“I’m still optimistic
Even though their
“The tobacco buyout was probably the most significant agricultural policy legislation for Kentucky farmers since the federal tobacco program’s development in the 1930s. It has forever changed the landscape of Kentucky’s agricultural economy,” said Will Snell, UK agricultural economics extension professor. “While controversial, if it had not occurred, it could have been a disastrous situation for tobacco farmers because quota cuts would have continued, lease prices would have remained high, and the government may have eventually ended the program with no grower compensation.”
About 72 percent of Kentucky tobacco farmers exited the market after the buyout, but many of those who stayed or joined the market have since expanded their operations. The number of Western Kentucky growers has increased, while Central and Eastern Kentucky have had a reduction in the number of tobacco farms.
When the possibility of a buyout was first proposed, some producers were very much against it. As a former president of the Burley Tobacco Growers Cooperative Association, UK grad Rod Kuegel of Owensboro was one of those farmers. He did not initially support the buyout because he believed that without the government quota system, small farmers would be at a disadvantage compared to larger ones.
“It was my position that losing the government quota program would be one of the worst things to happen,” Kuegel said. “But it became apparent to me that if we kept the quota system, quotas would continue to decline; we would lose our ability to compete internationally and eventually would not be able to grow tobacco in the United States.”
Even while he fought to continue the quota system, Kuegel knew that a system without quotas would be beneficial to his tobacco operation and those of some other Western Kentucky farmers. Kuegel and these farmers wanted to expand production but could not do so under the tightening quota system, with cuts coming every year and lease prices skyrocketing.
“With the quota, I was down to 40 acres of tobacco,” he said. “The first year without the quota, I grew 100 acres.”
Tobacco farmer Rod Kuegel of Owensboro was able to
Kuegel and his son are the fourth and fifth generation of farmers to be dependent on tobacco and grow burley and dark air-cured. They believe tobacco will continue to play a part in the state’s economy.
“We are investing in the future of tobacco,” he said.
Clint Hardy, Daviess County extension agent for agriculture and natural resources, said that like Kuegel, many Western Kentucky producers have expanded their operations in the last five years.
“We have several farmers who never grew tobacco before the buyout growing 20 to 30 acres. Many farms have expanded production 200, 300, or even 400 percent,” Hardy said.
Much of the growth in Western Kentucky is the result of a shift from burley to dark tobacco due to the increased demand for smokeless tobacco, which is made from dark.
The buyout was not just beneficial for farmers who increased their acreage. It also helped those who wanted to diversify.
UK grads Jeremy and Joanna Hinton, owners of Hinton’s Orchard in Hodgenville, took the lump-sum buyout payment and invested in trees and equipment for their business.
They grow a variety of fruits and vegetables at their orchard, including apples, peaches, blueberries, pumpkins, and strawberries. They also lease an apple and peach orchard a few miles down the road.
Jeremy and Joanna Hinton (here with daughter Joslyn and son Jacob) took the lump-sum buyout payment and invested in trees and equipment for their orchard business.
The opportunity for an orchard business came while the Hintons were looking for tobacco quota to lease.
“We couldn’t find what we needed because of the repeated cuts in quota,” said Jeremy Hinton.
“We felt like the orchard business was something different that could supplement our current crops, but we figured out that to do this right, you have to make a real-time investment in the fruit trees,” Joanna Hinton said.
To learn more about producing and marketing their crops while they were diversifying, the Hintons worked with UK horticulture and entomology specialists; David Harrison, Larue County’s extension agent for agriculture and natural resources; and Abby Tate, the county’s program assistant for the Expanded Food and Nutrition Education Program.
Even though their main focus has shifted to the orchard, the Hintons’ income is still partially dependent upon tobacco. During the winter, Jeremy Hinton works at the tobacco receiving station in Elizabethtown. He also sells crop insurance and has several tobacco farmers as clients.
“Tobacco remains an important part of our overall picture,” he said.
Hinton still sees many small farmers at the receiving station, but nowhere near past numbers. He added that those numbers grow smaller every year.
Like the Hintons, Wayne Cropper of Mayslick has diversified his farming operation. He now grows and sells a variety of nursery crops in addition to raising about 35 to 40 acres of burley tobacco and producing alfalfa.
Cropper started his business, Cropper’s Greenhouse and Nursery, nine years ago. He has five nursery greenhouses and cold frames and two tobacco greenhouses. He said diversifying allowed him to keep his temporary workers busy throughout the year.
Unlike Cropper, many farmers in Eastern Kentucky left the industry after the buyout. He said many of the growers who exited were nearing retirement, and the buyout funds provided the financial boost they needed to retire.
“We still grow a lot of tobacco in this area but not as much as they do in Western Kentucky,” Cropper said.
Wayne Cropper of Mayslick now grows nursey crops along with tobacco
While he still grows a substantial amount of tobacco, it’s not even close to the 125 acres he was producing in the 1990s. However, Cropper attributes his acreage decline more to his age than the buyout.
While some completely got out of the business, others took their payments and invested them into diversifying their farming operations. As a result, many niche farms popped up in Eastern Kentucky. Cropper used some of his funds for his nursery greenhouses.
“The buyout definitely put a lot of money into people’s pockets,” he said. “There’s a lot of good fencing and improved cattle genetics in this area as a result.”
Cropper said the future of tobacco is likely to be in the international markets, such as China, which accounts for 30 percent of the world’s cigarette consumption. It will be important for U.S. tobacco sellers to tap into this market for future success, Cropper said. He believes the high quality of Kentucky tobacco will keep it in demand.
“Quality is going to be more important in the future,” Cropper said. “Anytime companies need less, they’re only going to buy the best.”
During the first few years after the buyout, those who stayed in enjoyed a favorable marketing situation in which demand exceeded supply. However, in 2009, the accelerated decline in domestic consumption, the high value of the U.S. dollar compared to other currencies, and an increase in foreign tobacco production have caused concern about how growers will fare without the safety net of a price support program and a guaranteed buyer.
“We knew this day would come when supply would be greater than demand, and that’s when it takes good management to survive,” Snell said. “I’m still optimistic about the future of tobacco in this state, but we’re starting a new chapter with new and more difficult challenges. It seems we’re always starting new chapters for tobacco.”