Colonial Virginia Tobacco
Relatively cheap labor, a growing population of middling planters, the increasing worldwide demand for tobacco, and a system of regulation designed to maintain the quality of the product all contributed to the creation of a tobacco industry in Virginia, especially in the Piedmont area.
When Virginians first began exporting tobacco, they relied on building personal relationships with English merchants to whom they sold their wares. This allowed planters to receive payment immediately instead of waiting for the tobacco to be sold in Europe. But as tobacco prices fell in the 1680s and 1690s and the market became less stable, it was more economical for planters to ship at their own risk to England, where a commission agent would, for a fee of 2.5 percent, store the tobacco, pay all duties and fees, sell it, and use the profits as his client directed. By 1730 approximately 40 percent of Chesapeake tobacco was being shipped by the consignment system.
Merchants sent agents, or factors, to Virginia to liaise with the planters from whom they purchased tobacco. Factors operated from the small port towns on the Chesapeake Bay and the major rivers and opened stores, where they sold manufactured goods from Great Britain on credit. They also sent agents to buy tobacco directly from middling to small planters who could not afford the costs of consignment. The store system was dominated by enterprising young Scotsmen who had access to cheaper, faster shipping routes and whose operating costs were lower than those of their English counterparts. As a result, Scotland took over a large portion of the tobacco trade from London. In 1720, Scotland, Bristol, and Liverpool transported about 40 percent of the Chesapeake's tobacco.