YOU ARE HERE: Central Kentucky Home→Collections→Tobacco Companies

Burley auctions begin Monday

November 19, 2005

The first burley tobacco auction sales of the post-buyout era will begin Monday at 9:30 a.m. at the Farmers Tobacco Warehouse in Danville. While tobacco is primarily sold through direct contracts with manufacturers, 15 auction warehouses in the burley-belt have announced plans to host auction sales this year.

Additionally, the Burley Tobacco Growers Cooperative Association (BTGCA) has announced plans to participate in the sales and purchase tobacco for export customers. The tobacco buyout legislation passed by Congress in 2004 eliminated all price support regulations, so the auction markets will have no minimum price guarantees.

Roger Quarles, President of the BTGCA said the presence of an alternative market offers growers something to fall back on and the BTGCA's involvement as a buyer adds competition to the marketplace. "While this alternative market is a small part of the total market, having one more purchaser of burley tobacco is good for all growers," said Quarles.

Significant consolidation has occurred among purchasers of U.S. tobacco over the past year. In 2004, the second and third largest tobacco companies in the U.S., R.J. Reynolds Tobacco and Brown and Williamson Tobacco Corporation, merged to form Reynolds American Inc.

Earlier this year, DIMON Incorporated, the second largest tobacco leaf dealer, merged with Standard Commercial Corporation, the third largest, to form Alliance One International. This year more than 90 percent of U.S. burley tobacco will be purchased from farmers through direct contracts with four tobacco companies.

The BTGCA announced plans to purchase tobacco in an effort to provide a reserve of burley to use in promotion and expansion of export markets.

The BTGCA has worked on developing new export opportunities for burley growers for many years. Most notably the BTGCA has been a leader in exporting U.S. burley to China, with exports exceeding 4 million pounds over the past couple years.

Quarles said Chinese customers have stated a preference to purchase tobacco from the BTGCA, because it allows them to work directly with tobacco growers.

"We are excited about the potential opportunities that exist for U.S. growers to expand exports to China," said Danny McKinney, CEO of the BTGCA, "We plan to continue to supply high quality burley tobacco to that market and others."

Additional information about the 2005 marketing season, including a sales schedule, can be found online at www.burleytobacco.com.

|

|

|