Tobacco auctions making a comback

Tobacco Auction

The sing-song cry of the tobacco auctioneer – which wafted across Tobacco Road for decades but has been largely silent since 2004 – is beginning to be heard once again.

Auctioneers have become involved in the sale of the leafy crop for the first time in any size since the quota buyout of 2004, Southeast Farm Press reports.

For example, 265,000 pounds of flue-cured and a little burley tobacco were sold in late October at an auction held in the Old Belt Tobacco Sales warehouse in Rural Hall, N.C.

“The average price was just under $2.02 per pound, very competitive with contract delivery stations,” the publication reported. “Many of the lots brought $2.20 a pound, also very high, and there were substantially no rejections of bids by farmers.”

This was the third year that Old Belt Tobacco Sales has conducted auctions in Rural Hall, 10 miles north of Winston-Salem, Southeast Farm Press added.

In 2010, the warehouse sold five million pounds, then 2.5 million pounds in 2011, when Hurricane Irene reduced the tobacco available.

Tobacco auctions have slowly rebounded from the impact of the 2004 tobacco buyout, part of the Fair and Equitable Tobacco Reform Act – which ended the US Department of Agriculture quotas and subsidies for tobacco growers and prompted many farmers to move to other crops, or get out of farming altogether.

“The switch from a subsidized market to a free market caused confusion in the industry, drove down prices and put a damper on the tobacco market,” according to a 2010 article in the Burlington (NC) Times-News. “The amount grown and price per pound fell to levels not seen in (North Carolina) since the early 1900s.”

Prior to 2004, tobacco growers since the Great Depression had been guaranteed a certain price for their crop if they limited production.

After the 2004 Tobacco Act, farmers began to sign a contract in the spring to sell their crop directly to a tobacco company after harvest instead of selling their crop at a tobacco auction in the fall like they had previously, according to the Evansville (Ind.) Courier & Press.

“If they and the company buyers can’t agree on the quality of the crop and a suitable price at market time, the farmer has been able to take his product elsewhere,” the publication added.

While average sales prices did drop after the buyout, they are now close to what they were before the Fair and Equitable Tobacco Reform Act.

Rural Hall wasn’t the only market to have an auction for flue-cured in 2012. The Piedmont Warehouse in Danville, Va., also operated a conventional auction this past season.

“We got prices comparable to contract prices, and some grades brought higher than contract prices,” said Jim Eggleston, one of the partners running the auction. “There was a lot of demand.”

This was the third year of auctions for Piedmont Warehouse, with Eggleston adding that there “has definitely been some dissatisfaction with contracting in this area.”

Conventional auctions still have a small but loyal following among burley tobacco growers.

Scott Travis of Kentucky said never felt really comfortable about the contracting system, so this year, for the first time since contracting began, he is selling all his crop at auction, he told Southeast Farm Press.

“My trust of the people running the Danville auction is the big reason I sell there,” said Travis, who farms near Louisville. “To me, it seems like a good alternative to contracting.”

Most farmers need a contract to get financing to produce their crop, he said. “But smaller farmers like me can get by without one, so I would say the auction system has a place serving the smaller farmer.”

Auctions offer an additional advantage to smaller burley growers, said Travis. “We can sell there in either large or small bales,” he said.

(Above: Old-time tobacco auction in Granville County, North Carolina.)

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