Tobacco Enterprise Analysis

By Evan Conrad, KFBM

A tobacco enterprise analysis was recently completed by the Kentucky Farm Business Management (KFBM) program. Burley, dark air, and dark fire were all included in the enterprise analysis.

Burley
Nineteen (19) burley enterprises from across the state were examined and averaged. Average yield was 2333 lbs/acre with a max of 3775 lbs/acre and a minimum of 1490 lbs/acre. Gross returns averaged $4159/acre ($1.78/lb) with a maximum of $6607/acre and a minimum of $2682/acre. Mean variable costs were $3099/acre ($1.32/lb). Variable costs include transplants, fertilizer and lime, chemicals and pesticides, fuel, utilities, machinery repair, building repair, machine hire, crop insurance, hired labor, interest on operating loan, and cash rent. Returns over variable costs were $1061/acre ($0.33/lb). Fixed costs, which included depreciation, interest on long term notes, and taxes, totaled $185/acre ($0.06/lb), leaving a return to operator labor, land, and management of $876/acre ($0.29/lb).

Dark Air Cured
As expected dark air returns were higher than burley. Average yield for the fourteen (14) enterprises was 3049 lbs/acre, while gross returns averaged $6511/acre ($2.14/lb). Variable costs averaged $3975/acre, bringing the returns over variable costs to $2535/acre ($0.83/lb). Fixed costs average $173/acre ($0.06/lb), leaving a return to operator labor, land, and management of $3802/acre ($1.25/lb).

Dark Fire Cured
Dark fired tobacco yielded the highest return per acre, with a return of $4093/acre, but not the highest return per pound at $1.15/lb for the eleven (11) enterprises examined. This came as a result of the highest yield per acre of 3549lbs/acre, but increased variable costs as well. Variable costs for dark fired tobacco averaged $4231/acre ($1.19/lb). Fixed costs were lower than the previous two types, averaging $133/acre ($0.04/lb). The major benefit to dark fired tobacco is a higher gross return of $8687/acer ($2.45/lb).
In conclusion, the enterprise analysis of the three types of tobacco grown in Kentucky yielded results one might expect. The most significant variable cost for producing tobacco continues to be labor. In all three types of tobacco labor accounted for more than 50% of the variable costs, with another large portion going to transplants, fertilizer, and chemicals.