Billy Whaley is not allowing any of the clouds hanging over the tobacco industry to interfere with his goal of keeping tobacco as his major profit center. He is taking an aggressive approach to insuring his future as a tobacco farmer.
While flue-cured quotas have been slashed nearly 50 percent over the last three years, Whaley has bought and rented additional quota, increasing his production to 260 acres. That's up from 210 acres in 1998 and 190 acres in 1999.
The Kinston, N.C., farmer bought two additional bulk barns this past year and he has already installed heat exchangers in all 28 of his curing barns. His entire operation is mechanized, from topping to harvesting to live bottom trucks and a mechanical leaf spreading system for uniformly filling boxes. All of his tobacco is baled before it goes to the warehouse. Even with all of the mechanization and the increased acreage, Whaley consistently grows high quality tobacco. His market average in 2000 was $1.83 per pound, with all of his crop sold at auction.
This fall and winter, Whaley intends to pursue a contract to sell all of his tobacco directly to a major tobacco company.
"This day and time you have to be aggressive to stay in business," he says. "I still feel like there is a future in tobacco for me and my family. As long as I feel that way I will continue to invest in it. I have a nine-year-old son who wants to farm. He will be the fourth generation of tobacco farmers in this family, following my grandfather, my father and me. If that's what he wants to do, I intend to do all I can to help make that possible. Part of that involves keeping tobacco farming profitable."
The 37-year-old farmer believes one key to a profitable future in tobacco rests on keeping cigarette companies happy with the leaf he offers for sale as well as how he chooses to deal with the companies. He has, for instance, elected not to participate in a class action suit against the major tobacco companies.
"I have always said I'm going to do what I can to please the companies," he says. "I intend to continue to have a good business relationship with my customers, the tobacco companies. They don't owe my anything and I don't owe them anything. But, we need each other to survive and stay profitable. I feel like I can continue to operate under the current marketing system or I can adapt to contracting. I'm ready to do what the companies think is best for the long run. I can understand why any company would not want to deal with anyone who is suing them. I'm opposed to the suit. I'm proud to say I'm not involved in that lawsuit.
"Tobacco companies have made a lot of money. That's what they are in business to do. They have also enabled me and my family to make a good living with tobacco and they hold the key to me and my family being able to continue making a profit with tobacco."
In addition to growing a high quality crop, Whaley believes in adding value to the leaf by the way he cures and prepares his crop for marketing. He has installed heat exchangers in all of his barns and he bales all of his tobacco for marketing.
"I want to give the companies the best quality, low nitrosamine tobacco they can get anywhere in the world," he says. "This is a good example of how the companies are willing to work with us. I appreciate the money they made available to help us pay for heat exchangers. That money made the transition a lot easier for us to handle. They didn't have to do that."
Whaley placed orders for his heat exchangers in May and had all of his barns retrofitted before the end of the curing season. About 70 percent of his 2000 crop was low nitrosamine tobacco. Even though he made sure buyers knew his tobacco was cured in retrofitted barns, Whaley says he saw no price increases for the low nitrosamine tobacco.
"It didn't seem to make any difference this year. But I know it's going to make a big difference next year. I don't believe you'll be able to sell tobacco that is not certified as low nitrosamine in 2001. You're sure not going to be able to get a contract if you haven't converted your barns. It took some planning and some work to get all our barns converted, but I think that's one investment that's going to pay off," he says.
While it appears that the tobacco barn retrofit program will solve the problem of high nitrosamine levels, Whaley is concerned that another major impediment to increased tobacco sales is not going away. He would like to see the tobacco quota transferred to growers, thus significantly reducing each growers' cost of production.
"The biggest single cost of raising tobacco is the price of quota," he says. "I own a substantial amount of quota. I purchased all the quota I own. I have spent several hundred thousand dollars over the years to buy quota and I still have to pay every year to rent most of the tobacco I grow. I have fared well under the quota system. If we can increase our quotas under the program we have, I'll continue to support the program. But I don't believe our program can continue to work. Other countries are gaining on our quality advantage and they are growing that good quality tobacco for a lot lower cost than we are.
"If we didn't have our quotas, we could sell our tobacco for 40 cents a pound less and we could pass that savings along to the companies. We have to do something to make our tobacco more competitive with the good quality, cheaper tobacco some other countries are growing."
If the quota program is eliminated, Whaley says he believes quota owners should be compensated for the loss of their quota. He also admits he cannot predict whether or not the loss of production controls would result in excess production, lower prices and reduced profits.
"I don't have the answers," he says. "But I think I know what I should do. I'm going to grow the best quality tobacco I can grow and I'm going to do everything I can to get a contract if Philip Morris offers contracts next year. I feel comfortable growing tobacco and I intend to continue growing tobacco. I have adapted to program changes and quota cuts. I believe I can continue to adapt and keep on growing tobacco."