Tobacco production bounces back after decline

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MOUNT STERLING, Ky. --- Lindsay Pasley is an eager young man in what used to be an older man's game -- tobacco farming.

He recently took 20 tons of his early prepared leaf to Clay's Tobacco Warehouse in Mount Sterling, due east of Lexington in the Appalachian foothills, where he said he earned enough to "have a nice Thanksgiving and Christmas."

The auctioneer's singsong chant still rings out at Clay's and a few other tobacco-selling sites stubbornly hanging on with limited sales, but not nearly as often.

Clay's is the last tobacco warehouse in Mount Sterling, which once had four. Owner Roger Wilson, who has watched longtime growers switch crops or quit farming altogether over the years, hopes to sell more than 2 million pounds this season, comparable to last year but down about half from the days before Congress pulled the plug on a Depression-era buyout program.

Yet Mr. Pasley, 28, wants to quadruple his acreage. He has a contract to sell 10 times as much to R.J. Reynolds Tobacco Co. as he did at the auction.

A decade ago, tobacco seemed destined to wither as cigarette companies shelled out tens of billions to settle lawsuits. Smoking bans then swept the country and -- worst of all for the small-time grower -- Congress cut off the quota system four years ago.

As a rebound in production this year shows, however, Big Tobacco and individual growers alike have proven as resilient as their leaf, aided by a boost in exports primarily to Germany and Switzerland and by new marketing tactics emphasizing smokeless options.

The uptick has coincided with the increasing consolidation of growing onto fewer farms.

In 2004, the last year of the federal price-support program, there were nearly 26,000 farms with quota licenses to grow the more common flue-cured tobacco in North Carolina, still the nation's top tobacco-growing state. By this year, that was down to 2,500 to 3,000 farms, said Scott Bissette of the state agriculture department's tobacco marketing division.

U.S. tobacco production was valued at $1.3 billion in 2007, off from $1.75 billion in 2004, according to the USDA. Domestic cigarette sales are falling by 3 percent to 4 percent a year, a decline that has worsened since the quota system ended. Smokers have felt increased pressure to quit because of smoking bans and higher prices.

The top two U.S. cigarette makers -- Philip Morris USA and Reynolds American Inc. -- are aggressively searching for a smokeless product that consumers will like. They are focusing on cigars, moist snuff, chewing tobacco and snus, which comes in tea baglike pouches that users stick between the cheek and gum.

Exports of U.S. tobacco have played a big role in the crop's rebound. Foreign sales peaked in 1978 at 700 million pounds, but the price supports meant American farmers were undercut by developing countries such as Zimbabwe and Malawi selling tobacco for as little as a third of the U.S. cost. U.S. exports slid to about 339 million pounds in 2005 before rising again to 398 million pounds in 2006, the USDA said.

The rebound was because a weak dollar and rising currencies overseas, said Blake Brown, a North Carolina State University agricultural economist.

The U.S. is expected to remain the world's fourth-largest tobacco grower throughout this decade, trailing China, India and Brazil, according to the United Nations. Not only has tobacco production expanded outside the Southeast to places such as Pennsylvania and Missouri, but farmers are feeling better about their prospects.

In 2004, 69 percent of North Carolina growers in one survey said they saw a future in tobacco. Two years into the buyout experience it was 76 percent, according to the research conducted under National Cancer Institute grants. About a third of farmers said in 2006 they would advise their children to grow tobacco, up from about one-fifth in 2004.

Mr. Pasley said he expects to produce about 500,000 pounds this year, and that he would have produced another 150,000 pounds if he'd gotten more rain.

"My goal is to sell 1 million pounds before I turn 30," he said. As he sees it, the best thing tobacco has going for it is demand.

"People always chew and smoke," he said.


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