The Mt. Sterling advocate., 1921-07-12
Enormous Profits are
Made in Cigarettes

facturers Of cigarettes are making
the greatest profits in the history
of the industry" IA
The Wall Street journal, probably
the most authoritative financial
journal in the country, makes this
statement on the basis of figures
compiled by experts, and by the
manufacturers themselves. Such a
pronouncement should be of great
interest to the tobacco growers,
since the prices paid to the farmers
of Kentucky during this period, were
much lower than the prices during
several previous years. In fact, this
decrease in the price paid to the
farmer is offered as one Of the two
principal reasons for the enormous
profits made by the manufacturers.
In 1920, Kentucky produced 467,-
100000 pounds of tobacco. Accord
ing to Wall Street figures the aver
age price for the 1920 crop was 1872
cents less than the price Of the 1919
crop. This reduced price meant in
creased profits Of more than $107,-
100000 to the manufacturers. A GER
tain part of this decline is held by
some persons to be due to the 1920
crop being Of inferior quality. Ex-
pert tobacco men at Lexington and
the Bluegrass say, however, that
the 1920 crop was very useful one
for smoking tobacco brands.
But granting that the 1920 crop of
tobacco was not Of the most valu-
able quality, this factor would be
counteracted by the lower labor
costs in manufacturing, as the cost
Of living declined.
"1t was estimated last year that
20 per cent of production costs went
for leaf. With prices for leaf cut in
half compared with those for the
1919 crop, the enormous saving to
the cigarette manufacturer is OBJ
vious."
Add to these considerations the
fact that the price Of cigarettes in
which Burley tobacco is used has
not been reduced, and it becomes ap-
parent that the greater part Of the
money represented by the reduced
price paid growers for tobacco must
have gone to the manufacturer as
profits. To swell these figures still
further, a great increase in the use
of cigarettes is indicated by figures
for the first four months of this
year.
"a production Of $4,000, 900, 900
cigarettes ESTIMATED total for 1927
would mean an increase in profits
Ito the manufacturer) Of $24,500,-
O00," says the Wall Street Journal.
GAS a result of lower leaf prices,
cigarette manufacturers are making
unprecedented profits. 1t is fficial-
ly estimated that one of the big
manufacturers purchased its 1920
supply of tobacco at something like
$20,000,000 less than ii cost in 1919.
The increased demand for cigarettes
makes unlikely a reduction in Gig
arctic prices for the time being.
These statements are not made by
the Wall Street Journal nor quoted
by this newspaper to prove that the
manufacturers are treating either
the grower or the public unfairly.
Plainly, the manufacturers are only
following principles found to be
sound in any business. They buy
the raw product at the lowest price
that will insure a continued supply
and sell the finished product at the
highest price that will insure a con-
tinued demand.
But something evidently is wrong
when the the producer loses, or at |
least does not make money, when
the public demand is greater and
when the manufacturer makes un-
paralelled profits.
xrrI