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:
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Well . . .
- WILLIAM MANSFIELD:
-
I don't necessarily in the selling of the tobacco but the
persona that the auctioneer has.
- EDWARD STEPHENSON:
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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:
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They got a bunch of it. They got 67%.
- WILLIAM MANSFIELD:
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At least they sold some tobacco.
- EDWARD STEPHENSON:
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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:
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And Reynolds isn't buying it and Phillip Morris
they've got what they need.
- EDWARD STEPHENSON:
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And B&W, they got what they need. So it's just sad,
in a way. It's just sad.
- WILLIAM MANSFIELD:
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It seems like the auctioneer added so much life to the sale.
- EDWARD STEPHENSON:
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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.