The sun is still burning off the early morning haze in Clarkton, N.C., but it's clear enough to see there's not much going on inside the New Clarkton Warehouse.

Five buyers are milling around the bales of flue-cured tobacco — they're taking cursory glances while talking about the news of the day with warehouse employees, USDA graders and others.

In the first full year of wide-scale contracting in flue-cured country, approximately 90 tobacco warehouses remain open. Four years ago, 198 warehouses were in operation; flue-cured farmers are contracting about 80 percent of their crop this season directly with tobacco companies.

With so much tobacco off the auction floor, the traditional method of marketing tobacco, warehouse owners like Lawrence McDougald are left with almost empty warehouses and questions concerning the future. “It doesn't take a rocket scientist to figure that between the downturn in the farming industry, most of the tobacco going to direct contracting and taking half of the cash flow out of this, that it's hard to pay your debts.”

Still, the show must go on. And as McDougald walks out of his office onto the floor, a buyer asks him, “Ready to go?”

McDougald takes his place at the head of a short list of buyers, motions to auctioneer Frank Jenkins of Fairmount, N.C., and starts the bidding. “75, 75, 75,” he says. “PF, 3 or 4…4F.

“Come on, rock ‘n’ roll — you know where the money is if you want it,” McDougald encourages the buyers.

“70,” shouts a buyer.

“Lock ‘em up, let’s rock ‘n’ roll,” McDougald says, motioning with his fingers.

The warehouse owner walks backward along three rows of tobacco. He comes to the end of the first row and begins the process again.

“Three…three…threeeeeeee,” McDougald chants.

“Don't back up son, that's the best bale in here,” he chides a buyer.

“Let another one go — give him that 3. Hale and Cotton.”

A little farther down the row, McDougald says, “I told you to look at the side and not the top. Study long, study wrong.”

A little less than 10 minutes from the time he started the auction at 9 a.m., McDougald has led five buyers through the 111 bales of tobacco.

Even the buyers notice the difference a year can make. “This used to be exciting,” confides one buyer as he walks toward the warehouse door to his next appointment across the tracks at Jimmy Green's warehouse in Clarkton.

The movement of some 500 million pounds of tobacco off the warehouse floors left an echo that's still waiting to settle. For McDougald, it makes things tough.

The bottom line, is “nobody's participating but one company, basically,” McDougald says in an interview after the auction. “I mean there are two or three buying, but only a few bales here, there and yonder. Hale and Cotton, of course, because they need tobacco and they need it desperately — they don't contract so they have to go out to the smaller markets and try to buy what they need.”

The bigger companies do have buyers on the floor, but they're only participating in a “token” fashion, McDougald says. “They're not buying hardly anything — and that makes it awfully tough to compete.”

The warehouse bought a “bit of tobacco” at this auction to keep the price up. Most bales that sold went for $1.73 to $1.74, but McDougald had to “lead the buyers to the trough” to get that price.

“One of them was bidding at $1.73 on one bale and he tried to get the next bale at $1.70 and another bale at $1.68 because there wasn't any competition, so I went down the other row and said, ‘well, give me all of them at $1.74,” McDougald says. “And when we started back down the other row, $1.73 bought it. You've got to have some guts in this game.”

When Philip Morris, the largest cigarette manufacturer in the United States, announced it would expand its contracting program to flue-cured, many farmers felt like the train was leaving the station and the only way to avoid being left behind was to get on board. PM successfully introduced a contracting program in burley last season. In the past few years, other companies have also offered contracting on a limited basis.

McDougald believes even the tobacco companies were surprised at how contracting took off this year. “The farmers who said they didn't want it felt like ‘we'd better get in or we're out also,” McDougald says. “The quantities that the dealer tobacco companies now are contracted to buy gives them too much bottom-stalk tobacco. The competition should increase as we move up the stalk.”

It leaves McDougald in a tough position and literally threatens the century-and-a half-old tradition of the tobacco warehouse. The first indoor tobacco auction warehouse opened in Danville, Va., in the mid-1800s.

McDougald has been in the warehouse business since 1982, but came from a family closely tied to the business. His grandfather, Albert Gillespie McDougald, owned six warehouses in Clarkton, when the town was the largest market on the Border Belt. “I can remember my grandfather sitting out front of the warehouse leaned back against the building saying, “Drive in.”

After his grandfather's death in the 1950s, the family sold the warehouses to out-of-town buyers.

“We were a six-week market, everybody would bring their tobacco from places like Fuquay-Varina and the local people could not sell their crops,” McDougald remembers. “The local farmers had to carry their tobacco to South Boston, Va. Then we came through designation. We've gone from putting the tobacco on sticks to tying it in sheets and now to bales. A lot of changes.”

As a youngster, McDougald sold lemonade and cleared as much as $100 a day selling it to the vast numbers of farmers who came to town to sell their tobacco. As a teenager, he got a job tagging the tobacco for most every company on the floor.

He remembers it as a distant cry from the way things are today.

Today, the warehouse stands almost empty and good for only one thing: Housing a tobacco auction, McDougald says.

“Well, it's a possibility that this will be the last year for this auction,” McDougald says. “I didn't know whether I was going to be here this year or not. We kind of hung in there to see what was going to happen.”

For almost 20 years, the warehousemen relied on the stalwart efforts of Mac Dunkley, director of the Bright Belt Warehouse Association, to navigate the changes. Dunkley's untimely death hurt the industry both personally and professionally, McDougald says.

“It's amazing the amount of respect Mac had through the whole tobacco industry,” McDougald says. “People could see that he believed in what he was doing. He was a positive influence.”

Dunkley believed that the auction system could adjust to the changes and carry on despite the challenges, McDougald says. He had proposed a cooperative effort among warehousemen. Currently, the Flue-Cured Stabilization Board is operating a pilot marketing center in Wilson to help fill the void left by the closing of so many tobacco auction warehouses.

McDougald concedes it's difficult to get warehousemen to agree on what to do. “Once you go together, if I take my tobacco to another building, then I'm basically out,” he says.

“I honestly think if we're going to continue, we're going to have to have some help from these companies which said they didn't want contracting,” McDougald says. “They're going to have to come in and buy some of this tobacco — even if they have to keep it two or three years. If they don't, we're going to contracting — regardless.”


e-mail: cyancy@primediabusiness.com