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

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Published: Thursday, 24 Feb 2011 | 11:37 AM ET
Brian Shactman By:

CNBC Reporter

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.

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."

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

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