TOBACCO -- SUMMARY September 27, 1999 September 1999, ERS-TBS-244 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete text of the report will be available electronically about 1 week following this summary release. --------------------------------------------------------------------------- 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 27. 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. Printed copies of the Tobacco Situation and Outlook Report will be available in about 2 weeks. For more information, contact Tom Capehart (202) 694-5311. The complete report will also be available on the ERS website at www.econ.ag.gov. END_OF_FILE