Tobacco Industry on Ropes? Not on These Kentucky Farms

Kentucky farmer Paul Hornback maneuvers his blue pickup truck along the gently rolling hills of his farm and stops at a small parcel of brown, frozen land that he refers to as if it were the Garden of Eden. The land was where Mr. Hornback harvested tobacco last year. And these days the controversial crop, which makes up 60 percent of his gross income, has him in a euphoric mood.

"The tobacco business is better now than it ever has been," he says.

Across Kentucky, where tobacco farming is as much a way of life as horses and bluegrass music, farmers like Hornback are in the midst of a boom time. Because of low inventory and increased demand for cigarettes, especially overseas, they have a chance this year to harvest the biggest crop in nearly five decades.

Despite this optimistic forecast, some tobacco industry experts see gathering clouds on the horizon that could threaten a culture that has been a fixture of the rural South for more than two centuries.

True, tobacco has been under assault domestically for a number of years, forcing growers to diversify into other crops and the industry to step up campaigns to bolster its image. The new threat is from abroad.

"Not this year, but perhaps within sight ... farmers may find themselves not able to sell their product" on the world market, says Ferrel Guillory, who studies tobacco at MDC Inc., a research firm in Chapel Hill, N.C. "The question then is: Under what conditions will they be able to farm ... and what happens to people who make their livelihood in tobacco, who may not be able to in the future. What happens to their towns, to rural economies?"

Mr. Guillory says growers in other countries sell tobacco at cheaper prices than do growers in the United States. US tobacco is more expensive because it is considered higher quality and because of the tobacco farm program, which guarantees US tobacco farmers minimum prices in exchange for restricting production.

In the past, the higher prices have not mattered; cigarette companies favor the quality of US tobacco, which they like to blend with lower-grade tobacco.

International competition

Growers in South America and Africa, however, are gaining more technological know-how to increase the quality of their product. If they do this and sell it cheaper than US tobacco, farmers here may be squeezed out of the market. The tobacco program - considered essential to the success of US tobacco farmers - may collapse, Guillory says. If that happens, it could force many farmers out of business, he adds.

Farmers and analysts also voice concerns over mounting pressure from lawyers, health groups, Congress, and the White House to regulate tobacco. "The political challenges facing the industry, the excise taxes, the FDA [US Food and Drug Administration] - those are extremely critical issues that could, if pushed to the hilt, devastate the industry," says Will Snell, an agricultural economist at the University of Kentucky in Lexington.

Tobacco is this state's No. 1 cash crop, and Kentucky is second only to North Carolina in tobacco production. The crop is grown by 67,000 farmers in 119 of 120 counties, from the plains of western Kentucky to the steep hillsides in the eastern Appalachian region.

What about the consequences?

"None of us growers are in favor of teen smoking," Hornback says. "Growers and companies work harder than anyone else in Kentucky to get legislation passed to make it harder for kids under 18 to buy cigarettes. But we are in favor of adults being able to make a choice."

Growers say tobacco runs the rural economies, puts food on the table, and sends the kids to college.

"There is no alternative for tobacco. Without it I can't make it in farming," says Hornback, who lives 30 miles west of Louisville. Though he plants tobacco on just 50 of his 580 acres, he says he can gross $5,000 an acre, versus $400 an acre for corn or soybeans, two of his other crops.

The lucrative nature of the leaf crop is the main reason farmers don't abandon it to grow other products. Still, many tobacco farmers here and across the South have diversified. In North Carolina, for instance, tobacco has declined from 36 percent of the state's farm output in 1975 to 15 percent today. Kentucky, however, is more dependent on tobacco. It accounts for 25 percent of total farm sales.

Despite growing pressures on the industry, farmers here say they are cautiously optimistic about the future. After declining about 2 to 3 percent a year since the early 1980s, domestic tobacco consumption has stabilized. Overseas consumption is expected to grow about 2 percent annually until at least 2000.

As a result of increased demand, the US Department of Agriculture is expected to raise farmers' quotas - the maximum amount of tobacco farmers can sell - to the highest levels ever in Kentucky and surrounding states. The quotas are allotted to more than 350,000 farmers in 17 states, based on tobacco companies' demand for sales as well as reserve stocks. The higher quotas could enable farmers to produce the largest tobacco crop ever.

Though some analysts say this growth can't be sustained for long, they foresee continued demand for the kind of tobacco grown in Kentucky - burley tobacco - because it is hard to duplicate elsewhere.

"No one thinks it will be a growth industry, but tobacco will be a mainstay of Kentucky agriculture for years to come," predicts Marshall Coyle, chairman of the Tobacco Advisory Committee at the Kentucky Farm Bureau Federation.