What is in this article?:
- Tobacco growers turn to new methods of marketing
- Take it or leave it
• There is a small, but growing trend for tobacco farmers to seek out alternative marketing options when they can't — or don't want — to sell at contract delivery stations.
Direct contracting with a manufacturer or leaf dealer has been the dominant method of marketing American tobacco in this century.
But there is a small, but growing trend for tobacco farmers to seek out alternative marketing options when they can't — or don't want — to sell at contract delivery stations.
“There has been a dramatic increase in the last few seasons in the number of what I call 'secondary' leaf markets,“ said Rick Smith, a leaf dealer in Wilson, N.C. “I consider this development not only desirable but inevitable.”
Smith said these markets provide a method for absorbing the excess tobacco left over after contracting has absorbed all the leaf it wants.
“What is typically left is tobacco produced without a contract, tobacco produced under a contract but in excess of the contracted amount, or tobacco produced with a contract but which doesn't meet quality requirements,” he said.
Alternative marketing vehicles are not an entirely new concept in American tobacco.
“Even back under the tobacco program, there were secondary buyers who bought outside the auctions,” said Smith. “The reason was the same then as it is now: Excess tobacco has and will at times find itself without a home, and sooner or later, some means has to be devised for it to enter the trade.”
Among the ones that have sprung up are:
• Sealed bid auctions — In this type of sale, one buyer at a time inspects the offerings and makes a bid, which he seals in an envelope and leaves in a secure place designated by the owner.
“This method (sometimes called the silent bid) seems to me to offer the possibility — over time, anyway — of getting close to the highest bid a farmer is going to get,” said leaf dealer Smith.
“A 'questionable' lot of tobacco — one that is close to grade but not quite there — will attract a better price in this type of auction than if it gets a discounted grade at a receiving station.”
One sealed bid auction was conducted in 2012. It took place at the Liberty Warehouse in Wilson.
Greg Ray, the manager, said, "We had competition, with eight or 10 buyers at each sale, and the sealed bid gives the buyer a lot of incentive to make his bid at the highest level he can afford," said Ray.
"This system gives the farmers the best chance at getting the highest price."
• Delivery stations that don't require contracts — Tobacco Rag Processors in Wilson, N.C., has added a new aspect to tobacco marketing.