As the days have passed since Hurricane Irene made landfall, crop damage, especially to tobacco, has not only become more evident, but is changing, for the worse, daily. Graham Boyd, Executive VP Tobacco Growers Association of North Carolina says that storm damaged leaf in some areas is degrading daily. And for some farmers, the damage is 100%:
"If you are a grower in the counties that are most hard hit, the storm damage is 100% and that is absolute. So for those folks, those are the people we are most concerned about. This is catastrophic. Even though we're saying, "Oh it's going to be 20-30% of the crop..." It's probably out of the equation for some farmers. We don't need to throw that number around lightly as though it is insignificant because for some farmers it is 100%."
The question has arisen as to whether tobacco companies will even buy storm damaged leaf. Boyd says:
"I have had an opportunity to speak in person with buyers from at least six of the leaf dealers or company tobacco manufacturers through of yesterday. My intention is to reach out and communicate with all of them, that just takes some time to do. But, I would say that I have no information direct from any company that they are telling growers to not harvest or to not proceed with whatever mitigation schedule insurance may require of them... Or, in a farmer's judgement, if he thinks he can salvage tobacco, they're not discouraging the farmers from trying to do that."
With that being said:
"By the same token, I think that every farmer needs to be very keenly aware that we should expect that these tobacco companies are going to buy tobacco on their grading and pricing schedule this week, the same as they were the week before the storm arrived. I do not think, and do not have any impression from tobacco companies, that there's going to be some shift in their buying pattern or their grading schedule. "
"So what that means is, if I harvest damaged tobacco and it comes out of the barn and goes into the belt and it displays itself as poor quality, damaged tobacco, then that is the grade I can expect to recieve on that tobacco. It could be .50 cents, could be something less or it could even include too poor a quality to even offer a price. And that is a perogative of the companies, per the contract. So we should not get into a scenario of believing that the2011market will function anywhere near what happened in 1996, when we had two hurricane events."
And Graham warns, that putting sub-standard product on the market could damage the overall reputation for US growers:
"So we need to also guard against - let's not flood the market with some highly measurable volume of inferior, poor quality tobacco because that can contribute to tarnish our marketing efforts, especially abroad -- that US tobacco is the world's premium leaf standard, the best you can buy, etc. We don't want to develop an impression among growers around the globe that, well... "You know, US growers are disregarding that premium factor and putting junk on the market."
And flood the market, possibly compromising 2012 contracts. So, Boyd has this advice:
"I just think that, given how difficult this crop already had been, I would hope that farmers will proceed carefully and do a pretty sharp pencil on the arithmetic of the value economically, is it worth it to invest more money harvesting tobacco that is going to give them a lower return. The long term impact of that on all fronts is not positive."
NOTE: State and federal crop damage estimates should become available within the next seven to 10 days.
Executive VP Tobacco Growers Association of North Carolina, Graham Boyd