The market for used flue-cured tobacco machinery was unexpectedly hot over the fall and winter.
“It seems that any type of curing barn or harvesting machine was selling well this year,” says Loren Fisher, North Carolina Extension tobacco specialist. “This started last season. But there was not a great deal of machinery on the market then, since farmers were waiting to see which way the market went.”
Now, it appears farmers who think they have no future in tobacco decided to sell their equipment, while farmers who think they can make it in flue-cured are looking for more equipment to help them expand production.
The high cost of producing the 2006 crop may well have pushed many marginal growers into a decision to exit tobacco farming.
David Hinnant, a flue-cured grower in Kenly, N.C., said the hot sales of tobacco equipment shows there is still optimism about growing tobacco.
“There has to be if they are willing to pay these high prices,” he says.
Farmers in a position to expand their operations are usually the ones you see buying at these auctions, Hinnant says.
“Often, they are people who have a way to go until their retirement years,” he says. “And maybe they have sons in back of them who want to grow tobacco.”
Some farmers appear to be taking the opportunity at auctions to upgrade their equipment, he says. “It seems a lot of farmers who are still using rack barns, but want to convert to box barns are coming to these sales.”
Besides barns, Hinnant has seen many sprayers and combines for sale, along with some used greenhouses.
He hasn't seen a lot of out-of-state buyers at North Carolina auctions, but he has seen quite a bit of out-of-state equipment, mainly from Georgia, Florida and sometimes South Carolina.
How old is the equipment? “It ranges all over the chute,” says Hinnant. “Some is but a year or two old, and some has been around a long time.”
Hinnant says he saw several barns of the Long brand sell this winter for prices of $15,000 to $22,000, depending on the features they had. “A new barn of this type might run $27,000 to $28,000 now,” he says.
From 1998 to 2004, says Fisher, when production was declining, there was a lot of used machinery available but not much demand, so prices were low. Building of new tobacco equipment ground to a near halt.
“I think with demand the way it is, you will see manufacturers getting new equipment on line,” says Fisher.
The high prices result from the desire by many growers to increase acreage and make up for the reduction in income they have experienced, he says.
The farmers who are buying equipment are the ones who are committed to the industry and to growing tobacco, says Hinnant. “They are either getting enough machinery to expand their production or they are upgrading the machinery they are using now. It's not new people coming into tobacco.”
Hinnant says he didn't buy any used equipment in 2007. “We bought barns last year, so we are sitting in our tracks now, watching what everyone else does.”
One effect of this transfer of machinery is greater economy of scale in the farmer corps as a whole. “But total acres planted are not necessarily increasing in 2007,” says Fisher. “The equipment is just moving from one farm to another.
“A redistribution among growers of flue-cured production is going on.”
A geographical redistribution is also going on. “The counties of central eastern North Carolina — Wilson, Nash, Edgecombe and Pitt — have seen large increases in acreage since the buyout, and will probaby see more, while the Piedmont is losing some. We could have flue-cured produced in a more compact area.”
That would indicate these areas are better suited for a large expansion of production than areas that are losing production, or at least the farmers think so. Fisher says there could be a drawback to this concentration, at least from an agronomic point of view.
“As production is spread over a smaller area, there would be more concern about the effects of a bad season,” he says.
“In 2006, the value of used tobacco barns was an unexpected surprise,” says Graham Boyd, executive vice-president of the Tobacco Growers Association of North Carolina. Perhaps as a result, this year, tobacco equipment manufacturers “have introduced full-scale inventory of new barns for sale. This reflects an expected increase in production for the future.”
But Boyd warns that another issue looms just over the horizon for flue-cured growers: how to address the degradation of converted heat exchangers.
“Many of the initial units are approaching six years or greater in age,” he says. “That means efficiency loss, increased breakdowns or even the need to be completely replaced, all of which will be expensive.”