Md. tobacco growers rush to find new contracts
Tobacco farmers in Maryland have been scrambling to find new growing contracts after Philip Morris USA recently announced it is no longer buying burley tobacco in the state.
The company sent a letter to its growers in late February, just a week or two before many were slated to begin planting, telling them it would not renew their contracts this year. Many had already purchased seed.
“It was pretty much a slap in the face,” said Wayne Guy, who grew tobacco for Philip Morris on about 20 acres in St. Mary’s County.
Cigarette sales have declined nationwide, and Philip Morris USA doesn’t need as much tobacco as it once did, said Steve Callahan, a spokesperson with Altria, Philip Morris’s parent company in Richmond, Va.
“We found it necessary to stop the purchase of burley tobacco in the Maryland market and announced this decision in a timely manner so that growers can evaluate their plans for the 2019 crop year,” he said in an email. “We know the impact this decision has on growers and we appreciate their partnership over the years.”
Cigarette makers have released tobacco growers across the country over the last year as the industry adapts to a rapidly changing marketplace. In 2018, U.S. farmers produced about 533 million pounds of tobacco, a low not seen since the 1800s and nearly half what they produced in 2000, USDA data show.
An increasing number of consumers understand the severe health risks of smoking cigarettes, and many consumers now smoke e-cigarettes, said Pat Raines, president of the Burley Tobacco Growers Cooperative Association, a multi-state co-op in Lexington, Ky., where much of the nation’s crop is grown.
“Everybody took a huge cut this year,” he said. “Every year we lose a certain percent, and we assume we’re going to lose more this year.”
Tobacco companies are increasingly betting on e-cigarettes, whose popularity among teens and young adults has skyrocketed as a safer alternative to cigarettes. Two months before ending its relationship with Maryland growers, Altria announced a $12.8 billion investment in Juul, a leading e-cigarette maker in San Francisco.
Tobacco production has also expanded in Pennsylvania, perhaps making Maryland’s small community of growers less essential, said Ben Beale, a University of Maryland Extension agent in St. Mary’s County. Nearly 900 Maryland farmers took money from the state government in 2000 to stop growing the crop. The buyout removed almost 8 million pounds of production from the state.
The vast majority of the remaining crop is grown in Southern Maryland, much of it by Amish and Mennonite farmers who truck their tobacco to a receiving station in New Holland, Pa.
Only about 800 acres of tobacco production remain in the state.
“I just think Maryland was not big enough a player at this point,” Beale said.
The state’s 60 to 70 tobacco farmers have been trying to sign with new companies, most of which are offering contracts for tobacco varieties different than the burley Maryland growers have been cultivating since the mid-2000s.
Several companies, such as Hail & Cotton, Lancaster Leaf, and Dunn & Foster, are looking for farmers to grow Type 51 tobacco, known as Connecticut Broadleaf, for as much as $6 per pound, Beale said. The crop, used primarily for cigar wrapping, is raised in nearby states, though never commercially in Maryland, and several farmers said they anticipate a learning curve for those who decide to grow it.
“It’s all speculation,” Guy said. “I know some people in Pennsylvania and some people in Virginia that’s growing (it). We’re kind of in the middle, so we’re pretty sure it can be done, but we might have to tweak it a little bit as far as our nitrogen rates and so forth.”
Late last month, at least five companies were also offering contracts to grow Maryland 609 — used in cigarettes, cigars and as pipe tobacco — but prices have ranged from $1.90 to $2 per pound, Beale said
“A lot of growers are finding it challenging to make those numbers work out,” he said.
Compared to burley, Maryland 609 is a fussier, less resilient crop that must be handled with care, said Charlie Cox, a tobacco grower in Calvert County who said he was with Philip Morris for the last 12 years. A burley crop can be left in the field longer and is less sensitive to sunlight, while Maryland 609 has to be cut green and hung within several hours, making it more labor-intensive, he said.
With Maryland 609, he said he believes his average yield of 3,000 pounds per acre could drop by a third.
“Really, we got spoiled by burley tobacco,” Cox said.
Cox and Guy said they were frustrated by Altria’s decision to back out of Maryland just before growing season began. Guy said he had already purchased burley seeds and was thankful when his seed dealer accepted them back. This season, he’s growing Connecticut Broadleaf, which he’s already seeded and placed in greenhousing as he waits to transfer the crop to soil.
He’s hoping for a bounce-back year. Heavy rain destroyed more than half of his crop last year and his profit.
“I was just lucky to get my costs back,” he said.
He said he’s not making assumptions about how this year will turn out.
“We’ll find out this time next year,” he said. “It’s a high-risk, high-return type of thing. … This is a whole new world to me, so it’s kind of trying to figure out as I go along.”
Cox said he recently purchased a self-propelled sprayer for his family’s grain operation.
“Tobacco was going to help pay for that, but now we have to look at other options,” he said.
When asked what farmers in Kentucky were doing to compensate for lost tobacco contracts, Raines pointed to a new crop — hemp.