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Excerpt from Oral History Interview with Edward Stephenson, September 21, 2002. Interview R-0193. Southern Oral History Program Collection (#4007) See Entire Interview >>

Effects of fixed prices and consolidation on tobacco auctions

The rewards of clever bidding by buyers and shrewd salesmanship by auctioneers have drained out of the business, Stephenson explains. Not only has grading effectively fixed prices, but huge tobacco companies like Philip Morris exert a great deal of control over the process, sometimes circumventing it altogether by contracting directly with growers.

Citing this Excerpt

Oral History Interview with Edward Stephenson, September 21, 2002. Interview R-0193. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.

Full Text of the Excerpt

WILLIAM MANSFIELD:
Ok. Now we've talked about the farmers and the buyers, now I want to ask about the auctioneers. When you were growing up and your dad was auctioneering, how do you think the auctioneers from your father's generation are different from the auctioneers of today?
EDWARD STEPHENSON:
Oh, it's night and day. It's not even close.
WILLIAM MANSFIELD:
What's changed? What's different?
EDWARD STEPHENSON:
Well, we sell one day a week, where we used to sell five. Well sell 600,00 pounds a day where they used to sell 150,000 pounds four times a week. It used to be a true auction, where we had 12 buyers and all of them bidding on the same pile. Now it's three or four buyers and all four of them are buying for one company. You know, you've got one company that's buying 75 % of the tobacco that's grown in the United States. Everybody knows it's Phillip Morris. I mean, on tape or what ever I have to say it, they control it. They buy 75% of what's bought and sold and, pretty much what they say, goes.
WILLIAM MANSFIELD:
How does that change affect what the auctioneer does?
EDWARD STEPHENSON:
Well . . .
WILLIAM MANSFIELD:
I don't necessarily in the selling of the tobacco but the persona that the auctioneer has.
EDWARD STEPHENSON:
You're talking about how it has changed the . . . . . ..
WILLIAM MANSFIELD:
I remember, they talked about "Dancing" Jake Taylor and . . . . . .
EDWARD STEPHENSON:
It's immaterial to do that any more. That doesn't make any difference anymore. They're going to give so much. You can't entice them to give more anymore. You can't entice them to may jump at $5.00 to show-off for the pretty girl. They don't do that. That's not a part of the plan any more. They bid what they want to and most of the time that's just a penny over the support price, if the government's got it supported at $1.80 they give $1.81. That's just the way it is.
WILLIAM MANSFIELD:
So that performance aspect ?
EDWARD STEPHENSON:
I don't think it's any good any more. If you do it, it's just . . . . . . You know, used to the performance was maybe helped the sale, helped it to get better. Or helped the buyer to give a few more cents, because of the pretty girl or because they were happy and everybody was and this auctioneer really had them going, you know had them in the palm of his hand. That's immaterial now. It's so standard, its so cut and dried. When you start out, if it's a B4F [grade of tobacco] you pretty much know it's going to bring 93 or 94 co-op. There's no in between. Used to, if a buyer could be slick enough to buy one cheap, he bought it. If the other buyer weren't smart enough to recognize that it was a good pile and you were—you just bought a bargain. But that's not that way anymore.
WILLIAM MANSFIELD:
So there is a lot more control?
EDWARD STEPHENSON:
I don't hardly know how to explain it. It's just not that way. You just got one company that's literally got a monopoly, in my opinion, They buy all the tobacco. You got four buyers there and all . . . . . . On my sale I actually got Phillip Morris buying tobacco, but there's three more buyers, but they are buying for him too. So it's . . . . . . in my opinion and it really doesn't make any difference, but they have a monopoly. I mean they control it. It's like last Monday they came in and bought 36% of the sale and all of my farmers were happy and everything was good and tobacco was selling good. And three days later they come in and buy 4%. Everybody is gloomy, dead. It's terrible. A bad sale. Just 72 hours before That, they were happy.
WILLIAM MANSFIELD:
When they only bought 4%, did the co-op get the rest of it?
EDWARD STEPHENSON:
They got a bunch of it. They got 67%.
WILLIAM MANSFIELD:
At least they sold some tobacco.
EDWARD STEPHENSON:
Well, there are other companies that buy, but they're just . . . . . . See they're only two people, three people that make cigarettes. You got Reynolds and they don't follow the auction. They buy none at auction. Zero!
WILLIAM MANSFIELD:
They all do contract growing?
EDWARD STEPHENSON:
Yeah. When you got B&W, which is Brown and Williamson, they don't . . . they buy 15, 18 %, 12 or 15 %. And they're dealers. The dealers, like DIMON, they're a dealer. They buy it and re-sell it to make a profit. They don't make cigarettes. So when you've got one company that buys 75% of it, which is Phillip Morris, I mean it's just . . . . . . they control what goes on from day to day. They decide they've got enough of this kind —- that's it! These other fellows can't buy it. Like a dealer, if they buy it, they got to re-sell it. Who they going to re-sell it to? They got to re-sell it to a cigarette maker.
WILLIAM MANSFIELD:
And Reynolds isn't buying it and Phillip Morris they've got what they need.
EDWARD STEPHENSON:
And B&W, they got what they need. So it's just sad, in a way. It's just sad.
WILLIAM MANSFIELD:
It seems like the auctioneer added so much life to the sale.
EDWARD STEPHENSON:
Well he did. I mean. In it's heyday, that was the only way to sell tobacco. The only way to sell tobacco was at auction. And you had 260 warehouses from Florida to Virginia. Smithfield, for instance, had seven warehouses. Now they got one. It was the only way to sell tobacco. The auction. There wasn't no such thing as contract. Now all of a sudden they come out with direct sales, and over night, literally over night 80% went to the contract. BAM! I don't think the companies even realized it would go that big. It could be 100[%] just like that. All they'd have to do is say, We'll take the rest of it. That's all they'd have to do, but they can't use it. Even Phillip Morris can't use it all. And when they can't use it all that doesn't leave but just a few more people. And that's a dealer and he's got to buy it and re-sell it. And we've kind of priced ourselves out of the world market. They can buy tobacco in Brazil a dollar a pound. Our tobacco, the same tobacco would be $1.90. And just four years ago, we grew a billion pounds of tobacco. A billion, pounds. One hundred million pounds in 1997. This year we're growing 460 million pounds. That's a big, big, big, big, decline. But when we sold a billion pounds, they only way to sell it was at the auction. And you had to have a bunch of auctioneers. A bunch of ticket markers. But all of these fellows you saw today [at the Museum's mock auction] 95% of them are unemployed. All of those world champions, 90% of them are unemployed. They don't have a job. There is nothing for them to do.
WILLIAM MANSFIELD:
They can't sell tobacco, but what was it, Mr. . .
EDWARD STEPHENSON:
Well they can sell real estate, but that's certainly not tobacco.
WILLIAM MANSFIELD:
It's not the same. It's not the same. It moves a lot slower. Well I've been badgering you with questions for the past hour or so. Is there anything you want to say that I haven't asked about?
EDWARD STEPHENSON:
No, other than just I hope in some way, some way there is enough tobacco can be designated to the auction, that in someway, if it's not me (I hope it's me) that some where in North Carolina, or where ever, (especially in North Carolina) that it would be a day when you and I have to sit here and say what it was like when there was an auction. I hope it doesn't ever get that way. I hope it's always somewhere, if it's not but one little auction, in Oxford , North Carolina or Fairmont or Kinston, or Smithfield, I hope always, at some point in time—before I lay down and die and go on—I hope I can always say that there is a an auction, a tobacco auction some where.