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For Today's Tobacco Farmers, It's Diversify or Die

Thursday, 24 Feb 2011 | 11:37 AM ET

Tobacco is not just a commodity. It is a culture, a way of life, and a multi-billion dollar business. And it is the most controversial crop on the planet.

There is so much discussion about the health hazards and the politics of cigarettes. They kill people, yet taxes on them sustain so many government services.

Each year, the taxes on cigarettes go up, and smoking rates go down.

But beyond those headlines, there's a farm story, a product grown on U.S. soil for centuries. How ingrained is tobacco in agrarian America? Don't forget, Native Americans used it as currency before Europeans even arrived. In many parts of the country, it is the most lucrative crop per acre. Even with huge increases in prices for wheat, corn and soybeans, which average about $300 per acre, nothing makes more money than $1,500-per-acre tobacco.

"Farming is just like gambling. You put it all on the line every year here." -Kentucky tobacco farmer, Brian Furnish

"We call it the 13-month crop," said Todd Clark, who has been a tobacco farmer since he was a teenager in the 1980s. They call it that because tobacco farmers start preparing for the next season's crop before the previous year's yield has been sold at auction.

Put simply, it's a long process — but a profitable one.

Clark came to tobacco late compared to Brian Furnish, whose family has raised tobacco in Kentucky for 200 years. For a century before that, the Furnish family grew it in Colonial Virginia.

"You know, farming is just like gambling," Furnish says. "You put it all on the line every year here."

That way of life, in many ways, has not changed.

It's especially true for a type of tobacco called burley. It's a key ingredient in "American Blend Cigarettes" like Marlboro.

"Tobacco is probably one of the most labor intensive crops there is, especially burley tobacco, because there's no mechanization," Furnish says. "It's all done by hand."

A tobacco crop in Wilson, N.C., begins to bloom.
Photo: David Grogan for CNBC.com
A tobacco crop in Wilson, N.C., begins to bloom.

The planting process is the closest to full mechanization. But it's still not that close. Seedlings are loaded into a machine on top of a tractor, which then plants them at about a mile an hour. As it the seedlings drop into the ground, at least one farmers follows along and makes sure it is sewn properly into the ground.

That happens in the spring. Then, later in the summer, flowers are clipped off the top of the tobacco — which is technically a "weed" and not a "plant." When the leaves become large, hanging off a thick stalk, the tobacco is chopped down by hand, one at a time. It is then strung up in a barn to cure, and by late fall, it's put into bales and sent to auction.

From Farmer to Salesman
Brian Furnish is an eighth generation farmer. He and his family have been raising Kentucky tobacco since the early 1800s. Furnish trades in his overalls for a suit and travels the globe, selling his tobacco to emerging markets.

"It seems like that we're starting a new crop before we finish," said Todd Clark.

In the past, tobacco was an easy game: plant, harvest, cure, sell. Rinse. Repeat. But with cigarette use continuing to decrease in the U.S., tobacco companies have increasingly gone overseas both to sell and to buy tobacco.

Furnish says he has gone from selling most of his Kentucky crop domestically, to exporting about 85 percent of it. Literally, he puts away his overalls and puts on a suit and tie to sell tobacco outside of the United States.

Workers hang tobacco to cure in a barn outside Lexington, Ky. They will use every inch of space available in the barn. The tobacco that doesn't fit will have to be thrown away.
Photo: David Grogan for CNBC.com
Workers hang tobacco to cure in a barn outside Lexington, Ky. They will use every inch of space available in the barn. The tobacco that doesn't fit will have to be thrown away.

"A lot of the burley farmers depend on what we're trying to do," said Brian Furnish, who helps run a five-state tobacco co-operative that tries to sell millions of pounds of tobacco in foreign markets. He travels 100,000 miles a year to places like China, Egypt, Indonesia and Eastern Europe. "We have a lot of people depending on us to try to create new markets."

It's diversify or go out of business. The major U.S.-based tobacco companies are buying less, and that has made it a lot more difficult for farmers to make a living.

For the first time in years, Todd Clark is going to auction with about one-quarter of his crop still without a buyer. Selling it will be the difference between profit and loss.

Tobacco farmer Todd Clarke hangs his crop to cure.
Photo: David Grogan for CNBC.com
Tobacco farmer Todd Clarke hangs his crop to cure.

"This year in particular, they (tobacco companies) reduced their contracts," Clark said. "It feels like sometimes we're in the dark as producers as to what the next move is."

As Furnish has doubled down on tobacco and has turned into a salesman, Clark has become a 21st century farmer, diversifying his crop. He now raises cattle, chickens and sells hay.

But in spite of all the issues, involved, it's still worth the headaches and risks for Clark and for Furnish.

"Tobacco's been the backbone of our economy in Kentucky for over 100 years," Furnish said. "It's still the number one cash crop.

"There's no replacement for it."

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  • Shactman joined CNBC in 2007 as a general assignment reporter and fill-in anchor for CNBC's business day programming.