LOUISVILLE — Burley tobacco farmers in Kentucky are reaping some of their best paydays since plunging into the free market, capitalizing on tight leaf supplies and a quality crop that bounced back from an early-season drought.
Farmers who endured the tough growing season have been rewarded with burley prices near or at $2 per pound so far during the marketing season, said Will Snell, a University of Kentucky agricultural economist. That nearly matches the prices burley fetched in 2004, the last year growers sold their crop under federal production and price controls dating back to the Depression era.
Now, after years of being squeezed by sluggish prices, higher production costs and uncertain markets due to smoking bans, burley farmers are welcoming the return of more robust prices. It's driven by stronger demand from tobacco companies, partly due to smaller tobacco crops this year in places like Africa and South America.
"It's a good feeling again to have something somebody wants," said Daviess County tobacco farmer Rod Kuegel.
Prices for last year's Kentucky burley crop averaged $1.75 per pound, the peak average so far in the free-market era that started in 2005.
The 2010 crop, hurt by drought as it cured, averaged $1.45 per pound, the lowest average of the period. During post-harvest curing, green burley tobacco leaves change to a reddish brown color desired by tobacco buyers.
The price outlook for growers improved in recent weeks due to competition from independent leaf dealers and tobacco cooperatives also vying for limited supplies, Snell said. As a result, at least one tobacco company rewrote its contracts with producers to increase the prices it offered, said Paul Denton, a burley tobacco specialist for the University of Tennessee and the University of Kentucky.
University of Kentucky extension tobacco specialist Bob Pearce rates this year's burley crop as one of Kentucky's best in a decade. Yields will be close to average due to the early drought, he said, but quality is high thanks to ideal curing conditions in late summer and fall.
Kentucky is the nation's top producer of burley, an ingredient in many cigarettes.
R.J. Reynolds Tobacco Co., the maker of such brands as Camel and Pall Mall, contracted for higher burley production amounts from its U.S. growers this year, said company spokesman David Howard.
The prices offered its contract growers also are up, he said, without specifying amounts.
"We expect to meet our burley needs from out contract growers," he said. "And though it is very early in the process, we are very pleased with the quality of burley leaf that has been delivered."
Two other leading leaf buyers, Marlboro maker Philip Morris USA and Philip Morris International, also said they were pleased with the quality of burley being supplied by contract growers.
Kuegel said the first load of tobacco he delivered to his contract buyer this month sold for an average of $1.93 per pound, his best price since the tobacco buyout ushered in the free market.
For farmers, the favorable marketing season is a turnaround from early July, when the crop's prospects looked grim.
"I wouldn't have given you a nickel for it at one time," Kuegel said of his tobacco.
The crop showed resilience after timely rains spurred a late-season spurt.