Title: Farmers Growing more Tobacco for Chewing as Smokers Quit (News)
Associated Press
BUMPUS MILLS, Tenn. - Like other tobacco farmers in Tennessee, Charlie Hancock used to grow mostly burley tobacco, a leaf used in the blend of American cigarettes.
But Hancock says he can hardly make a profit on burley anymore, so he switched to growing more acres of dark-fired tobacco, a different kind of leaf used for chewing and smokeless tobacco.
"It's (dark-fired) keeping most of the farmers in this area on the farm," said Hancock, who harvested 17 acres of burley last year, but now has only seven. He grew nearly 28 acres of dark-fired this year on his farm about 65 miles northwest of Nashville.
The American market for burley continues to shrink as health warnings and anti-smoking laws persuade more people to quit smoking, so farmers like Hancock are shifting to the more profitable, dark-fired plant.
It's still a small market compared to burley, but the market for chewing and spitting has been growing in recent years. Major cigarette companies are getting into the smokeless tobacco market for the first time.
"I hate to see the burley kind of leave in a sense because it's been so good to us," Hancock said. "But I guess it's the right time."
Sales of moist snuff products - known as smokeless tobacco, or "dip" - have been growing 4 percent to 5 percent annually for the past five years, and dark-fired tobacco production has increased over that same period.
Last year farmers produced an estimated 37 million pounds of dark-fired tobacco, a 3 percent increase over the previous season, according to the U.S. Department of Agriculture. Most of it is grown in western Kentucky, northwest and middle Tennessee and southern Virginia.
Americans have been smoking fewer cigarettes over the past two decades. Last year, smoking was down 3 percent over 2004, and tobacco leaf production was 27 percent lower, the USDA reports.
But some of those former smokers have become spitters.
The nation's No. 2 cigarette maker, Winston-Salem, N.C.-based Reynolds American Inc., got into the smokeless market earlier this year by purchasing Conwood, a private company that makes Kodiak snuff and Levi Garrett chewing tobacco.
"It makes great sense for us," Reynolds American spokeswoman Maura Payne said. "The U.S. cigarette industry is in decline. That's in part what made us interested in entering another tobacco category."
Smokeless tobacco users take a pinch of the shredded tobacco leaf, tuck it between their lower lip and gums and spit out the juice.
But Reynolds American has also recently started selling a "spitless" tobacco called Camel Snus in at least two markets.
"We're encouraged and it is tending to skew more toward smokers versus snuff users," Dianne Neal, Reynolds' chief financial officer, said this week during a conference call with analysts.
The nation's largest cigarette company, Philip Morris USA, has also said it will test a smokeless, spitless tobacco product called Taboka.
The two products are similar and come in small pouches, which users put into their cheek but don't spit or chew. Taboka will be sold in 12-pouch containers, which are expected to cost about the same as a pack of cigarettes.
Philip Morris has said Taboka is designed for adult smokers who are interested in smokeless tobacco alternatives, but not necessarily the "chewing, dipping and spitting" products now on store shelves.
Bronson Frick, associate director of Americans for Non-Smokers Rights, said part of the decrease in smoking - and increase in chewing - has to do with public smoking bans. More than three dozen communities and states have already passed anti-smoking laws, he said.
"There's a huge mountain of evidence about the dangers of second-hand smoke," Frick said. "The public has greater awareness of those health risks and lawmakers are responding to the concerns of constituents. What we're seeing with the smokeless tobacco is an industry that is determined to keep its customer addicted to nicotine in any form."
Even the Legislature in North Carolina, the nation's top tobacco-producing state, voted this year to ban smoking in the General Assembly buildings. Lawmakers chiefly cited the need to preserve the health of the tens of thousands of school children that visit the Legislature each year.
Farmers significantly cut back growing burley tobacco after Congress passed the $10.1 billion tobacco buyout in 2004, ending the industry's Depression-era production and price controls and replacing them with a free-market system.
"Cigarette companies can get the burley cheaper from other countries in Africa and South America," Hancock said. "We're having to compete on global markets, but we're having to pay U.S. prices for our inputs."
Burley and flue-cured tobacco, which are both used to make cigarettes, still account for the vast majority of tobacco production in the U.S., though dark air-cured and dark-fired tobacco have seen the biggest growth in recent years, said Tom Capehart, a senior economist with the USDA economic research service.
Dark air-cured tobacco is similar to the dark-fired, except that air - not fire - is used to cure the plant.
"Right now were seeing an upswing," Capehart said. "It's not a huge increase but between 2004 and 05 it went up about up about 1 percent for the dark air-cured and 2 percent for the dark-fired.
"Were seeing a continued drop in 2006 for the burley," said Capehart, noting that about 160 million pounds of burley were expected to be produced this year, compared to 195 million pounds in 2005.
"The big tobacco companies are going to be moving into this area (smokeless tobacco). It's a natural place for them to expand because the other side of the market is declining."
Hancock says it pays more to grow dark-fired, though curing the plant is more expensive than burley.
"Tobacco is still the most profitable crop on a per-acre basis," said Hancock, who last year got about $1.60 a pound for burley and $2.40 a pound for dark-fired. Last year, he made a gross profit of $3,200 per acre for burley and $8,000 per acre for dark-fired tobacco.
"I barely made a profit off burley last year," he said. "There's not enough profit there to cause a person to want to expand. It boils down to the price the company's willing to pay us."
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