Tobacco operation retains flexibility Throw a roadblock in front of Fuquay-Varina, N.C., tobacco farmer David Holland and he'll drive around it. Quota cuts, tobacco specific nitrosamines, urbanization taking over farmland, contracting, labor and suits against tobacco companies have forced Holland to make decisions he never would have considered just a few years ago.
Housing developments have claimed 25 acres where the Wake County farmer once grew tobacco. That loss, along with quota cuts and the loss of one 10-acre farm to competition for quota have slashed his quota from 185 acres to only 70. Yet, Holland manages to adapt and survive.
"I'm going to do what I can to stay around 70 acres," he says. "I'm only going to pay so much to rent quota, but, if we don't get another quota cut, I believe I'll be able to grow about 70 acres in 2001."
Holland knows he's going to receive a premium price for at least half of his 2001 production. He contracted to sell a third of his 2000 crop directly to R. J. Reynolds tobacco company. He anticipates contracting about half of his crop with the same company.
While some growers agonized over questions about retrofitting curing barns and contracting directly with buyers. Holland didn't hesitate. When Reynolds representatives offered him a contract, Holland jumped right in. There were tradeoffs, but he figures he's coming out ahead with contracts compared to the income he figured he would receive on the auction market.
"I know before I plant what I'm going to get for good tobacco," he says.
"I have to haul my tobacco to Wilson to deliver it, so that's a little more expense. But I have sold tobacco at the auction in Wilson in the past. I averaged nine to 10 cents a pound more than I would have gotten if I had sold it at the auction. I had to pay for a USDA grader, but I didn't have to pay warehouse fees.
"Plus I got a premium for all the tobacco I sold under contract. On top of that, Reynolds paid to retrofit three of my barns. I'm going to convert my other barns before next summer."
With a five-year contract in hand, Holland complied with Reynolds' wishes and installed the heat exchangers the company required. Now, he says, he will take a look at any other contracts that are offered by other companies. If Reynolds wants to increase his contract volume, he says he will give them first choice. If not, he hopes to increase the amount of tobacco he sells under contract by doing business with other companies. He is also evaluating other heat exchanger retrofit kits, for cost and efficiency, as he makes plans to convert his remaining barns.
Why did Holland elect to sign a contract even though some detractors say contracting could kill the auction system? He says the decision was a simple matter of survival.
"The reason I contracted is I was trying to take care of David and my family," he says. "That's my first responsibility. Our profit margin is a whole lot narrower now than it was just a few years ago. I am glad to have a chance to increase my profits just a little.
"The federal government controls what I have to pay my H2A (migrant) workers, and that rate keeps going up. LP gas and fuel costs are up. With the law suits and everything else that's going on, I don't know how long the quota and auction system will last. I'm doing everything I can to help me survive and keep growing tobacco."
Part of Holland's survival strategy involves diversifying into other crops. He grows 100 acres of soybeans as well as cabbage and sweet potatoes for the fresh market. He establishes markets for his vegetables before he plants.
"The H2A workers' hourly wages are so high I can't afford to have them sitting around. I added the cabbage and sweet potatoes as much as anything to create a job for them when there's nothing to do in tobacco. The federal government sets the H2A labor rate, plus I have to pay for transportation and housing. But, I need the labor to handle the tobacco. By adding cabbage and sweet potatoes, I can keep the labor busy and I can make a little more profit myself," Holland says.
As more and more individuals buy farmland for housing lots, Holland is faced with another challenge. About 80 percent of the land he farms is either adjoining or inside the city limits of Fuquay-Varina. Non-farm neighbors are frequently concerned about the chemicals he applies to his crops. One neighbor claims to have an allergic reaction to one sucker control chemical Holland has long depended on.
"I have notified her for four years every time I was getting ready to spray, so she could leave for a short while or stay inside," Holland says. "This year I switched to a low-odor contact sucker control chemical. You can ride by the field right after I've applied it and you can't tell I've sprayed. It costs a little more, but it's worth the cost to keep peace with the neighbors.
"That's what I'm doing to try to stay in business. I'm looking for opportunities. I'm trying to keep my costs down. I'm trying to be flexible," Holland says.