TOBACCO October 21, 1999 September 1999, ERS-TBS-244 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- TOBACCO is published three times a year (includes yearbook) by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. This release contains only the text of the report -- tables and graphics are not included. Subscriptions 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 # SUB-TBS-4031, $30/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- Contents Summary 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 List of Tables Principal Contributor Thomas Capehart (202) 694-5311 Editor Lindsay Mann Graphics and Table Design & Layout Wynnice Pointer-Napper Summary U.S. Tobacco Crop Down 11 Percent in 1999 With damage from hurricane Floyd still unknown, U.S. tobacco production is forecast at 1.31 billion pounds. The September 1, 1999, forecast is 11 percent lower than last year because of an 8-percent decline in acreage and lower yields. Flue-cured auctions are currently underway with about half of marketings completed through September 14th. Grower prices have been higher than a year earlier. The supply of U.S.-grown tobacco for 1999/2000 will likely change little as higher carryin is offset by decreased production. Carryin of U.S.-grown stocks (July 1 for flue- cured and cigar wrapper types, October 1 for all other types) is likely to increase about 4 percent from a year earlier due to lower cigarette production and exports. Total stocks of imported leaf fell 8 percent to 1.1 billion pounds on July 1, 1999, compared with July 1, 1998. Estimated U.S.-grown leaf use declined about 1 percent, to 1.45 billion pounds in 1998/99, from 1.51 billion pounds in 1997/98. The slide in U.S.-grown leaf use stems from the fall in cigarette production and declining leaf exports. Imported leaf use fell in 1998/99. The proportion of foreign- grown leaf used in cigarette production is expected to decrease slightly. U.S. leaf tobacco exports in 1998/99 (July-June) fell 3 percent, reaching 462 million pounds, declared weight. In 1998, U.S. cigarette production declined to 680 billion pieces, down 6 percent from a year ago. Cigarette consumption in 1998 fell 7 percent to 465 billion pieces. Per capita consumption declined from 2,422 cigarettes per person (18 years or older) to 2,320 cigarettes. Exports fell by 7 percent. Price increases by manufacturers and impending tax increases will dampen future cigarette consumption. The Federal excise tax will increase by 10 cents per pack of 20 cigarettes in January 2000 and an additional 5 cents in January 2002. Manufacturers increased wholesale cigarette prices by 18 cents per pack in August 1999, the second-highest increase after the 45-cent increase in November 1998. July 1999 retail prices for tobacco products averaged 9.8 percent above July 1998. As of September 1, the 1999 flue-cured crop was estimated at 700.5 million pounds, 17 percent below 1998. On-farm carryover this year was about 48.2 million pounds. In spite of hurricane damage, available leaf may still approach the effective quota, resulting in increased carryover. Beginning stocks on July 1, 1999, were 1.23 billion pounds, 2 percent below 1998. The total 1999 supply of U.S.-grown flue-cured was 1.93 billion pounds, 6 percent below 1998. Use may decline this season from 1998/99's 834.1 million pounds because of lower cigarette production and exports. Flue-cured leaf exports were unchanged from 1997/98, when they dipped to their lowest level since 1942. Flue-cured sales began July 2. By September 14, growers had sold 320.3 million pounds of leaf, with 17 percent of production going under loan. Quality fell slightly from last year. After 28 days of selling, flue-cured auction prices are 1.2 cents per pound higher than last season. Sales through September 14 averaged $1.67 per pound. Lower marketings in 1999 will depress cash receipts for the season. This year's burley crop is expected to be 8 percent below last season's because of reduced harvested acreage and lower yields. Due to continuing drought conditions, production and farm carryover will likely be substantially below the effective quota of 690 million pounds. Beginning stocks on October 1, 1999, are likely to be about 50 million pounds more than in 1998 due to reduced domestic use. Burley supplies on October 1 will be nearly unchanged as 1999 production falls and carryin advances. A larger crop is forecast to decline as of September 1 for dark air-cured tobacco while Maryland, dark fire-cured, and cigar tobacco production is forecast to decline. The national marketing quota for the 2000 flue-cured crop must be announced by December 15, 1999. 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, 2000, and allotments for other types will be announced by March 1, 2000. Price supports for 2000 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 previous 3 years compared with 1959. Tobacco Products Sharp Declines in Output, Domestic Consumption, and Exports for 1998 U.S. cigarette consumption in 1998 declined 3 percent, reaching 465 billion pieces. Taxable removals of 457.9 billion in 1998 fell by a similar proportion. Total U.S. cigarette production reached 679.7 billion pieces, down 5.5 percent from 1997. On a July-June basis, 1998/99 cigarette output is estimated at 665 billion pieces, compared with 714 billion a year earlier. Consumption will likely fall by 30 billion pieces to 440 billion during the same period. Wholesale cigarette prices increased five times in 1998, culminating with an increase of 45 cents per pack in November 1998, the largest in history. Wholesale prices were steady through late August 1999, when cigarette companies raised them by 18 cents per pack. As indicated by the Consumer Price Index (CPI) for cigarettes, retail prices in July 1999 were 32 percent higher than a year earlier. Prices in 1998 were 9.8 percent higher than 1997, using the CPI. New Hampshire and Maryland increased cigarette taxes in 1998. Maryland boosted its excise tax by 30 cents per pack. The Federal excise tax was unchanged at 24 cents per pack through 1999. In January 2000, however, the Federal tax will increase 10 cents a pack to 34, the first increase since 1991. Part of the August 1999 wholesale cigarette price increase may have been in anticipation of the Federal tax increase. A further increase of 5 cents per pack is scheduled for January 2002. Both tax increases were included in legislation President Clinton signed in August 1997. Per capita cigarette consumption continued to slide reflecting declines in total consumption and population increases. Per capita consumption was 2,233 cigarettes for the population 16 and over in 1998, compared with 2,331 in 1997. Based on a population 18 years and over, 1998 per capita consumption was 2,230 cigarettes. Discount brands accounted for 27.8 percent of cigarette sales in 1998, about the same as the previous year. Promotions, rebates, and discounts on premium brands have limited expansion of the discount segment. Discount sales' share for the first half of 1999 is unchanged from the previous year. Discount sales peaked in 1993 and have been trending down since. Cigarette exports in 1998 declined to 201.3 billion pieces from 217.0 billion in 1997. On a July-June basis, cigarette exports plummeted to 176.8 billion (1998/99) compared with 215.5 during 1997/98. July-June shipments to Japan fell slightly, but declines were sharper for shipments to the European Union (EU), Lebanon, Singapore, and Russia. January-June 1999 cigarette exports were 80.7 billion pieces compared with 105.2 billion during the same period last year. During the first 6 months of 1999, shipments to Japan were steady, but shipments to the EU, the former Soviet Union countries, and some Asian markets plummeted. Cigarette imports gained, reaching 4.3 billion, compared with 3.2 billion the previous year. Continuing Declines Forecast for 1999 Preliminary estimates for 1999 show cigarette production will continue 1998's slide. The massive price increase of November 1998 set the stage for reduced domestic consumption. Output of cigarettes is expected to decline 7 percent to 655 billion pieces, mirroring declines in consumption and exports. Exports for the first 6 months of 1999 declined 23 percent compared with 1998. July-June (1998/99) cigarette exports slipped 18 percent to 176.8 billion pieces, compared with 215.5 billion the previous year. Imports are projected to increase slightly, primarily due to increased grey market shipments. Grey market shipments are cigarettes legally exported from the United States, which are shipped back to the United States for sale. Although duties and taxes are paid for grey market cigarettes, they are still cheaper than cigarettes manufactured for sale in the United States because of their lower initial price. Federal Government Drops Criminal Investigation Against Tobacco Companies--Pursues Civil Suit On September 22, the Attorney General announced that the criminal investigation of the tobacco industry had ended and instead filed a wide-ranging civil suit against the largest tobacco companies. The suit alleges cigarette companies have conspired to defraud and mislead the public about the health effects of smoking. Seeking to recover expenses the Federal Government has incurred treating smoking-related diseases paid for by Medicare, military veterans, and Federal employees, the suit will also attempt to force the industry to finance education and other anti-smoking programs. Large Cigar Production and Consumption Gain Again in 1998 Consumption of large cigars (over 3 pounds per 1,000) in 1998 totaled 3.7 billion, 3 percent higher than 1997. Consumption growth slowed from 1997's gain of 16 percent. During 1998, U.S. cigar production advanced 18 percent to 2.8 billion, while imports declined to 507 million cigars, about 70 million less than 1997. Exports gained 56 percent to 158 million cigars. Consumption, which has increased steadily throughout much of the 1990's, is showing signs of leveling off at about 1.5 billion cigars above 1993, its lowest point. Consumption for July 1998-June 1999 is expected to decline slightly to 3.7 billion cigars after gaining 17 percent the previous year. Output of small cigars (those weighing less than 3 pounds per 1,000 cigars) advanced 16 percent in 1998 to 1.7 billion pieces. However, taxable removals, a proxy for consumption, only gained 3 percent. Exports declined, but higher tax- exempt removals during 1988 may portend increased exports in 1999. For the year ending June 1999, small cigar output is estimated up by 18 percent to 1.9 billion cigars. Taxable removals are estimated at 1.7 billion pieces, 7 percent higher than the 12-month period ending June 1998. Smoking Tobacco Output and Removals Reverse Long Decline Smoking tobacco output in 1998 was 3 percent above the previous year, reversing a decade of declines. Taxable removals (domestic invoices) were up 25 percent. The turnaround may be attributable to increased roll-your-own use resulting from higher cigarette prices. For the 12 months ending June 30, 1999, smoking tobacco production and taxable removals declined. Output advanced 19 percent and taxable removals advanced 17 percent. Smokeless Tobacco: Snuff Advances as Chewing Slips Further Snuff output gained 2 percent in 1998 due to continued increases in moist snuff output. Taxable removals (invoiced for domestic consumption) rose 3 percent. Some former smokers may be using moist snuff as an alternative to cigarettes. During July 1998-June 1999, snuff output and removals (invoiced for domestic consumption) were nearly steady. Chewing tobacco output fell 8 percent in 1998. Domestic invoices fell by 5 percent. Moist chewing and firm (plug) tobacco declined more than twist and leaf chewing tobacco. Leaf chewing tobacco accounted for 93 percent of total chewing tobacco production by weight. For July 1998- June 1999, chewing output fell by 8 percent and domestic invoices declined 5 percent. Chewing tobacco use peaked in 1995. U.S. Exports and Imports Leaf Trade July-June (1998/99) shipments of unmanufactured tobacco increased slightly, reaching 462 million pounds, about 12 million pounds higher than the previous year. Shipments to the Netherlands, Switzerland, and Turkey advanced while shipments to most Asian destinations fell. July-June value was $1.43 billion, less than $1 million below the previous year. Lower production in many tobacco-producing nations provided a more favorable market for U.S. exporters. However, during January-June 1999 unmanufactured tobacco exports fell 2 percent compared with the previous year, reaching 270 million pounds for the 6-month period. Shipments to the Netherlands surged but were offset by reduced shipments to Germany, Japan, and other countries. Marketing year (July-June) shipments of flue-cured declined by less than a million pounds. Shipments were steady to most major destinations. Burley exports for the marketing year to date (October-June) declined 11 percent. Total burley exports were 98 million pounds for the 9-month period. Shipments to the Netherlands surged, as with flue- cured, but those to Belgium, Germany, Japan, and Turkey all declined slightly. Burley exports for October1998-September 1999 are expected to be about the same as 1997/98. Demand for burley tends to be somewhat more robust than flue-cured because more is needed to produce American-blend cigarettes. World Cigarette Production and Trade The United States is the world's leading exporter of cigarettes and second in production only to China. In 1998, China produced 30 percent of the world's cigarettes. The United States, however, exported 21 percent of the cigarettes shipped worldwide. The United Kingdom and the Netherlands were the next largest exporters with quantity shipped at about half that of the United States. World cigarette output declined 3 percent to 5,497 billion pieces. China's cigarette production slid by 10 billion pieces. Production in Germany, the United Kingdom, and Brazil slid in 1998, while production in Russia increased slightly. Cigarette production in China has been trending downward since the early 1990's. China has imposed production quotas on manufacturers for nearly a decade to reduce stocks and limit consumption. Export Prospects The value of U.S. tobacco leaf and product exports reached $5.7 billion in 1998/99 (July-June). Cigarette volume decreased, accounting for most of the decline. After peaking in 1996, cigarette exports have declined. Cigarette and product export value is expected to decline further in the upcoming year as major importing nations continue to reduce consumption in the face of unsettled economies. Leaf export value was nearly steady in 1998/99, on slightly lower prices. Prospects for leaf exports have brightened as production in some major producing nations, especially Brazil, declines. Brazil vies with the United States as the largest exporter of leaf. However, in recent years, Brazil has seen its production affected by weather and export prospects dimmed by uncertain currency markets. However, volume in 1999 is expected to recover with a reduction in quality. Export prospects are also enhanced by favorable exchange rate fluctuations. Leaf Imports Unmanufactured tobacco imports fell 6 percent, reaching 357.9 million pounds during July 1998-June 1999. Lower cigarette production was the main cause of the decline. Imports from Brazil declined about 1 million pounds during the same period. Brazil still accounted for 24 percent of U.S. imports. Shipments from Zimbabwe nearly doubled, reaching 16 million pounds. However, shipments from Malawi slid nearly 20 million pounds. Shipments from Thailand also declined sharply. Imports from Turkey gained less than 1 million pounds. Total cigarette leaf shipments fell 21 million pounds. Oriental leaf shipments gained about 10 million pounds. Unstemmed flue-cured and stems gained about 4 and 2 million pounds, respectively. Other stemmed leaf (NSPF), mostly burley) declined by 30 percent to 81 million pounds. U.S. cigar and cigarette manufacturers use imported leaf in their blends. During 1998, cigarettes and other products, and semi-processed tobacco using cigarette leaf and stems, contained about 43.4 percent foreign tobacco, compared with 44.8 percent in 1997. U.S cigarette leaf imports for consumption (January-June) averaged $1.77 per pound, excluding ocean freight and duty, compared with $1.97 during the same period last year. Tobacco Trade Balance The value of U.S. tobacco leaf and product exports in 1998/99 (July-June) was $5.7 billion compared with $6.5 billion the previous year. Imports were valued at $1.2 billion, resulting in a tobacco trade balance of $4.5 billion. Unmanufactured tobacco export value totaled $1.4 billion, about the same as 1997/98 while product exports slipped nearly half a billion dollars to $4.3 billion. Unmanufactured tobacco imports were $372 million, about 23 percent below the previous year. Lower cigarette exports were the main factor in the balance of trade shift. U.S. Tobacco Leaf Situation and Outlook 1/ During the past marketing year, about 63 percent of U.S.- produced tobacco was used for domestic manufacture and the remainder exported. Estimated use of U.S. leaf totaled 1.45 billion pounds, 4 percent below 1997/98. 1/ All quantities in this section are farm-sales weight, unless otherwise indicated. Quotas declined substantially in 1999 as manufacturers lowered purchase intentions in response to declining cigarette consumption in the U.S. and lower export volume. Flue-cured basic quotas slipped 18 percent to 667.7 million pounds and burley quotas fell 29 percent to 450.6 million pounds. Effective quotas were reduced by 150 million pounds for flue-cured and by 177 million pounds for burley. For 1999, flue-cured acreage declined 53,000 acres from the previous year while burley acreage slid less than 2,000 acres. The September 1 production forecast for all tobacco is 1.31 billion pounds, 11 percent below last year. Efforts To Eliminate Unauthorized Pesticide Use Continue Pesticide use on U.S. tobacco has been restricted for many years. Furthermore, the Food Security Act of 1985 increased compliance standards. The act requires USDA to inspect domestic and imported flue-cured and burley tobacco to determine if pesticide residues exceed established limits. Before selling their tobacco, growers must certify to the Farm Service Agency (FSA) that any pesticides used in production have been approved by the Environmental Protection Agency for use on tobacco, and that they were applied in accordance with labeled directions. Growers lose price support if they falsify the certification, fail to certify, or refuse to provide samples for testing. Growers who are found filing a false report will be required to refund any price support advances received on the current crop. Violators are also subject to a $10,000 fine, 5 years imprisonment, or both. To ensure the integrity of U.S.-grown tobacco, efforts to eliminate unauthorized pesticides include (1) tests of samples taken from auction warehouse floors, (2) efforts to educate growers about nonapproved pesticides, and (3) intensified monitoring of pesticide use and penalties for misuse. Contract Tobacco Production Prior to the 1999 marketing season, Philip Morris proposed a system of contract purchases for leaf tobacco. Philip Morris presented the plan as a way to ensure the availability of U.S.-grown leaf of the type and quality it requires to manufacture cigarettes. It offered to buy all the tobacco a grower could produce for 3 years at a predetermined price based on stalk position, grade, and quality under a 3-year rolling agreement. Philip Morris would communicate with the grower regarding quality and ways to increase farm productivity. Included was a commitment to enter into contracts with large and small growers in all flue-cured and burley production areas. Warehouse owners would be compensated for receiving and processing tobacco. The proposal was dropped after growers indicated a strong preference for the current auction marketing system. Given trends in other commodities, further consideration of contracting arrangements will be likely in the future. U.S. Industry Buys 476 Million Pounds of Flue-Cured Tobacco During 1998/99 Marketing Year U.S. cigarette manufacturers purchased 476.3 million pounds (farm sales weight) of flue-cured tobacco during the July 1998-June 1999 marketing year, 30.1 million pounds less than the previous year. Actual purchases were 105 percent of manufacturers' purchase intentions of 454.0 million pounds. Legislation requires each major domestic cigarette manufacturer to purchase an amount equal to at least 90 percent of their stated purchase intentions to avoid the assessment of a penalty. Manufacturers purchased 454.6 million pounds of flue-cured tobacco during the 1998/99 marketing year. Marketing Quota and Price Support in 2000 By December 15, 2000, USDA will announce the flue-cured poundage quota and matching acreage allotment for 2000. Individual farm quotas and acreage allotments for the next year will reflect this year's overmarketings and undermarketings. Despite Hurricane Floyd, marketings this year may still approach the effective quota. By February 1, 2000, USDA will announce the 2000 burley poundage quota, and by March 1, it will announce the 2000 acreage allotments for other kinds of tobacco. Shortly after the announcements, growers of Virginia fire-cured and Kentucky-Tennessee fire-cured (types 21 and 22-23), and Kentucky-Tennessee dark air-cured (types 35-36) will vote in separate referenda for or against marketing quotas on their next three crops (2000, 2001, 2002). Growers of flue-cured tobacco approved marketing quotas for the 1998, 1999, and 2000 marketing years in a referendum held January 12-15, 1998. In a referendum held February 23- 27, 1998, burley growers voted to continue marketing quotas on a poundage basis for the 1998, 1999, and 2000 marketing years. Growers of Maryland, Pennsylvania filler, and Connecticut binder (types 51-52) have no price supports because they turned down marketing quotas in referenda held in March 1998. Growers of Wisconsin and Ohio filler and binder voted in March 1999 to accept quotas for the next three crops (1999, 2000, and 2001). Growers of Virginia sun-cured (type 37) voted on March 23-26, 1998, to approve quotas for the 1998, 1999, and 2000 crop years. The quota law provides that flue-cured and burley quotas equal the sum of buying intentions of domestic cigarette manufacturers, the average of unmanufactured tobacco exports, and adjustments of loan association inventories needed to reach the reserve stock level. The Secretary of Agriculture may adjust this three-part total up to 3 percent. Support levels for 1999 average $1.632 per pound for flue- cured and $1.789 for burley. Grade loan rates for flue-cured range from $1.14 to $1.85 per pound. And for burley, they range from $1.09 per pound to $1.98. Price supports for kinds other than flue-cured and burley average from $1.212 per pound to $1.681 in 1999. For 2000, the flue-cured and burley price support will be the level for 1999 adjusted by changes in the 5-year moving average of prices (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 costs not directly related to tobacco production. The Secretary of Agriculture can set the price support between 65 and 100 percent of the calculated increase or decrease. For other kinds, changes in price support will continue to be based on the average of the parity index during the 3 previous years compared with 1959. However, loan associations can request lower support levels if market conditions warrant. Estimated flue-cured production costs for 1999 will be used by FSA in determining the cost component for the 2000 support level. The combined effect of price and cost changes will likely result in a slight increase in the flue- cured support level in 2000. Growers of Maryland, Pennsylvania filler, and Connecticut binder tobacco turned down marketing quotas in their last referenda (1998), so government price support is not available for their 2000 crop. Pennsylvania filler has never had marketing quotas. For Maryland, quotas last applied to the 1965 crop, and Connecticut binder quotas last applied to the 1983 crop. Shade-grown wrapper tobacco (type 61) is not covered by marketing quota legislation. Agricultural Act of 1938 Changed To Allow Release Of Tobacco Producer Information Public Law 106-47, signed by President Clinton on August 13, 1999, amends the Agricultural Act of 1938 to allow USDA to release otherwise confidential tobacco production and producer marketing information to the State organizations overseeing distribution of a $5.15 billion farm trust fund. The fund was set up by the four major cigarette companies for the benefit of persons involved in growing cigarette tobaccos (flue-cured, burley, and Maryland kinds). Flue-Cured Due to Hurricane Floyd, flue-cured tobacco sales were canceled for September 15 through 23. After the sixth week of sales, about 48 percent (348.5 million pounds) of the 1999 crop had been sold based on the effective quota. Loan receipts for the 1999 season through September 14 reached 55.5 million pounds or 17 percent of the estimated crop. At the same point last year, 62.1 million pounds, or 15.6 percent, had been placed under loan. Damage from Hurricane Floyd has not been adequately assessed at the time of publication. Most damage will likely stem from flooding in warehouses or barns or from interrupted power supplies to curing barns. Flue-cured quality in 1999 suffered due to hot, dry weather conditions in much of the production area from the time of transplanting until early June. In addition, a third of the Georgia crop has been damaged by the tomato spotted wilt virus. Through September 14, auction prices averaged $ 1.6659 per pound, 1.2 cents above the average for the same number of sales days last season. To receive price support in 1999, flue-cured tobacco growers must: o Certify pesticide use and absence of nesting (hiding lower quality leaf or foreign matter in a sheet or bale of tobacco). o Designate one or more warehouses within 100 miles of their county seat where they plan to sell their crop. o Contribute to a no-net-cost account and a budget deficit marketing assessment that totals 1 cent for the producer and 1 cent for the purchaser for each pound of 1999- crop flue-cured tobacco that is marketed. Under quota legislation, growers receive price support on marketings up to 103 percent of their farm poundage quotas. However, marketings above the poundage quota are deducted from the following year's quotas. For marketings above 103 percent, growers must pay a penalty of $1.32 a pound (75 percent of the average market price for the preceding year). Based on the September 1 USDA estimate, 1999 production will total about 700 million pounds. Growers carried over 48.2 million pounds of the 1998 crop. The effective quota is 671.5 million pounds, so carryover into 2000 could be 60 million pounds. Marketings are expected to total about 690 million pounds. Since 1988, lease and transfer of flue- cured quotas has applied under disaster conditions only. Disappearance Lower in 1998/99 Last season, disappearance of flue-cured tobacco totaled 834 million pounds, about 30 million below the previous season. Export disappearance remained about the same, but domestic disappearance declined by 8 percent due to lower cigarette production. Greater use of U.S. leaf may result in little change in domestic use for 1999/2000, in spite of further declines in cigarette production. Flue-cured exports were nearly the same in 1998/99 as the previous season. Lower world production in 1998 helped maintain U.S. export levels. Declines in shipments to some Asian nations were offset by increased shipments to the European Union (EU). Higher flue-cured production in 1999 will likely lead to more competition for U.S. leaf and lower exports in 2000, especially as the Brazilian crop rebounds from a poor year in 1998. U.S. leaf exports continue to be affected by high U.S. prices, stagnant or declining cigarette consumption in major importing countries, and reduced leaf use per cigarette. Flue-Cured Supplies Decline Smaller marketings and lower beginning stocks reduced flue- cured supplies for 1999. Flue-cured acreage for harvest fell 14 percent compared with the previous season, and little change in yields resulted in a similar decline in production. Yields were down in Georgia and Virginia and increased in other States. Less than 10 percent of 1999 marketings were produced in 1998. The domestic flue-cured carryover held by manufacturers and dealers on July 1, 1999, totaled 940 million pounds, 6 percent lower than a year earlier. Flue-cured supply (indicated marketings plus carryover) was estimated at about 2.5 times prospective use, close to the traditional benchmark level. Marketings this year are likely to be less than use, and stocks will likely fall. After loan takings of 82 million pounds in 1998, it appears loan takings this season could approach 100 million pounds. Through September 14, loan takings have accounted for 17 percent of net sales. Loan stocks were 2 percent lower than the previous season when the marketing season began. Unsold loan stocks on January 1, 2000, will likely exceed 300 million pounds. Use of foreign-grown flue-cured leaf and stems declined in 1998/99. Stocks of foreign-grown flue-cured were 16 percent lower on July 1, 1999, than a year earlier. Stocks declined because cigarette manufacturers continued using foreign leaf for cigarette production and reduced cigarette leaf imports. Burley Total burley tobacco use is likely to fall in 1998/99 (October-September marketing year). About 63 percent of the crop will be used for domestic cigarette production, 34 percent exported, and the remainder used for other products, primarily smoking tobacco. Disappearance Falls Domestic use of U.S. burley in 1998/99 is expected to slide about 8 percent from 1997/98 to about 350 million pounds, much less than the previous year's decline. Lower cigarette output and reduced leaf exports contributed to the decrease. Carryover of U.S.-grown burley is expected to rise about 6 percent because marketings will exceed use. For the first 9 months of 1998/99, burley exports totaled 150.0 million pounds, farm sales weight, about 4 percent above a year earlier. For the 1998/99 marketing year, exports should total about 180 million pounds, short of the previous year's record 209.5 million pounds. Production Down for 1999/2000. The September 1 forecast of the 1999 U.S. burley crop is 536.1 million pounds, about 9 percent less than last year. Quota cuts reduced planted acres. Moisture was adequate during the spring but extremely dry during late July and August, resulting in lower yields. Yields for the 1999 crop are expected to decrease slightly from last season. Marketings in 1999/2000 are forecast at about 536 million pounds, compared with 589 million pounds a year earlier. The effective quota of 690.1 million pounds will likely be underproduced by less than one-fourth, compared with a shortfall of nearly 40 percent last season. Since 1985, marketings have consistently fallen short of the effective quota, especially in Tennessee. Beginning in 1991, the quota law was changed to permit greater use of burley quota, including belt-wide sales of burley quotas within counties, and lease and transfer of quotas across county lines in Tennessee. The projected marketings, combined with lower carryover, are likely to leave supplies unchanged. This is about 2.7 times the expected disappearance, somewhat higher than usual. U.S. auction sales usually begin in late November. The 1998 crop sold for an average of $1.903 per pound, 1.8 cent below the previous marketing year's $1.885. In 1999, price supports will average $1.789 per pound for all burley grades, a gain of 1.1 cent per pound. There is no budget deficit assessment in 1999. Southern Maryland Southern Maryland tobacco (type 32), a light air-cured tobacco, goes almost entirely into cigarette production. About 30 percent of the crop was exported in 1998. Disappearance Falls Maryland tobacco disappearance totaled 15.3 million pounds during October 1998-June 1999, 4.4 million pounds above a year earlier. Total use in 1998/99 is expected to increase compared with 1997/98, with less than half exported. Prices of 1998 Maryland tobacco increased, but much tobacco was not purchased, especially in Pennsylvania. By January 1, 2000, carryover should increase from last year's 20.6 million pounds. Exports of Maryland tobacco slid nearly 50 percent to 2.5 million pounds during the first 9 months of the marketing year. Production Down in 1999 The 1999 crop of Maryland tobacco is estimated at 13.7 million pounds, 11 percent below 1998. Production is expected to decline in both Maryland and Pennsylvania with the greater shortfall in Pennsylvania. The 1981 farm act prohibits growing and marketing Maryland tobacco in quota areas. However, quotas are not applicable to Pennsylvania seedleaf tobacco, so with seedleaf's usually lower prices, some growers have changed to Maryland production. About 36 percent of total Maryland production will be grown in Pennsylvania in 1999. Fire-Cured Fire-cured tobacco is mainly used in making snuff and plug and twist chewing tobacco. About half the crop is usually exported. During the last four seasons, production and use have rebounded. Strong demand has boosted prices. Disappearance Slides Disappearance of Kentucky-Tennessee fire-cured (types 22-23) during the first 9 months of the 1998/99 marketing year (beginning October 1, 1998) was unchanged at 29.9 million pounds. Higher domestic use caused most of the gain. Output of snuff, the major domestic use of fire-cured, has been increasing and exports fell. Total disappearance of types 22-23 for the entire marketing year (October 1998- September 1999) is estimated at 40 million pounds, about the same as 1997. Carryover is expected to decline slightly. In 1999, Kentucky-Tennessee fire-cured production is expected to slide due to fewer planted acres and lower yields. Disappearance of Virginia fire-cured (type 21) is projected to increase in 1998/99 partly because of higher snuff production. Production of Virginia fire-cured (type 21) in 1999 is expected to increase, reaching 2.5 million pounds. Kentucky-Tennessee tobacco (types 22-23) exports reached 10.4 million pounds (farm sales weight) during the first 9 months of the 1998/99 marketing year, slightly below last season. Export demand for Virginia fire-cured has been lower this season. Dark Air-Cured Dark air-cured (types 35-37) is used in plug and twist chewing tobacco, snuff, and to some extent, smoking tobacco. Production and use have declined by more than half over the last two decades. Exports usually account for 10 to 20 percent of total use. Disappearance Falls Disappearance of dark air-cured (types 35-36) tobacco totaled 6.0 million pounds during October-June, 36 percent below 1998/99. Advances in domestic use more than offset declines in exports as dark air-cured leaf is used in snuff production. By the end of the 1998/99 marketing season, total disappearance of types 35-36 is expected to increase, perhaps reaching 11.6 million pounds. Higher marketings are expected to increase supplies for 1999. Disappearance of sun-cured tobacco (type 37) is about the same as last year at 100,000 pounds. Production Gains The September 1 estimate of 1999/2000 dark air-cured (types 35-37) tobacco production is 10.4 million pounds, 7 percent above last season. Next season's supplies represent about 2.8 times this season's estimated use. Cigar Tobacco Cigar leaf (types 41-61) is classified according to its traditional use: filler, binder, and wrapper. Most cigar wrapper is exported, but loose leaf chewing tobacco takes most of the filler and binder. Exports of filler and binder are negligible. Cigar Leaf Use Down for 1998/99 During the first 9 months of the marketing year for filler and binder types and the entire marketing year for wrapper, total cigar leaf disappearance declined 7 percent. Disappearance for all types declined except Connecticut Valley Broadleaf binder and wrapper. Cigar leaf disappearance for the entire 1998/99 marketing year (October- September for filler and binder, July-June for wrapper) is expected to fall below 1997/98's 25.1 million pounds to about 23.4 million pounds. For 1998/99, filler supplies are down, but binder and wrapper supplies are up. As of July 1, 1999, no cigar filler or binder was held by cooperatives. Supplies for 1999 Expected To Fall Cigar tobacco production in 1999/2000 is expected to fall to 15.6 million pounds from 1998/99's 19.9 million pounds. Lower production and carryin will result in reduced supplies. During July 1998-June 1999, imports of cigar leaf and cigar scrap both rose. Total cigar leaf imports declined 29 percent, after gaining the previous year. About 23.3 million pounds were used domestically for cigar and loose leaf chewing tobacco production. For 1998/99, imports accounted for about 80 percent of total domestic use, slightly less than a year earlier. Filler For the first 9 months of 1998/99 (October-June), disappearance of U.S. cigar filler tobacco (types 41-46) totaled 6.1 million pounds, 6 percent below the previous year. After gaining in 1997/98, disappearance is expected to reach 10.4 million pounds for the entire 1998/99 marketing year (October-September), a drop of 600,000 pounds. As of September 1, the 1999/2000 Pennsylvania filler crop was indicated at 5.6 million pounds, about 40 percent less than 1998. The new crop, plus estimated carryover, will provide a supply that is about 4 million pounds below last season. Production of Ohio filler has ceased because of high no-net-cost assessments. Puerto Rican filler is no longer included in the program, as production has ended. Binder Cigar binder disappearance (Wisconsin and Connecticut) is expected to decline by 20 percent in 1998/99 as supply falls. Production in 1998 declined and carryin was lower. For Wisconsin binder tobacco (types 54-55), loose leaf chewing is the major outlet. Output of loose leaf chewing, the major use for binder tobacco, is expected to fall 4 percent in 1999. Total binder production is expected to fall to 6.9 million pounds in 1999. Disappearance of Wisconsin binder tobacco will again exceed production, resulting in lower beginning stocks in 1999/2000. Production of Connecticut Valley binder (type 51) increased by 16 percent in 1998/99. Disappearance is expected to decrease in 1998/99 due to reduced cigar production. Disappearance of Connecticut Valley binder is expected to be short of production, resulting in higher beginning stocks in 1999/2000. Wisconsin binder production is expected to fall by 26 percent to 2.8 million pounds in 1999/2000. Acreage planted was reduced and yields increased. Carryover is expected to continue to decline as use exceeds production. As of September 1, 1999, Wisconsin binder production is projected at 2.8 million pounds, down 34 percent from 1998. Wrapper For the July 1998-June 1999 marketing year, shade-grown cigar wrapper (type 61) disappearance increased again, reaching 3.2 million pounds, compared with 2.3 million pounds the previous season. Production in 1998 was unchanged at 2.4 million pounds. Much of the shade-grown cigar wrapper is shipped overseas for processing, either to foreign buyers or to subsidiaries of U.S. firms in the Dominican Republic. Acreage of Connecticut Valley wrapper is expected to be up in 1999 with production estimated at 3.0 million pounds, 541,000 pounds higher than the previous year due to higher acreage and better yields. Supply will likely decrease in 1999 due to higher disappearance. Disappearance is expected to continue the upward trend due to strong demand for premium cigars. END_OF_FILE