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Farmers growing more smokeless leaf; RJR spending millions to defeat bans

BUMPUS MILLS, Tenn. -- Like other tobacco farmers in Tennessee, Charlie Hancock used to grow mostly burley tobacco, used to make cigarettes. But Hancock said he can hardly make a profit on burley anymore, so he switched to growing more acres of dark-fired tobacco, a different kind of leaf used for chewing and smokeless tobacco, said the Associated Press.

It's [dark-fired] keeping most of the farmers in this area on the farm, said Hancock, who harvested 17 acres of burley last year, but now has only seven. He grew nearly 28 acres of dark-fired this year [image-nocss] on his farm near Nashville.

The American market for burley continues to shrink as health warnings and anti-smoking laws persuade more people to quit smoking, so farmers like Hancock are shifting to the more profitable, dark-fired plant. It's still a small market compared to burley, but the market for chewing and spitting has been growing in recent years. Major cigarette companies are getting into the smokeless tobacco market for the first time.

Sales of moist snuff productssmokeless tobacco, or diphave been growing 4% to 5% annually for the past five years, and dark-fired tobacco production has increased over that same period. Last year, farmers produced an estimated 37 million pounds of dark-fired tobacco, a 3% increase over the previous season, according to the U.S. Department of Agriculture. Most of it is grown in western Kentucky, northwest and middle Tennessee and southern Virginia.

Americans have been smoking fewer cigarettes over the past two decades. Last year, smoking was down 3% over 2004, and tobacco leaf production was 27% lower, the USDA said.

But some of those former smokers have become spitters.

As reported in CSP Daily News, Reynolds American Inc., got into the smokeless market earlier this year by purchasing Conwood, a private company that makes Kodiak snuff and Levi Garrett chewing tobacco. It makes great sense for us, Reynolds American spokesperson Maura Payne said. The U.S. cigarette industry is in decline. That's in part what made us interested in entering another tobacco category.

Reynolds American has also recently started selling a spitless tobacco called Camel Snus in at least two markets. Philip Morris USA has also said it will test a smokeless, spitless tobacco product called Taboka. The two products are similar and come in small pouches, which users put into their cheek but don't spit or chew. Taboka will be sold in 12-pouch containers, which are expected to cost about the same as a pack of cigarettes.

PM USA has said Taboka is designed for adult smokers who are interested in smokeless tobacco alternatives, but not necessarily the chewing, dipping and spitting products now on store shelves.

Farmers significantly cut back growing burley tobacco after Congress passed the $10.1 billion tobacco buyout in 2004, ending the industry's Depression-era production and price controls and replacing them with a free-market system.

Bronson Frick, associate director of Americans for Non-Smokers Rights, said part of the decrease in smokingand increase in chewinghas to do with public smoking bans. More than three dozen communities and states have already passed anti-smoking laws, he said.

And in related news, R.J. Reynolds is expected to invest millions in Arizona to defeat a statewide smoking ban on the November ballot and support a compromise measure that would strike down more restrictive local ordinances. The maker of Camel, Kool and other cigarette brands said it would spend $40 million on campaigns in Arizona, Missouri, California and Ohio, reported The Arizona Republic.

The Smoke-Free Arizona initiative would ban smoking in most enclosed public places except outdoor patios, designated hotel rooms, fraternal clubs when not open to the public and tobacco shops with separate ventilation. There would be no exception for bars.

That initiative also would create a two-cents-per-pack tobacco tax to fund enforcement of the restrictions.

The tobacco-backed measure does not include any funding for enforcement, said the report. And while creating a statewide ordinance, it would strip local governments of their ability to pass all-out bans, as Tempe, Ariz., voters did in 2002.

R.J. Reynolds' investment in Arizona is similar to its efforts in Ohio, the newspaper said, where the company is backing a campaign called Smoke Less Ohio to compete with a more restrictive smoking ban. In California and Missouri, the company is targeting ballot proposals to raise tobacco taxes. California voters will weigh whether to boost taxes of cigarettes and other tobacco products by $2.60, to $3.47 per pack, to fund health care programs and other projects. In Missouri, voters will be asked to raise cigarette taxes to 97 cents per pack from 17 cents and increase taxes on other tobacco products by 20%.

In addition to the competing smoking restriction initiatives, Arizona voters in November will also be asked to vote on a significant increase in tobacco taxes to fund early childhood programs. The First Things First initiative, the brainchild of the Basha grocery store family, would boost taxes on cigarettes 80 cents, to $1.98 per pack. That's just as large as the tobacco tax being considered in Missouri.