Tobacco Production, Prices Expected To Drop In 2016

Tobacco-22016 could be another challenging year for tobacco growers.

Tobacco production is a $60 million a year industry in Johnston County at the farm gate. Farmers are looking at a potential drop of $10 million this year alone.

The problem is a reduction in prices being paid for tobacco, including many farmers who are finding some of their contracts to sell tobacco in 2016 had been reduced or eliminated altogether. Bryant Spivey, County Extension Director of the Johnston County Cooperative Extension Service, said the county currently has about 78 farm operations growing tobacco. Many of the growers have contracts to sell their tobacco with two or more companies.  This year, many producers are finding the amount of tobacco companies want to purchase is lower than in 2015. 

Tobacco-1In 2014, tobacco was grown in 12,600 acres in Johnston County. In 2015, production declined to 10,600 acres. This year, a 15 to 20 percent cut is anticipated, Spivey told

He said prices are also dropped. In 2014, when growers were producing 2,600 pounds per acre, the price was close to $2.00 per pound. In 2015, the average fell a dime to $1.90. In 2016, prices will likely be down for  lower stalk tobacco. 

“Production is bound to be down,” Spivey said. “We had a fairly difficult year in 2015 in that we had a really hot dry period in May and June that lingered in July that effected the quality, especially on lower stalk tobacco, which is really not favorable in our market. In addition, the American economy has strengthen as opposed to foreign countries that have not. Major competitors live Brazil and Zimbabwe, the strength of the dollar has gone up dramatically, while the value of the Brazilian real has gone down against the dollar. That makes our tobacco expensive and their tobacco cheap.”

Tobacco-3“The big thing for (local) growers,” Spivey added, “is definitely that our market is based on premium quality tobacco. We always talk about quality and it is becoming more and more the case, especially with these exchange rates.  Spivey said area producers can bring high quality premium tobacco to the markets than can’t be duplicated in other parts of the word.

Spivey said no one really knows what 2016 will hold but all indications are acreage will be reduced and prices will be lower than in 2015.