TOBACCO--SUMMARY September 14, 1995 (Rereleased September 19, 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. ----------------------------------------------------------------------------- NOTE: This summary was released on September 14 as TOBACCO, which is the title reserved for the full text of the Tobacco report. It is rereleased here to correct this mistake. ERS apologizes for the error. ----------------------------------------------------------------------------- U.S. Tobacco Production Down U.S. tobacco production in crop year 1995/96 is forecast down about 15 percent because of lower yields. Yet, because of large flue-cured and burley farm carryover and higher flue-cured quotas, marketings in 1995/96 may increase about 3 percent. The U.S.-grown tobacco supply for 1995/96 is forecast to fall because carryin stocks (July 1 for flue-cured and cigar wrapper types, and October 1 for all other types), are likely to decline 5 percent from a year earlier to 2.33 billion pounds. In contrast, stocks of imported leaf rose 2 percent to 1.05 billion pounds. Flue-cured tobacco output is down this year. However, with larger quotas and a record amount of 1994-crop leaf carried over on farms, marketings will increase in 1995. Prices are averaging higher because of poor quality crops in some competitor countries, legislation that required increased use of U.S.-grown leaf, larger cigarette production, increased bulk smoking exports, less uncertainty about Federal excise tax levels, and more higher value upper stalk marketings. U.S.-grown leaf use rose about 12 percent during 1994/95 from 1993/94's 1.44 billion pounds. U.S.-grown leaf use may decline in 1995/96, even though cigarette production is expected to increase. The proportion of foreign-grown leaf used in cigarettes may increase. President Clinton proclaimed a tariff rate quota (TRQ), effective September 13, for certain imported tobaccos, primarily flue-cured and burley. The annual quota replaces domestic content provisions that had been in effect since January 1, 1994. The TRQ of 150,000 metric tons, about 330 million pounds, is less constraining than the domestic content provisions. The proclamation also eliminated duties on Oriental and cigar wrapper, binder, and filler tobacco. U.S. leaf tobacco exports in 1995/96 (July/June), are projected to remain near last season's 433 million pounds. Although U.S. prices are somewhat higher than some major competitors', tighter world supplies will favor U.S. exports. In 1995, U.S. cigarette production may increase from the high level of a year earlier. Higher cigarette exports will more than offset slightly lower domestic cigarette consumption. U.S. consumption may fall a little due to smoking prohibitions and restrictions, health concerns, and declining acceptability of smoking. Lower retail cigarette prices during the last 2 years have slowed the rate of decline from the 1983 to 1993 period. The per capita smoking rate (persons 18 and older) will decline from last year's 2,514 cigarettes. Cigarette exports will likely increase and set a new record for the second consecutive year. As of early September, the 1995 flue-cured crop was estimated at 746 million pounds, down 14 percent from last year. However, about 140 million pounds of 1994-crop carryover leaf will be sold in 1995. Beginning stocks on July 1 were down 8 percent. The total supply of U.S.-grown flue-cured tobacco is 2.07 billion pounds, about 2 percent below last year. Total use this season may decline from 1994/95's 915 million pounds, with a decline in both domestic use and exports. Flue-cured sales began July 18. By September 13, growers had sold about 65 percent of anticipated marketings, with less than 1 percent going under loan. Sales through September 13 averaged $1.78 per pound, about 14 cents above the previous year. With larger marketings, cash receipts will rise from a year earlier. This year's burley crop is expected to be 17 percent below the 1994 crop due to lower yields. Because 1994 marketings were short of use, ending stocks of U.S.-grown burley tobacco on September 30 are projected 3 percent lower than last year. The 1995/96 supply will be down about 3 percent. A smaller crop is forecast for dark fire-cured, dark air-cured, and cigar tobaccos, but a larger crop is forecast for Maryland tobacco. The national marketing quota for the 1996 flue-cured crop must be announced by December 15, 1995. Individual farm quotas and allotments will reflect undermarketings and overmarketings for the current crop. For burley, the marketing quota will be announced by February 1, 1996, and allotments for other types by March 1, 1996. Price supports for 1996 flue-cured and burley tobaccos will be based on a 5-year moving average of market prices and changes in costs of production. For other types, changes in support will continue to be based on the average of the parity index during the 3 previous years compared with 1959. This issue of the Tobacco Situation and Outlook contains two special articles "Costs of Producing and Selling Flue-cured Tobacco: 1993, 1994, and Preliminary 1995" and "U.S. Tobacco Import Update." 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) 720-9045. END-END-END