TOBACCO--SUMMARY September 16, 1996 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. ----------------------------------------------------------------------------- Hurricane Fran Disrupts Flue-Cured Harvest On September 1, prior to Hurricane Fran, U.S. tobacco production was forecast up 25 percent from the previous season because of higher acreage and increased yields. The effect of Hurricane Fran has yet to be determined, but flue-cured harvesting and curing were disrupted. Initial reports indicate that in some areas of the Coastal Plain of North Carolina, South Carolina, and parts of Virginia, damage to unharvested tobacco in the field was total. Furthermore, extensive power outages caused spoilage of tobacco in the curing barns after the storm passed. Marketings in 1996/97 would likely have increased 9 percent if not for the hurricane. The total U.S.-grown tobacco supply for 1996/97 will likely decline. Carryin stocks (July 1 for flue-cured and cigar wrapper types, October 1 for all other types) are likely to decline 5 percent from a year earlier, but considering hurricane damage, gains in production may not offset the carryin reduction. Total stocks of imported leaf advanced 7 percent to 1.12 billion pounds on July 1, 1996, compared with July 1, 1995. Prior to Hurricane Fran, flue-cured tobacco output was expected to gain 20 percent. However, marketings are expected to decline despite higher quotas because of the hurricane. Auction prices are approaching those of 1995, and the season average will likely be above a year earlier. Less farm carryover tobacco being marketed meant a greater proportion of lower priced, lower stalk tobacco being marketed early in the season. U.S.-grown leaf use declined about 6 percent in 1995/96 from 1994/95 s 1.63 billion pounds. U.S.-grown leaf use may increase in 1996/97 as demand for cigarette production is strong. The proportion of foreign-grown leaf used in cigarette production is also expected to increase. The tariff rate quota (TRQ) has been in effect 1 year as of September 12, 1996. The TRQ covers flue-cured, burley, and certain other imported tobaccos. Oriental and cigar leaf are not covered by the TRQ. During the first year, the TRQ was 150,450 metric tons, about 330 million pounds, and was less constraining than the former domestic content provisions. Since the TRQ became effective, imports (arrivals) of tobacco leaf and stems have increased. U.S. leaf tobacco exports in 1995/96 increased 9 percent, reaching 472 million pounds, declared weight. Continued tight world supplies and U.S. leaf quality have benefited U.S. exports in spite of higher prices. In 1996, U.S. cigarette production is expected to increase to a record 760 billion pieces. Steady domestic consumption will be augmented by higher exports. Lower retail prices since 1993 have curbed the decline in cigarette consumption. Per capita consumption decreased slightly with steady total consumption as population rose. Cigarette exports are expected to drive increasing production in the coming year. As of September 1, the 1996 flue-cured crop was estimated at 898 million pounds, up 20 percent from 1995. The effects of Hurricane Fran on harvesting and curing are as yet undetermined. On-farm carryover this year was quite low and little 1995-crop tobacco was brought to market. Beginning stocks on July 1 were 1.17 billion pounds, only 1 percent lower than 1995. The total supply of U.S.-grown flue-cured was estimated at 2.06 billion pounds, up slightly from 1995 based on pre-hurricane conditions. Total use this season may do well to equal 1995/96 s 875 million pounds because of a potentially smaller supply. Flue-cured sales began July 23, 5 days later than last year. By September 12, growers had sold more than 50 percent of anticipated marketings, with only .4 percent going under loan. Sales through September 12 averaged $1.77 per pound, about the same as last year. Cash receipts are uncertain in 1996/97 because of the effect of the hurricane on marketings. This year s burley crop is expected to be 36 percent above the 1995 crop due to higher yields and fewer production problems. Beginning stocks in 1996 are expected to be the lowest since 1992. Supplies in 1996/97 should be up due to larger production, in spite of lower beginning stocks. Larger crops are forecast for Maryland, dark fire-cured, and dark air-cured tobaccos; only cigar tobacco production is expected to decline. The national marketing quota for the 1997 flue-cured crop must be announced by December 15, 1996. 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, 1997, and allotments for other types will be announced by March 1, 1997. Price supports for 1997 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: 1994, 1995, and Preliminary 1996" and "U.S. Tobacco Import Update." Printed copies of the Tobacco Situation and Outlook will be available in about a week. For more information contact Tom Capehart (202) 219-0890. The text of the report will also be available electronically. For details, call (202) 219-0515. END-OF-FILE