TOBACCO June 19, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- TOBACCO Situation and Outlook is published four times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. TBS-231. Please note that this release contains only the text of TOBACCO-- tables and graphics are not included. Subcriptions to the printed version of this report are available from the ERS- NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #TBS, $19/year. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Tobacco Situation and Outlook. Commercial Agriculture Division, Economic Research Service, U.S. Department of Agriculture, June 1995, TBS-231. Contents Page Tobacco Products U.S. Exports and Imports U.S. Tobacco Leaf Situation and Outlook Flue-Cured Burley Southern Maryland Fire-Cured Dark Air-Cured Cigar Tobacco Statistical Summary List of Tables Principal Contributor Verner N. Grise Voice (202) 219-0890 FAX (202) 219-0042 Database Coordinator Graphics and Table Design Fannye Lockley-Jolly Design & Layout Wynnice Napper Word Processing Betty Barrett Approved by the World Agricultural Outlook Board. Summary released June 14, 1995. The summary of the next Tobacco Situation and Outlook is scheduled for release September 14, 1995. Summaries and full Situation and Outlook reports may be accessed electronically through the USDA CID System. For details, call (202)720-9045. The Tobacco Situation and Outlook is published in April, June, September, and December. See back cover for subscription information. Summary Disappearance of U.S.-grown tobacco during the 1994/95 marketing year is likely to rise about 15 percent because of increased cigarette production and substitution of U.S.-grown for foreign- grown leaf. Use will likely exceed 1994/95 marketings, so stocks carried over to the new marketing year (beginning July 1 for flue-cured and October 1 for burley and other kinds) should decline from last year's 2.47 billion pounds. Despite higher price supports, 1995/96 auction prices will likely change little from the previous season because of ample supplies of U.S.-grown and foreign-grown leaf. Cigarette production may decline in 1995/96 because exports are not expected to offset reduced U.S. consumption. Despite an increase in 1994/95, leaf exports may decline in 1995/96 because of competition from countries such as Brazil, Zimbabwe, and Malawi. March planting intentions point to a 10-percent increase in flue- cured acreage from a year ago. Production should total about 890 million pounds if average growing conditions prevail and planted acreage approximates growers' intentions. Including tobacco carried over on farms, available tobacco may total more than 1 billion pounds in 1995. However, marketing quota constraints will likely limit 1995 sales to about 925 million pounds. Total flue-cured supplies are expected to increase from 1994/95. Loan receipts may be near last year's level. Burley growers indicated they would plant 5 percent less acreage in 1995. With average yields, burley production should fall about 6 percent from 1994/95 marketings. Production and the carryover of 1994-crop tobacco might exceed 600 million pounds. However, quota constraints will limit 1995/96 burley sales to about 550 million pounds. Higher exports will cause cigarette production to rise about 10 percent for the year ending June 30, 1995. During 1994/95, Americans will smoke slightly fewer cigarettes than a year earlier. Increased prohibitions and restrictions, health concerns, and growing social unacceptability of cigarette smoking offset stable prices. Unmanufactured tobacco exports, between July 1994 and March 1995, were 4 percent above a year earlier. Export volume on a marketing year basis will likely increase slightly from a year earlier because of expected increases in shipments of the two major kinds--flue-cured and burley. For the 1994/95 marketing year, an estimated 370 million pounds of flue-cured and 160 million pounds of burley, farm sales weight, will be exported. The anticipated 1994/95 increases reflect some recovery from the declines of 1993/94. During July 1994-March 1995, unmanufactured tobacco imports (duty paid) fell 31 percent. On April 1, U.S. manufacturers' stocks of imported cigarette tobacco were above a year ago. Stocks of flue-cured and burley were up 28 percent and 16 percent, respec- tively. Oriental stocks were down 3 percent. Cigar leaf stocks were down slightly. Disappearance of U.S.-grown flue-cured tobacco in 1994/95 is forecast up 15 percent from last season's 792 million pounds because of increased domestic use. Disappearance is expected to exceed 1994 marketings, so July 1 carryover will decline. Marketings in 1995/96 will probably be above use. Burley disappearance in 1994/95 is likely to increase somewhat from last season's 552 million pounds. Both domestic use and exports are up. Use is expected to exceed marketings, so October 1 stocks likely will decline from last year's 1.01 billion pounds. Prices of 1994-crop Maryland tobacco (type 32) rose 5 cents to $1.48 a pound because of higher prices in Maryland. The 1994 crop auctions in southern Maryland ended April 6, 1995, and prices averaged $1.635 a pound, 12 cents above a year earlier. Prices declined in Pennsylvania. Disappearance will likely decline from last season. The use of fire-cured tobacco is projected up in 1994/95 because of higher domestic use and exports. Dark air-cured use is also higher this season. With an anticipated smaller 1995 dark air- cured crop, supplies are expected to decline next season. A smaller cigar leaf crop is projected for 1995, and carryover is smaller. Consequently, cigar leaf supplies will decline. Tobacco Products Cigarette Production Up; Consumption Stable U.S. cigarette consumption remained about the same in 1994 as a year earlier (table 1). During 1994/95 (July-June), U.S. cigarette consumption likely declined slightly from last year's 486 billion, a somewhat smaller decline than the year before. The small drop in consumption was due to a growing number of prohibitions and restrictions on where people can smoke, publicity about relationships between smoking and health, and declining social acceptance of cigarette smoking. In 1994/95, the rate of decline would have been greater had retail cigarette prices not averaged lower. For 1995/96, the rate of decline may increase because of the growing number of prohibitions on smoking and the likelihood that prices will increase. Output in 1994/95 is estimated at 735 billion pieces, about 10 percent more than a year earlier. This includes about 242 billion pieces for export and shipments to U.S. possessions and overseas military personnel. For the 9 months through March, cigarette exports were up 21 percent from a year earlier, with shipments to the major destination--Belgium-Luxembourg (a point of entry and distribution to other European countries) up nearly 50 percent. Shipments to Japan, the second largest destination, were up 10 percent (table 2). Although the European Union (EU) has shown a growing preference for American blend cigarettes over the last decade, a number of countries have shifted to local production of this cigarette type, made either by licensees or subsidiaries of U.S. firms. In 1994, manufacturers did not change wholesale prices of premium brand cigarettes. Manufacturers raised prices about 3 percent in May 1995, the first increase in 18 months. Reflecting relatively stable wholesale prices, retail tobacco product prices rose only 2 percent between April 1994 and April 1995, compared with an 8- percent decline a year earlier. Overall, the average annual retail price of tobacco products is expected to increase from 2 to 4 percent in 1995. State tax data indicate that cigarette shipments during July 1994-January 1995 rose slightly from a year earlier. The number of shipping days was similar in each period, so the sales increase probably reflects the effects of lower cigarette retail prices. So far in 1995, three States have announced or imposed cigarette tax hikes averaging about 19.7 cents per pack of 20 (Washington will raise its tax 25 cents to 81.5 cents per pack July 1 and become the highest in the nation). Eight States raised taxes in 1994 an average of 15.6 cents a pack of 20. Forty-three States now impose sales taxes on cigarettes, and this number is expected to grow. The Federal excise tax totals 24 cents per pack. The 104th Congress convened in January and several cigarette tax increase bills have been introduced. However, Congress may not approve any of these bills this year. Federal Trade Commission Releases Report on Cigarette Labeling and Advertising The Federal Trade Commission (FTC) released its annual report on cigarette labeling and advertising in early May. Promotion and advertising expenses reached a record $6.03 billion in 1993 (the latest year for which data are available), a 15-percent gain from the previous year. The report also summarized trends in cigarette consumption and advertising and promotion expenditures. Cigarette Recall The major U.S. cigarette manufacturer voluntarily recalled a number of its cigarette brands in late May because a small number had defective filters. The defective filters could cause temporary discomfort to smokers. Large Cigar Consumption Rises During July 1994-June 1995, U.S. cigar consumption is projected to total 2.34 billion large cigars (including cigarillos), 7 percent more than a year earlier. Demand has been increasing in the higher-priced categories. Production of small cigars (less than 3 pounds per 1,000) is estimated at 1.43 billion for the year ending June 30. Output is expected to increase about 4 percent from a year earlier. Snuff Consumption Up; Chewing and Smoking Tobacco Down Smoking tobacco production is down, and consumption for the year ending June 30 may decline. In the first 9 months of 1994/95, domestic smoking tobacco output fell slightly from a year earlier. Including imports, domestic sales may decline about 4 percent. Smokeless tobacco output in 1994/95 is expected to decline from the previous year. Greater production of moist and dry snuff probably will not offset reductions in looseleaf, plug, and twist chewing. Consumption of chewing tobacco probably has been hurt in recent years by price hikes, publicity about the relationship between health and use of chewing tobacco, and legislation. Laws passed in the mid-1980's require rotating warning labels on product packages, a ban on radio and television advertising, and a Federal excise tax on chewing tobacco. The factors limiting chewing tobacco use also apply to snuff, although, after falling in 1986/87, snuff consumption has increased during the last 7 years. Snuff use in 1994/95 is expected to increase slightly from the 1993/94 level. Rising snuff consumption probably results from the growing number of restrictions on smoking, effective industry promotion, and the possibly waning impact of warning labels, tax hikes, and negative publicity. U.S. Exports and Imports Exports May Rise Slightly For the year ending June 30, 1995, exports of unmanufactured tobacco will likely total between 445 and 465 million pounds, a little above 1993/94's 442 million pounds (576 million pounds, farm sales weight). During July 1994-March 1995, leaf exports rose 4 percent to 324 million pounds. Average unit price rose about 6 percent. The seasonal peak in shipments to Japan, the EU, and other European countries came in late 1994-early 1995 (table 5). Exports of flue-cured tobacco during July 1994-March 1995 were 3 percent higher than a year earlier. Burley shipments rose 14 percent. Shipments of Kentucky-Tennessee fire-cured, Virginia fire-cured, blackfat, cigar wrapper, and other leaf rose. Exports of Maryland and stems fell. European countries took more U.S. tobacco, but Asian countries took less during July 1994-March 1995 compared with a year earlier. Within Europe, Germany (the major importer) took 50 percent more than a year earlier. Japan took 28 percent less. Although Japan's demand for U.S. tobacco leaf strengthened in recent years, Japanese buyers recently have shifted to leaf from lower-priced sources. With tighter but ample global supplies and a weak dollar, U.S. exports for the second half of calendar 1995 may be near those of last year, if the quality of the 1995 flue-cured crop is good. Export prospects are also enhanced because of a continuing shift to American blends that require more high-quality flue-cured and burley tobacco and increased trade with developing countries. On the other hand, factors that constrain U.S. export growth include high U.S. leaf prices, declining cigarette consumption in some major importing countries, and a shift to cheaper cigarettes in some countries. Imports Decline During July 1994-March 1995, U.S. duty paid imports of unmanufactured tobacco (for consumption) fell about 31 percent from a year earlier. Imports declined the second year in a row because the Omnibus Budget Reconciliation Act (OBRA) requires major domestic manufacturers of cigarettes to pay certain assessments and make certain tobacco purchases if, for any calendar year beginning in 1994, domestic tobacco constitutes less than 75 percent of the total tobacco used by manufacturers to produce cigarettes in the United States. Cigarette leaf imports for consumption fell 30 percent during July 1994-March 1995 compared with a year earlier. Imports of stems fell even more--55 percent. Cigar leaf and scrap imports were up a little. Arrivals of tobacco (general imports) for the first 9 months (July 1994-March 1995) were down about 11 percent. Declines occurred for unstemmed flue-cured and burley, stemmed flue-cured, other stemmed leaf (mostly burley), cigar wrapper, cigar scrap, and stems. Oriental, cigarette scrap, and cigar filler rose. By April 1, 1995, U.S. stocks of foreign-grown cigarette and smoking tobacco had risen to 1.02 billion pounds, 12 percent above a year earlier. Flue-cured stocks rose 28 percent, burley rose 16 percent, but Oriental fell 3 percent. Cigar leaf stocks fell 1 percent from a year earlier. Flue-Cured Tobacco Production and Sales in Major Producing Countries Zimbabwe's 1995 tobacco auction markets opened April 25, 2 weeks later than usual. Prices averaged US$0.72 per pound during the first 2 weeks of sales ending May 10, compared with US$0.57 during a similar period a year earlier. Auctions began in late April in Malawi, another major African producer, and prices averaged US$0.66 per pound during the first 3 weeks of sales, 12 cents above the similar period a year earlier. Higher prices reflect lower 1994 world flue-cured production. Production is down in Brazil. Ample world supplies and a decline in shipments to the United States has weakened demand. Canadian flue-cured auction markets closed on March 15, and sales through the Ontario Flue-Cured Tobacco Growers Marketing Board in 1994/95 totaled 129.6 million pounds, down 17 percent from the previous season. The average price was Can$1.63 (US$1.03) per pound, compared with Can$1.44 (US $ 1.04) per pound a year earlier. Canadian tobacco production will probably increase in 1995 because of greater cigarette production due to reduced Canadian cigarette taxes. Import Restrictions Update A dispute settlement panel determined that the 75 percent domestic content provisions for U.S. cigarette manufacturers is inconsistent with U.S. commitments to the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO). A provision in the 1993 OBRA specified that beginning January 1, 1994, U.S. cigarette manufacturers use at least 75 percent of U.S.-grown tobacco in cigarettes to avoid certain additional assessments. In order to comply with this law, manufacturers had to consider sharply reducing import share in their blends, or shift portions of their output to overseas factories. Implementing legislation for the GATT Uruguay Round contains provisions ending the domestic content provisions once the President proclaims a Tariff Rate Quota (TRQ) on certain tobaccos. Negotiations for establishing the TRQ have been ongoing for several months. The negotiations are in conformance with existing GATT/WTO requirements and would be a GATT/WTO- consistent alternative to the domestic content provisions of the OBRA. U.S. Tobacco Leaf Situation and Outlook Tobacco transplanting was about normal in the flue-cured belt but somewhat behind normal in the burley belt because of wet weather. Plant supplies were short in some flue-cured and burley areas. By early June, transplanting of flue-cured was nearly complete. About 55 percent of the burley had been transplanted by June 3. Auctions for the 1995 flue-cured crop are expected to begin between mid- and late July, although scheduling depends on the recommendations of the Flue-Cured Tobacco Advisory Committee (scheduled to meet June 15) and the availability of sufficient marketable volume. Last year's auctions opened July 19, 2 days earlier than the previous year. The 1981 amendment to the Tobacco Inspection Act of 1935 requires growers to pay for the USDA grading service. The fee was 70 cents per 100 pounds the last 4 years. However, the U.S. Department of Agriculture has proposed a fee increase of 13 cents to 83 cents per 100 pounds in 1995 because the current fee no longer covers the cost of providing services and maintaining an adequate reserve. With a smaller crop and carryover, domestic leaf supplies will likely decline. Price supports will increase 1.4 cents to $1.597 a pound for flue-cured and 1.1 cents to $1.725 for burley. Price supports for flue-cured and burley are calculated based on the level for the preceding year, adjusted for changes in a 5-year moving average of prices (two-thirds weight) and the changes in a cost-of-production index (one-third weight) as mandated in the OBRA of 1985. For Virginia fire-cured (type 21), Kentucky-Tennessee fire-cured (types 22-23), Kentucky-Tennessee dark air-cured (types 35-36), Virginia sun-cured (type 37) and Ohio filler and Wisconsin binder (types 42-44 and 54-55), price supports for 1995 will increase from 1.6 to 2.4 percent. The increases are based on the change in the average parity index of the 3 previous years compared with 1959 and evaluations by the Secretary of Agriculture on market conditions. Under the OBRA of 1990, the marketing assessment has been set at 1.597 cents a pound for flue-cured and 1.725 cents for burley (divided equally for growers and purchasers). For other types, the marketing assessment ranges from 1.101 cents per pound for Wisconsin binder to 1.518 cents for Kentucky-Tennessee dark fire- cured tobacco. In 1995, the no-net-cost assessment for flue-cured tobacco totals 0.0015 cent per pound for producers and 1.0015 cents per pound for purchasers. The no-net-cost assessment for burley was set at 0.1375 cent per pound for both producers and purchasers. The Agricultural Adjustment Act of 1949, as amended in 1986, requires that producers and purchasers share equally in no-net-cost assessments, to the extent possible, in maintaining the no-net- cost account for 1985 and subsequent crops of flue-cured and burley tobacco. The flue-cured purchaser assessment is more than the producer assessment because purchasers did not pay assessments for the 1985 crop of flue-cured and burley tobacco, and additional purchaser assessments are needed to equalize contributions of the two groups for flue-cured. Producer assessments began in 1982 and buyer assessments began in 1986. The no-net-cost assessment for Virginia fire-cured (type 21) has been set at 15.285 cents per pound and for Virginia sun-cured (type 37) the assessment has been set at 15.3675 cents per pound. The no-net-cost assessment for Kentucky-Tennessee fire-cured (types 22-23), Kentucky-Tennessee dark air-cured (types 35-36), and Wisconsin binder (types 54-55) had not been set as of June 14. No-net-cost assessments for kinds other than flue-cured and burley are paid solely by growers. USDA's Agricultural Statistics Board will publish separate estimates of acreage, yield, and production by state for each type and class of tobacco in August, September, October, and November Crop Production reports. Acreage, yield, and production estimates will be published for flue-cured in July and burley in December. In addition, acreage estimates will be published by state for each type and class of tobacco in late June. Congressional Advisory Committee Releases Report A Congressionally appointed 31-member advisory committee on tobacco that includes grower, warehouse, manufacturer, and exporter representatives was convened in January 1995 to explore ways to improve the efficiency and competitiveness of the U.S. tobacco industry. The committee was a follow-up to the December 1994 buyout of tobacco loan stocks. The advisory committee met a number of times during January-April and recently released a report of its findings. The committee addressed concerns and made recommendations for improvements in the areas of marketing, grading, tobacco cooperative operations, flue-cured tobacco program operations, flue-cured tobacco competitiveness, burley tobacco program operations, and burley competitiveness. Farm Bill Proposals, 1995 In preparation for a new farm bill, the U.S. Department of Agriculture released, in mid-May the Administration's proposals: 1995 Farm Bill: Guidance of the Administration. The report contains recommendations for commodity programs, rural development, conservation and environment, international programs, food and nutrition, research, education, economics, and food safety. The report contains no reference to tobacco inasmuch as the tobacco program is authorized by permanent legislation. Flue-Cured April Leaf Stocks Decline Stocks of U.S.-grown flue-cured tobacco (types 11-14) totaled 1.37 billion pounds on April 1, 115 million pounds below a year earlier. Loan stocks fell, but manufacturer stocks rose. Loan stocks fell because 1994 loan-takings decreased sharply, and manufacturers greatly increased purchases in early 1995. Only 17.9 million pounds of loan stocks were sold in 1994 but in December 1994, cigarette manufacturers agreed to purchase over a 7-year period, 298.2 million pounds of 1990-93 crop loan stocks. So far in 1995, about 173 million pounds of 1990-93 crop tobacco has been placed under purchase agreement and about 90 million pounds had been removed from Stabilization inventory by mid-June 1995. In addition, about 34 million pounds of 1994 crop tobacco has been sold in 1995. Total disappearance during July 1994-March 1995 was 733 million pounds, about 129 million more than a year earlier. Both domestic use and exports rose. For the marketing year ending June 30, U.S. flue-cured exports will likely increase from last season. For the 9 months through March, exports totaled 288 million pounds, about 10 million pounds more than a year earlier. Of the leading flue-cured importers, Germany, Italy, the Netherlands, Switzerland, Denmark, and Turkey took more while Japan, Thailand, Taiwan, and the United Kingdom took less. Disappearance To Rise Disappearance of flue-cured tobacco for 1994/95 is expected to be about 15 percent higher than 1993/94's 792 million pounds, but 30 percent below the 1973/74 record. Because use prospects exceed last year's marketings, carryover will decline (table 7). In December 1994, cigarette manufacturers agreed to purchase over a 7-year period, 298.2 million pounds of 1990-93 crop loan stocks. In addition, 34.2 million pounds of 1994 crop loan stocks have been sold. Uncommitted loan stocks on May 31 totaled 64 million pounds, compared with 302 million a year earlier (table 8). The record is 960 million pounds, set in January 1965. The recent increase in loan stock purchases reflect cigarette manufacturer commitments to purchase 1990-93 crops over a 7-year period. Also, leaf demand has strengthened because of stable domestic consumption, higher cigarette exports, less uncertainty about Federal excise taxes, and a smaller 1994 world tobacco crop. Loan stock purchases in 1995 will considerably exceed those of recent years. Flue-Cured Crop Likely Up in 1995 The 1995 effective quota is about 925 million pounds, up 16 percent from last year but 41 percent below the 1975 peak (table 9). As of early March, growers intended to set 396,000 acres, 10 percent above a year earlier. The 1995 crop should total about 890 million pounds, given a normal growing season, the effective quota, and estimated acreage. In addition, over 100 million pounds of 1994-crop tobacco remained unsold because of insufficient quotas for individual farms. Consequently, over a billion pounds will likely be available for sale. However, quota marketing constraints might limit 1995 sales to about 925 million pounds. The combined marketings and carryover would increase the 1995/96 supply from 1994/ 95's 2.1 billion pounds. In relation to use, this would represent a 2.6-year supply, somewhat above traditional benchmark levels. Since 1987, lease and transfer of quota have not been permitted before planting. However, the Agricultural Reconciliation Act of 1987 authorized lease and transfer of flue-cured quota after June 30 under certain conditions. Since 1982, quota sale-purchase has been authorized. Over two-fifths of the quota was sold from 1982 to mid-1994. Growers can also obtain quota by cash or share renting a farm to which the quota is assigned. Under certain conditions, growers may combine more than one farm into a single farming unit. The conditions include: (1) the operator has complete control of the farming unit, and uses the same accounting and management system on all tracts, (2) the rental agreement lasts for more than 1 year, and (3) one or more program, allotment, or quota crops are rotated among all tracts. Support Details, 1995 Flue-cured tobacco is under acreage-poundage marketing quotas, and price support is not provided for growers who plant in excess of their allotment, or for marketings exceeding 103 percent of the growers effective quota. To receive price support, producers must certify that their pesticides have been approved by the Environmental Protection Agency for use on tobacco and were used in accordance with label directions. As a condition of price support for flue-cured tobacco, USDA requires growers to designate a warehouse or warehouses where they intend to sell their tobacco. Also, growers must pay a no-net-cost assessment to cover projected losses in operating the price support program. In addition, a marketing assessment is imposed to help reduce the Federal deficit. In 1995, the combined assessments totaled 2.6 cents, with growers assessed 0.8 cent and purchasers 1.8 cents. The overall flue-cured price support level is set at $1.597 per pound, compared with $1.583 in 1994. The price support for flue- cured is the level for the preceding year, adjusted by changes in the 5-year moving average of prices, excluding the highest and lowest (two-thirds weight), and changes in a cost-of-production index (one-third weight). Costs include general variable expenditures, but exclude costs of land, quota, risk, overhead, management, marketing contributions, and other expenses not directly related to tobacco production. The 1995 loan rates for various grades of flue-cured tobacco range from $1.05 to $1.92 per pound. As in the past, no support will be offered on tobacco graded P5L, P5F, P5G, N1L, N1GL, N1XL, N1XO, N1PO, No-G (no-grade), N2 (second quality nondescript), W (doubtful keeping order), U (unsound), or scrap. Also, no support or only limited support is provided for discount varieties, and the support for tobacco with excessive sand is reduced. Growers Again Designate Warehouse Preferences By mid-May, growers of flue-cured tobacco had designated about 100 percent of their effective quota to the auction warehouse where they want to sell their 1995 crop. Growers may designate up to 103 percent of their effective quota. Since the procedure began in 1974, sales schedules and inspection services have been provided at individual auction warehouses according to the quantity of tobacco designated (table 10). After growers make warehouse designations at their local Consolidated Farm Service Agency offices, grower lists are prepared for each warehouse and the information is provided to the Flue-Cured Tobacco Advisory Committee. In addition to recommending opening dates and sales schedules, the committee advises USDA on the geographic grouping of auction markets and distribution of graders. USDA Proposes Revision of Flue-Cured Tobacco Standards The U.S. Department of Agriculture proposed in late May a revision in the grade standards for flue-cured tobacco to identify mixing of tobacco leaves from adjacent stalk positions. The proposed revision was recommended by the Flue-Cured Cooperative Stabilization Corporation and the Congressional Advisory Committee report. Tobacco groupings reflect the part of the tobacco plant from which the leaf is pulled. The proposed revision will establish a special factor to describe lots containing 25 percent or more of an adjacent grouping. Notice of the proposed rule was published in the May 26 Federal Register and comments are being received through June 26. Burley Total Use May Rise Domestic use of burley rose 55 million pounds to 239 million during October 1994-March 1995 because of higher cigarette output, reduced use of imported leaf and stems, and higher exports. The 6-month disappearance of 317 million pounds was 33 percent above a year earlier. For the first 6 months, exports were up 43 percent but may fall from those of a year ago during the second 6 months. For the entire 1994/95 marketing year, total disappearance might rise 15 to 17 percent because of increased cigarette production and greater use of U.S.-grown leaf. Also, penalties remain in effect for using more than 25 percent foreign-grown leaf in U.S. manufactured cigarettes. Export prospects for the marketing year are above last year's 152 million pounds. For the first 6 months of the marketing year, burley shipments totaled 78 million pounds, about 43 percent above a year earlier. Germany, Denmark, Italy, the Netherlands, Thailand, the Philippines, and Hong Kong took more, but Japan took less. Burley shipments during the second half of the 1994/95 marketing season are expected to fall short of those of a year earlier. The carryover at the beginning of 1994/95, 1.014 billion pounds, was 8 percent above a year earlier. By April 1, with the 1994 crop in storage, stocks totaled 1.26 billion pounds, 63 million below a year earlier. Loan holdings have fallen and will likely total less than 250 million pounds by October 1. With higher use in 1994/95, the carryover this fall is expected to be about 7 percent below last year's carryover (table 7). Crop Will Likely Decline in 1995 For 1995, the effective burley quota (preliminary) is about 576 million pounds, down 5 percent from 1994. In early March, farmers reported intentions to set about 5 percent less acreage than last year. If normal yields are achieved on the estimated acreage, burley production would total near 535 million pounds, 6 percent less than last year's marketings. Also, 67 million pounds of tobacco from the 1994 crop was reported to be carried over on farms because of insufficient marketing quota. Burley marketings in 1995/96 are projected to total about 550 million pounds. The amount is short of production and farm holdings because of quota constraints. The indicated carryover plus marketings would pull the 1995/96 supply 90 million pounds below this season's 1.59 billion pounds. The burley price support has been set at an average of $1.725 a pound, 1.1 cents above last year, based on the 5-year moving average of market prices (two-thirds weight) and changes in a cost-of-production index (one-third weight). Grade loan rates have not been set. The 1995 combined burley marketing assessment and no-net-cost assessment totals 2 cents per pound--1 cent for growers and 1 cent for purchasers. The marketing assessment was set at 1.725 cents divided equally between the grower and purchaser. The no- net cost assessment was set at 0.1375 cent per pound for both producers and purchasers. Southern Maryland Larger Crop Brings Higher Prices The 1994 crop of Maryland tobacco grown in Pennsylvania and Maryland (type 32) was about 2 percent larger than in 1993. It sold for an average of $1.48 per pound, about 5 cents above a year earlier. Auction sales in Maryland began March 14 and ended April 6. Prices in Maryland averaged $1.635, 12 cents higher than a year earlier. In Pennsylvania, however, prices averaged 5 cents a pound lower. Higher overall prices resulted from a better quality crop in Maryland and reduced 1994 world production of light air-cured tobacco. Growers of Maryland tobacco have not approved marketing quotas since the 1965 crop, so they are not eligible for price support. In a 1982 referendum, Maryland growers rejected USDA grading and its required fee. The 1981 Food and Agriculture Act provided prohibitive penalties for growing and marketing Maryland tobacco in quota areas. However, in 1994, about 3,600 acres of Maryland tobacco were produced in Pennsylvania, a nonquota area. Quotas are not in effect for Pennsylvania tobacco. Use Down, Stocks Expected To Rise Maryland tobacco goes almost entirely into cigarettes. Domestic disappearance was down while exports were up during the first half of 1994/95. Total use during 1994/95 will likely fall from last season's 17.3 million pounds. Carryover will likely increase in 1995 (table 12). Fire-Cured Disappearance May Rise The 1994 fire-cured crop (types 21-23) was larger than the previous year because of higher acreage and yields. In addition, beginning stocks are higher, so supplies are about 11 percent higher. Prices declined from the previous year's level of $2.17 a pound to $2.07 a pound. Country purchases (about 45 percent of the 1994 type 22-23 crop) averaged $2.25 per pound, while auction sales averaged about $1.93 for all three fire-cured types. Growers placed 1.65 million pounds under loan, the largest amount in 7 years. The disappearance of fire-cured (types 22-23) during the first half of 1994/95 was about 24 million pounds, about 5 million above last season. Both domestic use and exports are up. However, disappearance of fire-cured (type 21) will likely decline in 1994/95. Production of snuff, a major user of fire- cured, was up during October 1994-March 1995. This year's allotments are down. Individual farm allotments are down 7 percent for Kentucky-Tennessee (types 22-23) and down 15 percent for Virginia (type 21). Based on March planting intentions, acreage is expected to decline 8 percent in Kentucky and Tennessee and 14 percent in Virginia. Based on indicated acreage and a return to normal yields, growers will produce about 39 million pounds, somewhat less than last year's high yield crop. Prospects indicate a larger 1994/95 carryover, so supplies may change little. Dark Air-Cured Disappearance May Rise Disappearance of dark air-cured (types 35-37) during the first half of 1994/95 was 6.8 million pounds, up about 1.5 million from a year earlier. Domestic disappearance is up while exports are down slightly. The manufacture of plug chewing tobacco--a major outlet for dark air-cured tobacco--was less than a year earlier, but snuff production was up. For the entire year, total use is expected to rise because of higher domestic use. The 1994/95 supply is likely to decline from this season's 36.4 million pounds. Exports of blackfat tobacco, a semi-processed product consisting of dark air-cured and fire-cured leaf, totaled 1.08 million pounds during October 1994-March 1995, a decrease of 72,000 pounds from a year earlier. Almost all blackfat is exported to West Africa. Compared with 1993/94, growers received 3 cents a pound less for a crop that was 0.6 million pounds larger. Prices for Kentucky- Tennessee dark air-cured (type 35) fell 8.8 cents a pound, but prices for Green River (type 36) rose 9.8 cents a pound. Growers placed about 5.5 percent under loan, a little less than a year earlier. For 1994/95, disappearance is expected to increase, and may exceed production, so carryover stocks may decline slightly. This year, growers are expected to harvest about 4,700 acres of dark air and sun-cured tobacco, about 4 percent less than a year earlier. If normal yields are achieved, the crop could total about 8.9 billion pounds, 25 percent below last season's high average yield crop. With lower production and carryover the 1995/96 supply will likely decline. Cigar Tobacco Production Expected To Fall Supplies of domestically grown cigar tobacco are down in 1994/95 because both production and carryover were lower. With indicated acreage about 9 percent lower, normal yields would reduce 1995 production about 10 percent from 1994. Yields in 1994 were somewhat higher than the low yields of a year earlier. With near average yields and intentions for 17 percent less acreage than in 1994, this year's filler production might decline about 2 million pounds from last year's 11.3 million pounds. Again this year, allotments for Connecticut binder (types 51 and 52) do not apply. Because of falling allotments for Wisconsin binder (types 54 and 55), USDA did not offer a release and reapportionment program for the second year in a row. Production of Wisconsin binder may decline slightly if yields are normal in 1995. Acreage is expected to change little. Use in 1994/95 will likely exceed 1994 production and reduce carryover stocks. Wisconsin binder goes mostly into loose-leaf chewing, and consumption has declined for several years. Wrapper production will probably increase slightly despite about the same acreage. April 1 holdings of U.S. and Puerto Rican tobacco (types 41-61) were 52.4 million pounds, about 19 percent less than a year earlier. Filler and binder declined, but wrapper increased. On April 1, U.S. stocks of foreign-grown cigar tobacco equaled 76 million pounds, about 1 percent less than the previous year. Filler Use Expected To Decline; Binder To Increase Disappearance of cigar filler during the first half of 1994/95 was 0.6 million pounds less than last year. With lower supplies, prices rose. For 1994/95, disappearance is expected to decline from the previous season. Carryover may fall to 28 million pounds in 1995/96. Cigar binder disappearance during October 1994-September 1995 is expected to increase from a year earlier. Disappearance of Wisconsin binder (types 54 and 55) during 1994/95 is expected to increase from the low level of a year earlier despite lower loose-leaf chewing production. Prices of Wisconsin tobacco were up a little. With the smaller crop, no tobacco was taken by the loan cooperatives. The disappearance of Connecticut Valley binder tobacco may decline slightly. Ending stocks may fall. Wrapper Use Projected To Rise The use of shade-grown wrapper tobacco in 1994/95 likely increased from a year earlier. Production in 1995 is expected to increase from a year earlier. In 1995, supplies rose to about 4 million pounds from 3.7 million last year. The unit value of wrapper rose to $17.80 a pound this season, a 5-percent increase. The disappearance of cigar wrapper during July 1994-March 1995 was 1.4 million pounds, up from a year ago. Exports were up. List of Tables Page 1. Cigarettes: U.S. output, removals, and consumption, 1986-95 2. U.S. cigarette exports to leading destinations, 1993-95 3. Cigars and smoking tobacco: Output, removals, and consumption, 1992-95 4. Tobacco products: Output, 1993-95 5. U.S. exports of unmanufactured tobacco by types and countries, 1991-95 6. U.S. imports of unmanufactured tobacco for consumption and general, by categories, 1994-95 7. Flue-cured and burley tobacco: U.S. supplies, disappearance, and prices, 1985-95 8. Tobacco loan stocks, 1993-95 9. Flue-cured and burley tobacco: Marketing quota and marketings, 1984-95 10. Flue-cured tobacco: Effective farm quotas, designations, and auction marketings, 1993-95 11. Burley tobacco: Farm marketings by State and across State line movement, 1994 crop 12. Maryland tobacco: U.S. supplies, disappearance, and prices, 1986-95 13. Fire-cured tobacco: U.S. supplies, disappearance, and prices, 1986-95 14. Dark air-cured tobacco: U.S. supplies, disappearance, and prices, 1986-95 15. Cigar tobacco: U.S. supplies, disappearance, and prices, 1986-95 16. Cash receipts from tobacco by States, 1991-94 17. Unmanufactured tobacco exports by types, to principal destinations, crop years 1993/94-1994/95 18. Imported foreign-grown cigarette leaf stocks, by quarters, 1985-95 19. Tobacco: U.S. Department of Agriculture price support loan and program operations, and other expenditures, 1993-94 20. Marketing quota referenda, by kinds of tobacco 21. Tobacco: No-net-cost assessment, by kind, 1986-95 22. U.S. cigarette advertising and promotional expenditures, 1989-93 Statistical Summary END-END-END