TOBACCO--SUMMARY December 18, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of TOBACCO is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- Production Down; Prices Up The U.S. tobacco crop is smaller this year than last, and total supplies are also smaller because beginning stocks are down. Flue-cured prices increased because of tighter world supplies, higher price supports, more higher-value upper stalk marketings, and improved quality marketings. Burley prices were up slightly despite some decline in quality from a year earlier. The 1995 flue-cured crop averaged $1.794 a pound at auction, 9.6 cents above last year. As measured by official grades, overall quality was slightly higher. With higher prices and larger marketings (about 130 million pounds of 1994 farm carryover tobacco was sold in 1995), cash receipts rose about 12 percent this season. Burley auctions began on November 20, and during the first 4 weeks of sales, prices averaged about 0.2 cent a pound higher than a year earlier. Burley supports were increased by 1.1 cents a pound this season. Total U.S. tobacco production this year is forecast at 1.32 billion pounds, 16 percent below 1994 and the lowest since 1987. Although acreage was up 0.5 percent, yields were down 17 percent. With smaller production and lower carryin,domestic supplies were reduced about 7 percent this year. Production will likely increase in 1996. U.S. tobacco use during 1995/96 may exceed marketings, reducing next summer's ending stocks about 4 percent from the 2.32 billion pounds of U.S.-grown tobacco carried into this year. Still, both domestic use and exports may decline this year. U.S. cigarette consumption in calendar year 1995 is up slightly from last year. Output will likely increase because of larger exports. Cigar, snuff, and chewing consumption all may rise, but smoking tobacco use continues to fall. During January-September 1995, U.S. exports of unmanufactured tobacco rose slightly from a year earlier, but for all of 1995, exports will likely fall short of 1994's 196,794 metric tons (434 million pounds, or 571 million pounds, farm sales weight). U.S. leaf exports may fall a little short of the 1995 level in 1996 because of increased world supplies, short U.S. supplies of some qualities of flue-cured leaf, and smaller burley marketings. During January-September, unmanufactured tobacco imports (duty paid) fell 17 percent from a year earlier. The decline reflects lower cigarette leaf and stems. General imports (arrivals) fell 20 percent. U.S. stocks of imported cigarette leaf and smoking tobacco rose 3 percent. Imports are expected to increase during the remainder of 1995. Effective September 13, an annual tariff rate quota (TRQ) applies for certain imported tobaccos, primarily flue-cured and burley. The TRQ of 150,000 metric tons, about 332 million pounds, is less constraining than the domestic content provisions that had been in effect since January 1, 1994. The supply of U.S.-grown flue-cured tobacco for 1995/96 (July-June), about 2.04 billion pounds, is down 3 percent because of smaller carryover. With marketings above indicated use, ending stocks are expected to rise 1 percent from last year's 1.19 billion pounds. The national (basic) flue-cured quota for 1996 was set at 873.6 million pounds, 6.5 percent below 1995. The effective quota (reflecting adjustments for net under-quota marketings) is estimated at 944 million pounds, 2 percent higher than in 1995. Price supports will average $1.601, 0.4 cent higher. Basic quotas are down because cigarette manufacturers reduced purchase intentions. However, because of a 70-million-pound shortfall in 1995 marketings, the effective quota is up. The supply of U.S.-grown burley tobacco for 1995/96 (October-September) is estimated at 1.48 billion pounds, 7 percent below a year earlier. As of December 1, the 1995 crop was estimated at 499 million pounds. However, considering carryover on farms, marketings in 1995/96 are expected to total 515 to 525 million pounds. About 65 million pounds of 1994-crop tobacco remained unsold from last season because of insufficient quota. Sizeable farm carryover will likely remain at the end of the 1995/96 marketing season as well. By law, the marketing quota for burley must be announced by February 1, and acreage allotments for several other kinds by March 1. Supplies of fire-cured and Maryland tobacco are higher, but supplies of dark air-cured and cigar tobacco are lower. This issue of the Tobacco Situation and Outlook reports contains a special article "Costs of Producing and Selling Burley Tobacco: 1993, 1994, and Preliminary 1995." Printed copies of the Tobacco Situation and Outlook will be available in about 2 weeks. For more information contact Verner Grise (202) 219-0890. The text of the report will also be available electronically. For details, call (202) 219-0515. End end end