Tobacco Companies Slash Contracts With U.S. Farmers

The companies are instead receiving more tobacco from overseas.

May 24, 2010

CYNTHIANA, Ky. - Years after supplying leaf to Philip Morris International, Kentucky farmer Jess Burrier was told via a postcard that his tobacco would not be needed this year, the Associated Press reports.

"They were very courteous, but a Dear John letter??s still a Dear John letter," said Burrier, who??s contracted tobacco has shrunk from around 600,000 pounds in 2008 to 20,000 pounds this year.

Tobacco farmers in Kentucky, North and South Carolina, Tennessee and Virginia have all lost contracts this year, as the number of U.S. smokers continues to fall. Also contributing to the decline in contracts is companies receiving more overseas leaf, said Will Snell, a University of Kentucky agricultural economist.

That, coupled with last year??s federal law handing the U.S. Food and Drug Administration regulatory power over tobacco, has made U.S. tobacco companies very nervous about purchasing leaf. "When volumes go down, you don??t need as much leaf across the board to manufacture the product," said David Sutton, a spokesman for Altria Group, which owns Philip Morris USA.

R.J. Reynolds Tobacco also will be purchasing fewer bales of burley, said spokesman David Howard. "We are simply doing what any business would have to do, and that??s keeping supplies in line with demand," he said, adding that higher federal excise taxes contributed to the company??s decline in production.

According to the U.S. Department of Agriculture, burley farmers will plant 4 percent fewer acres than last year.

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