Indiana Ag Connection - Burley Tobacco Co-op Special Meeting Postponed

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Burley Tobacco Co-op Special Meeting Postponed
Indiana Ag Connection - 03/31/2020

In compliance with Kentucky Governor Beshear's March 25 Executive Order that no public gatherings occur during this coronavirus containment period, the April 8 special meeting on the petition by certain members to dissolve the Burley Tobacco Growers Cooperative Association is postponed.

The co-op covers Kentucky, Ohio, Missouri, Indiana and West Virginia, but most of its members are in Kentucky.

A written notice of the new date, time and location of the Special Meeting will be mailed to all 2019 grower members. Growers are also encouraged to check the Association's website, www.burleytobacco.com, or the Farmers Pride newspaper, or contact their District Director for further information.

Any written proxies growers have dated and already mailed in will carry over to the Special Meeting, unless they choose to revoke it.

The Association encourages growers to attend this important meeting to determine the future of the Association.

According to the Lexington, Ky., Herald-Leader in January, the cooperative is being challenged from two directions.

In one effort, an attorney representing tobacco producers is pushing to dissolve the Lexington-based co-op through a vote by members. The plan calls for dividing the co-op's $30 million in assets among growers.

The co-op has lost money on tobacco sales in recent years and its debt has increased.

On another front, attorneys representing three members filed a lawsuit in late January seeking a court order to dissolve the co-op. It is a class-action complaint; if it succeeds, the co-op's assets would be divided among all members.

The lawsuit argues that the co-op is wasting its assets, is not functioning as required, hasn't communicated well with members and has been more focused on preserving the board than serving members.

The co-op has acted illegally and its continued existence "will be illegal in that it no longer serves a purpose," the complaint alleges.

If the co-op ends by a vote of the members or as a result of the lawsuit, it will be a final chapter of sorts for a system that once dominated agriculture in Kentucky.

The co-op was formed in the early 1920s as a marketing organization, but for more than 60 years it was a part of the system put in place by the federal government in the Depression to help prop up the farm economy.

The system combined guaranteed minimum payments, called price supports, for farmers' tobacco, and quotas, or limits on how many pounds they could grow, to keep down over-production.

The program helped sustain tens of thousands of farm families in Kentucky and other tobacco-growing states.

The burley co-op maintained the pool of leaf that tobacco companies didn't buy, and then sold it later.

In the face of growing opposition to smoking, the federal government ended the price-support program in 2004, buying out farmers' quotas and leaving them to seek contracts from cigarette makers to sell tobacco.

The fight over the future of the co-op comes against the backdrop of a decline in the state's tobacco industry.

Many farmers quit growing tobacco when the price-support program ended, and those who continued have faced a range of challenges, including stagnant prices that haven't kept pace with rising production costs, continued decline in demand and competition from cheaper leaf grown overseas.

"It's just harder and harder for farmers to grow a profitable crop," Pedigo said.

In 2017, Kentucky farmers grew 173 million pounds of tobacco on just over 2,600 farms, down from 497.8 million pounds on 46,850 farms in 1997, before the end of the support program.

The market value of Kentucky tobacco totaled $351 million in 2017, far below the $828 million from 20 years earlier, according to the U.S. Department of Agriculture.

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