestic demand for tobacco by as much as 8 percent and lowered their orders accordingly at the beginning of this year, said Graham Boyd, executive vice president of the Tobacco Growers Association of North Carolina.
However, countries such as China have increased their orders of N.C. tobacco.
“So we are fortunate,” Boyd said. “While we have had steady decline in domestic consumption, we haven’t encountered the full brunt of that because there has been a trade off, if you will. Some of the export market is making up the difference.”
Another plus for North Carolina growers is that the dollar is doing well compared to the Brazil’s currency, the real. Brazil is a major exporter of tobacco, competing against places such as North Carolina for business. The strength of the dollar makes tobacco grown in the United States more attractive, he said.
The tobacco season is about midway, and so far, it’s been a good season, Boyd said.
“There have been benefits in this crop year compared to last. No. 1, it’s rained,” he said. “Rain drives everything. If you don’t have a yield, it doesn’t really matter what the price is,” he said.
Production costs such as fuels and fertilizer are down from last season.
“So, there are factors here that are going to help,” he said. “All that works into formulation of determining profitability.”
The verdict still is out whether this would be a successful tobacco season.
“It’s still premature to say it will be a good or completely successful year because there is tobacco in the field and a significant amount of tobacco to be marketed,” he said. “Call me next week. We could have a hurricane, which could change everything. But there are reasons to expect that this will be a successful year.”