The Burley Tobacco Growers’ Cooperative, a cornerstone of Kentucky farming for decades, is at a crossroads.
A former chairman has proposed dissolving the organization, formed in 1921, and distributing its almost $35 million in assets to members.
But few on the current 22-member board seem willing to go along with the proposal from Roger Quarles, co-op chairman from 2005-2012.
“If we can’t think of a way to go forward, we should dissolve,” Quarles said.
Instead, the board has voted to jump into another crop in a big way.
The co-op executive committee voted to buy hemp, up to $1 million worth, from Kentucky farmers and plans to sell hemp oil, he said.
Quarles, who still serves on the burley co-op as a director, said he was stunned when they were told about the hemp deal. He sees it as another potential financial disaster for the organization.
The co-op has tried lots of alternatives to tobacco, he said, including dairy, hay and even cigarette production. “They didn’t turn out too well,” he said.
Kentucky Agriculture Commissioner Ryan Quarles, who is Roger Quarles’ son, declined to comment on the co-op’s internal policies. As ag commissioner, Quarles has supported Kentucky’s burgeoning hemp industry but he cautioned, “I always say it’s a high-risk commodity.”
Roger Quarles has been pushing for the co-op to cash out to farmers before the money is gone.
In a guest editorial published “The Farmer’s Pride” newspaper in July, Quarles suggested that tobacco farmers could get up to $14,000 each in payouts if the co-op dissolves now.
He hoped to push for a vote on the idea at the board’s July meeting but instead the board decided to create a theoretical exit plan, with no plans to act upon it.
The co-op board will meet again on Wednesday and Thursday to focus on long-range planning.
The need for an exit plan was one “deficiency” pointed by an operational review on the cooperative prepared by Kentucky Center for Agriculture and Rural Development and the Center for Cooperatives in the College of Food, Agricultural and Environmental Sciences at Ohio State University.
That 2018 report said the co-op has struggled to find a role since the ending of the federal support program in 2005. It is now sitting on thousands of pounds of unsold tobacco in a declining market and is operating at a loss, losing almost half a million dollars a year since 2014, according to the report.
“The co-op’s inventory measures show that it has only sold a small fraction of the tobacco that it has purchased over the last five years,” according to the report, which was obtained by the Herald-Leader. “The net worth of the co-op has declined by approximately $2.5 million since 2014.”
The report, prepared at the behest of the co-op, pointed out several problems with the existing organization: It does not have the bylaws and structure of a true cooperative; doesn’t have defined membership; and has never distributed any income to members.
The board has “a fair amount of apathy,” the report noted, and while the co-op used to play a lead role in addressing issues facing burley growers, “the co-op has not filled this role since the buy-out.”
Board members seem paralyzed by fear of lawsuits, the report said, without realizing that inaction will carry risks, too.
The co-op has about $1 million in annual expenses to maintain the existing offices, staff, board and inventory of millions of dollars of unsold tobacco, according to the report.
Quarles said he wants to end the co-op now “because we can’t prove any benefit in the past several years, and there is nothing in the channels to do better.”
Current board chairman Pat Raines acknowledged that the co-op is looking for a new way to better serve its farmers. That’s why he recommended they get into hemp, he said.
“Every day I’m asked ‘what are we doing to help tobacco farmers,’” Raines said. “I’ve asked what we can do, but nobody ever gave any indication … until the hemp issue came up.”
Steve Pratt, executive director of the burley co-op, said the board “was looking for ways we could assist our burley tobacco farmers, our membership, and looking for different alternatives. So we explored the possibility of trying to get into the hemp business as one method.”
He said they have entered into a contract “to get into purchasing hemp this year from Kentucky farmers.”
Neither Raines nor Pratt would discuss specifics but Quarles said that they have described the deal in board meetings as a plan $1 million in Kentucky-grown hemp, which would be shipped to Tennessee to be processed at the new plant owned by the former Burley Stabilization Corp. After the hemp is pressed into oil, the Lexington co-op would be able to sell it, they have told the board.
Raines said that they already have a buyer who wants to purchased the potential oil.
“If it is successful … very possible to do more of the hemp in the future,” Raines said.
He and Pratt both said that the board has no plans to act on the suggestion to dissolve the co-op.
All of that worries Quarles, who says he has heard from many growers who like his idea.
“What I’m trying to impress upon our directors is if 20 or so directors start fighting this when 99 percent of the members want that, that’s not going to be nice. I think whatever esteem we had over the years will be lost,” Quarles said. “We know a little something about tobacco … And we can’t pull that off. So the hemp thing bothers me.”