TOBACCO--SUMMARY April 3, 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. ----------------------------------------------------------------------------- Acreage in 1995 May Be Up; 1994 Cigarette Production Up In early March, U.S. tobacco growers indicated intentions to increase this year's plantings about 3 percent to 692,000 acres. Despite a large carryover of 1994-crop tobacco, a 16-percent increase in the flue-cured basic quota boosted planting intentions 10 percent to 396,000 acres in 1995. Burley tobacco acreage is expected to decline 5 percent even though basic quota was increased 1 percent. The acreage decline results from large farm carryover and a smaller effective quota. There is a potential for the largest share of burley quota to be used since the mid-1980's. Even with a larger acreage, a crop with average yields would decline about 5 percent from 1994's 1.59 billion pounds. Despite a smaller off-farm carryin, the 1995/96 supply of tobacco will likely change little from the current season. Price supports in 1995 will rise 1.4 cents for flue-cured and 1.1 cents for burley. Price supports for other types are up from 1.7 to 3.5 cents per pound. Before the marketing season begins, USDA sets grade loan rates for the various kinds of tobacco receiving support. Flue-cured and burley no-net-cost assessments will be lower in 1995 for producers and purchasers. On January 1, 1995, off-farm stocks of U.S.-grown leaf were up 3 percent, and stocks of imported leaf were up 7 percent from a year earlier. With an anticipated increase in domestic use that more than offsets reduced leaf exports, total use of U.S.-grown tobacco in 1994/95 may increase from a year earlier. Consequently, October 1, 1995 carryover stocks of all U.S.-grown tobacco will probably decline. Cigarette output rose 10 percent last year to 726 billion units, the largest since 1981 and the second highest ever. Domestic use stabilized, and exports were up. U.S. smokers consumed an estimated 485 billion cigarettes in 1994, about the same as a year earlier. However, annual consumption per adult declined 1 percent to 2,514 cigarettes. Both total and per capita consumption are expected to decline this year because of expected higher retail prices, increased restrictions and prohibitions on smoking, adverse publicity, health concerns, and reduced social acceptance. The value of U.S. leaf and tobacco product exports in 1994 rose 20 percent to a record $6.7 billion because of an increase in volume and prices of tobacco products. The value of exports exceeded imports (arrivals) by $5.8 billion. The record export surplus was up 45 percent from the year earlier. Cigarette exports rose 13 percent to 220 billion, but exports of unmanufactured leaf fell 5 percent to 434 million pounds (571 million pounds, farm sales weight). Export leaf volume may fall further in 1995 because of ample foreign supplies at lower prices, and reduced consumption in some major U.S. markets. The quality of the 1995 flue-cured crop will be an important influence on exports late in the calendar year. In 1994, unmanufactured tobacco imports (arrivals) fell 27 percent to 584 million pounds. The reduction reflects reduced cigarette leaf and stem imports. Imported leaf accounted for about 26 percent of total U.S. leaf stocks on January 1, 1995, a little more than a year earlier. Consumption of cigars and snuff rose in 1994, while consumption of smoking and chewing tobacco fell. Use of cigars and snuff may increase in 1995, but use of other tobacco products may decline further. Disappearance of U.S.-grown flue-cured tobacco in the current marketing year is forecast up from last year's 792 million pounds. Domestic use is expected to increase more than enough to offset reduced exports. Disappearance in 1994/95 will likely exceed 1994/95 marketings, so the carryover of domestic flue-cured tobacco on July 1, 1995, may decline from the 1.3 billion pounds of a year earlier. Production in 1995 may increase from 1994's 870 million pounds. Disappearance of U.S.-grown burley tobacco in 1994/95 is expected to increase from 1993/94's 552 million pounds, with added domestic use. Burley sales this season totaled 573 million pounds, 9 percent less than last season. The U.S. burley carryover next October 1 may decline about 2 percent from a year earlier. USDA set this season's burley marketing quota at 549 million pounds, 1 percent above last year. However, the 1995 effective quota, which reflects last year's over- and under-marketings, totals about 576 million pounds, 30 million pounds less than last season. Individual farm acreage allotments were reduced 15 percent for dark air-cured and Virginia fire-cured tobacco, 7 percent for Kentucky-Tennessee fire-cured tobacco, and 5 percent for Virginia sun-cured tobacco. The allotments were steady for Wisconsin binder and Ohio filler growers and for Puerto Rican cigar filler growers. Acreage allotments unused in recent years were adjusted downward. Prices for the 1994 crop were mixed. Maryland and cigar prices were up, but fire-cured and dark air-cured prices were down. Printed copies of the Tobacco Situation and Outlook Report will be available in about 2 weeks. This issue contains a special article, "U.S. Tobacco Farm Trends." For more information contact Verner Grise (202) 219-0890. The text of the report will also be available electronically. For details, call (202) 720- 9045.