There was undiluted joy among individuals and organizations involved in the exportation of American leaf when the tobacco buyout was signed into law.
“The beneficial aspects of going to a free market will more than overcome any negative aspects of the buyout legislation,” says J.T. “Tommy” Bunn, executive vice president of the Leaf Tobacco Exporters Association. “Our organization has supported buyout legislation strongly. Our members are very optimistic that this legislation is going to improve access to the world market.
“The legislation gives us the first opportunity in decades to reverse the decline in the U.S. market and make it strong and viable once more. Dealers will almost immediately be able to service a larger strata of the world market.”
But he advises all involved to plan for gradual growth in demand. “I don't see a dramatic increase in production in the short-term. We will regain our market the same way we lost it, slowly and deliberately,” says Bunn.
The big question in the near future will be how to market a more world-oriented crop. The domestic manufacturers seem to have learned to live with contracting, but that marketing method has some limitations for export sales.
“It fits best with the customer who can use all stalk positions, and not everyone can,” Bunn says. “Some dealers have increased their contracting programs, others have cut back.”
On the other hand, growers may find it hard to arrange financing for a crop unless they have a contract to show their lending institution since the price support program no longer is around to guarantee a market.
“This is all going to be a developmental process — we will just have to see what transpires,” he says. “It will probably take at least one year to see where we are going.”
Kirk Wayne, president of Tobacco Associates, notes that the basic effect of the buyout — elimination of a federally set price — has to be viewed as positive for U.S. leaf exports.
“One thing is a given about the buyout — it will bring about a reduction in the price of U.S. tobacco,” says Wayne, whose organization promotes exports of U.S. flue-cured leaf. “Clearly that will be a positive aspect. U.S. leaf has been the most expensive on the market, and the high quality hasn't been enough to make up for it.
“Of equal weight is that it will relieve so much of the uncertainty of recent years. This will be significant. In my life, I have never witnessed anything so negative as this uncertainty has been as far as customers buying on our market were concerned. They just didn't know what next year's crop might be worth.”
So if nothing else, the buyout will have two positive effects on U.S. prospects on the world market. “This bodes well for us to predict an increase in demand for U.S. tobacco, along with the fact that I am sure there has been some pent-up demand for our leaf for some time,” says Wayne.
The only negative aspect relative to the competitiveness of the United States on the world market is that there will be a period of transition in marketing.
“If the foreign buyers are going to buy our leaf, there must be some way for them to access the grades they require,” says Wayne. “These buyers won't be anxious to contract with farmers for the whole stalk. Some means of providing grade selectivity will need to be found.”
It may be possible to do this through some modification of the current system of contracting and auction marketing centers. Or, a new system may have to be developed, he says. “I can't tell you exactly how the animal might look, but I am confident that it will evolve,” he says.
Counting the American component of cigarettes made here for export, 60 percent of the U.S. crop is now finding a home in the foreign market. “That is power enough to assure that some system to accommodate that interest will be found,” he says.
Wayne notes that his organization plans to continue an aggressive program of promoting U.S. flue-cured leaf overseas. “We may have to change some directions because of the new circumstances. We are going to look at some of our funding sources and levels. And there are a lot of other things we have to reassess. But the role of Tobacco Associates is more important than it ever has been. Farmers are going to be moving, marketing and selling their product in a different way than before, and we need to help them sell it by expanding export markets.”