The Future of the Co-op

by: Darrell Varner, President Council for Burley Tobacco

A challenging tobacco market for farmers has been a consistent theme in my articles over the past two years. The economic realities of the world tobacco market and decline in demand for US burley has taken a toll on tobacco farmers profitability and tobacco organizations have worked hard to find ways to support our grower members.  Earlier this month, the Burley Tobacco Growers Cooperative Association (the Co-op) board made a bold move to align itself with the new reality of the tobacco industry by passing a proposal to reorganize, distribute assets, and make direct payments to the Co-op members.

Over the last several months the Co-op leadership has attempted to address the growing concerns from farmers as to the role of the 99 year old Co-op in the new world tobacco market. In the plan, which was approved by the Co-op board, the organization will pay all liabilities in full and then begin the distribution of assets. The first distribution will be of a minimum of $15 million disbursed by December 31, 2020 to all growers deemed eligible from the 2015-2019 growing seasons.

Also in 2020, the leadership will list for sale the Co-op office building located at 620 South Broadway in Lexington. Over the course of the next three years as the building and all additional assets are sold, the Co-op will make annual distributions payments to the eligible growers with a final distribution to members no later than December 31, 2023. This multi-year approach on the liquidation of all assets will allow the Co-op time to secure a fair price for all assets.

The Co-op board decided to quit purchasing tobacco from growers beginning with the 2020 season. In the plan approved by the Co-op board the Co-op will contract with Burley Stabilization Corporation in Tennessee to sell the existing tobacco inventory, which consists of 3.9 million pounds of processed and 641,231 pounds of raw tobacco. As tobacco inventory is sold in 2021-2023 the net proceeds of the sales will be distributed to the eligible growers by December 31 of each year.

The plan approved by the Co-op board outlines that the organization will retain no more than $3.5 million of the liquidated assets to fund the restructured organization. The funds will provide a strong foundation to allow the streamlined organization to return to its roots of advocacy, education, research, and services for all tobacco farmers.

The Council for Burley Tobacco supports the plan approved by Co-op’s board of directors and we will work with the Co-op leadership team to share information in an effort to get the plan approved.  We plan to also give serious consideration to how our organizations can work together and possibly merge to create a single grower organization that will be the voice for future tobacco growers.

It is imperative that our growers have an organization that is willing to take up the fight for those that want a future in the industry.  This was clear in a meeting this past week with Philip Morris International (PMI) and Universal Leaf, where representatives explained that Universal Leaf is in the middle of restructuring and they have not issued any contracts to date. We walked away from that meeting with no guarantees that Universal Leaf and PMI will buy any burley or flue-cured tobacco in the upcoming growing season. Yet another blow to growers in our struggling market.

The Council will continue to work with the Co-op leadership, Farm Bureau, and tobacco organizations in other states to explore opportunities for our growers. As we enter into another season of uncertainty, the Council will continue to do our best to provide burley growers with information on the market season.

To learn more about the Council for Burley Tobacco and to become a member you can visit our website at www.councilforburleytobacco.com. You can also join the burley conversation by “Liking” the Council on Facebook at www.facebook.com/CouncilForBurleyTobacco.

Published: February 2020 in Farmers Pride