What is in this article?:
- High commodity prices drive farm machinery demand
- Viable alternatives for tobacco
The opportunity to increase acreage of either cotton, corn, soybeans or tobacco will make for some tough decisions for farmers in North Carolina in coming weeks.
Viable alternatives for tobacco
Strong commodity prices for corn, soybeans and cotton make them viable alternatives for tobacco, said Blake Brown, North Carolina Extension economist, at the annual meeting of the Tobacco Growers Association of North Carolina, which was held in conjunction with the Southern Farm Show.
“At this time, 2011 crop cotton could be booked for around $1 per pound in North Carolina,” said Brown. “While some cotton-producing areas have limited gin capacity for expansion, North Carolina actually has much unused gin capacity, placing Tar Heel farmers in good position to increase cotton production.”
But they could just as well increase tobacco production. Which one offers the best profit potential? Here is how Brown calculates it:
• The five-year average yield for North Carolina cotton is 844 pounds per acre. If farmers book cotton at $1 per pound, then potential revenue per acre could be projected at $844. Operating costs per acre are around $525, and land rent is around $100. “This leaves a potential $244 per acre return to equipment and management for growing an acre of cotton,” said Brown.
• Using the five-year average yield for tobacco of 2,226 pounds per acre and an estimated price of $1.75 per pound gives an expected revenue from an acre of tobacco of about $3,895. “Using an estimate of operating costs per acre of $2,750 and land rent of $100 gives a return to management and equipment of flue-cured of $1,045 per acre,” he said.
That would mean it would take 43 acres of cotton to yield an equivalent return to management and equipment as 10 acres of tobacco.
The question for North Carolina growers who have equipment to grow extra tobacco or cotton will be, “Would I rather grow an extra 43 acres of cotton or an extra 10 acres of tobacco?” said Brown.
But there is a complicating factor relating to tobacco. A new company — United States Growers Direct — says it wants to contract for 100 million pounds of flue-cured from the 2011 crop.
Could American growers produce that much additional flue-cured? It would be a tall order, said Brown.
“Suppose demand at current prices from traditional buyers is up 30 million pounds for 2011,” he said. “Production of 490 million pounds would be needed to satisfy demand (just) from traditional buyers.”
Even if enough acreage was planted to get that much volume produced, is there enough barn capacity to cure it? “Unless there is evidence that the 2011 increase in demand is permanent, it is unlikely new equipment will be manufactured or purchased to increase current capacity,” said Brown.