Tobacco buyers cut several contracts in Surry County this year, delivering a blow to the industry with local farmers taking the brunt.
Tim Hambrick, a cooperative extension agent, estimated that about 15 farmers from Stokes and Surry counties had been affected as of Friday afternoon.
While some contracts were reduced, many were cut entirely, leaving those growers with no place to sell their crop.
“The way things look right now they might be out of business,” Hambrick said. “It’s a lot of lost income for the area, and certainly for the growers.”
Agriculture is the top industry in Surry County, annually bringing in $280 million, according to Todd Tucker, president of the Surry County Economic Development Partnership.
Flue-cured tobacco was once the lead field crop in the county and is still at near the top of the list, with 3,400 acres and $15,351,00 produced in 2014, according to Surry County Cooperative Extension data. Statistics from 2015 were not available.
Hambrick estimated that the 2016 cuts resulted in a loss of about 500 acres of tobacco produced and sold in the county, which calculates to a loss of about $2 million, at an average price of $2 per pound and average production at 2,000 pounds per acre.
David Key, an Ararat farmer, was among those who did not receive a contract this year.
“It was not a big shock to me. I figured it was coming,” said Key, who decided in October of 2015 to build a second chicken house rather than prep his fields for tobacco. ““I feel like I cut them out. I told the man yesterday you don’t have to tell me nothing. I quit you. You didn’t quit me.”
Key said his farm, which he owns with his uncle, is diversified enough to withstand the blow.
“I feel like I was one of the fortunate ones who made the decision to quit,” he said.
Many of his fellow growers whose contracts were yanked are left with few options.
There’s no severance, no unemployment, nothing.
“It was a very sad day for a lot of farmers yesterday,” Key said on Friday. “Yesterday’s phone calls changed a lot of people’s lives in a big way. For a lot of folks that phone call was as bad as losing a loved one.”
Hambrick said several factors have contributed to decreased demand for tobacco of the past couple of years, including anti-smoking campaigns and high taxes.
The majority of the demand comes from exports, which with the high value of the U.S. dollar has become increasingly difficult not just for tobacco but crops such as corn and wheat, he said.
At the same time, Brazil produces three times more tobacco than is grown domestically. “Their currency is in a free fall,” Hambrick said. “Ours is really high, there’s is really cheap. Worldwide people are going to go to Brazil,” he said, adding that China has also decreased imports.
An Alliance One spokesperson provided the same reasoning.
“Demand for U.S. tobacco is based on its competitiveness versus other global tobacco crops. Based on recent strengthening of the U.S. dollar, some demand for U.S. grown tobacco has shifted temporarily to other full flavor markets,” stated Jennifer Bailey, communications and compliance manager. “We do not expect the current decline in demand to be permanent.”
In 2015, cuts were prevalent as well, with R.J. Reynolds Tobacco Company making a 25 percent reduction across the board and Alliance One cutting about 60 contracts, Hambrick said.
Those cuts were spread across a more widespread region, while this year’s contracts were more concentrated locally.
“I think it seems worse this year than last year,” Hambrick said. “The ones I’ve heard from this year are all Surry and Stokes County.”
Hambrick said U.S. Tobacco Cooperative may also have cut some local contracts.
“Alliance One is probably the one who had the most acreage in our area,” he said. “I don’t think Reynolds cut anybody.”
Simply getting out of the tobacco game is easier said than done, Hambrick said.
“There’s no crop that produces the income tobacco does.”
Hambrick explained that an acre of soybeans might bring about $800 compared to $4,000 for tobacco.
“I suspect some will retire or add chicken houses,” he said. “There won’t be anything that replaces it. It’ll be a hodgepodge of different things.”
Some might sell their land.
For those relying on a contract this year, it’s too late for a change.
“What are they going to do? That’s the hundred-thousand dollar question,” Key said. “My thoughts and prayers go out to them.”
Reach Terri Flagg at 415-4734.