TOBACCO May 11, 2000 April 2000, ERS-TBS-246 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. --------------------------------------------------------------------------- U.S. smokers consumed an estimated 435 billion cigarettes in 1999, 6.5 percent less than a year earlier. Price increases, higher State taxes, and expanding regulations are the main factors in declining cigarette use. Consumption per person based on a population 18 years and older declined 7.5 percent. Consumption is expected to decline at a slower rate in 2000. Taxable removals in 1999 slipped to about 433 billion pieces. Exports dropped from 201 billion pieces in 1998 to 151 pieces, the lowest since 1974. Increases in cigar consumption slowed to an estimated 2 percent in 1999, reaching 3.7 billion cigars. Snuff consumption rose in 1999. Smoking tobacco sales are up due to increased roll-your-own cigarette consumption. Use of other tobacco products, mostly chewing tobacco, is expected to continue declining. As of March 1, U.S. tobacco growers indicated they intend to harvest 500,700 acres of tobacco in 2000, 22 percent less than last year. Reacting to an 18-percent decrease in the 2000 effective quota (similar to last season), flue-cured growers indicated they would harvest 253,900 acres, down 16 percent from last season. Burley growers are planning to harvest 207,700 acres, about 31 percent less than last season. Assuming average yields, 2000 production could total 1.0 billion pounds (farm-sales weight), about 300 million pounds less than in 1999. Lower production and smaller beginning stocks anticipated for the 2000/01 marketing year will result in decreased supplies. Off-farm stocks of U.S.-grown leaf on January 1, 2000, were 6 percent below a year earlier, while stocks of foreign-grown leaf were down 8 percent from a year earlier. Price supports for the 2000 crop are up 0.8 cent per pound for flue-cured and 1.6 cents for burley. Price supports for other kinds under quotas are unchanged. Before the marketing season begins, the United States Department of Agriculture (USDA) sets grade loan rates for the various kinds of tobacco receiving support. The tobacco balance of trade--the value of manufactured and unmanufactured exports less imports--fell 20 percent in 1999. The value of U.S. leaf and product exports fell more than imports. Leaf imports (arrivals) plunged 8 percent to $721 million from $780 million. Imported products were $403 million, compared with $428 million in 1998. Exports of unmanufactured tobacco and tobacco products were down 18 percent at $5.2 billion in calendar 1999. The total tobacco balance of trade surplus fell from $5.1 billion to $4.1 billion. Total disappearance of U.S.-grown flue-cured tobacco in the current marketing year (1999/2000) is likely to be less than last year's 834 million pounds. Both domestic use and exports are expected to decline. Disappearance in 1999/2000 will likely exceed marketings, so carryover stocks at the beginning of 2000/01 will decline. Production in 2000 will likely fall from 1999's 658 million pounds due to an even lower effective quota. Disappearance of U.S.-grown burley tobacco in 1999/2000 is expected to decline from 1998/99's 520 million pounds. Burley auction sales in 1999/2000 totaled 549.7 million pounds, about 40 million less than last season. Production in 1999 will exceed total use, and 2000 carryin is expected to increase. USDA set this season's burley marketing quota at 247 million pounds, 206 million pounds below last season. The 2000 effective quota, which reflects last year's over- and under-marketings, totals about 367 million pounds, 323 million pounds below last year. The 2000 acreage allotments increased for Kentucky-Tennessee firecured and dark air-cured types, declined for Virginia fire-cured and cigar types, and were unchanged for Virginia sun-cured tobacco. Producers who did not plant tobacco in recent years may have had their individual allotments adjusted downward. Tobacco Products Domestic Cigarette Consumption Falls 6 Percent, Exports Continue Decline U.S. smokers consumed an estimated 435 billion cigarettes in 1999, 6.5 percent less than a year earlier. Price increases, higher State taxes, and expanding regulations are the main factors in declining cigarette use. Consumption per person based on a population 18 years and older slipped to 174 cigarettes. Consumption is expected to decline at a slower rate in 2000. Taxable removals in 1999 slipped to about 433 billion pieces. Exports dropped from 201 billion pieces in 1998 to 151 billion pieces in 1999. Cigarette output fell 7 percent to an estimated 635 billion pieces, the lowest since 1974. Per capita consumption continued to decline, sliding to 2,146 pieces (18 and over population), compared with 2,320 pieces for the same group in 1998. Premium brand cigarettes gained market share as discount brands' share of the market slipped from 27.8 percent in 1998 to 26.6 percent in 1999. Recent prices have been partially offset by aggressive promotions and discounts, mitigating consumption declines in the premium segment of the market. In January 2000, the Federal cigarette excise tax increased by 10 cents per pack, or $5.00 per thousand, making the current per-pack tax 34 cents. Another increase of 5 cents per pack is scheduled for 2002. Federal cigarette excise tax collections for calendar year 1998 totaled $5.6 billion, down from $5.8 billion in 1997, reflecting lower consumption and unchanged tax rates. State tax collections for calendar 1998 exceeded Federal, reaching nearly $8.0 billion, up from $7.6 billion in 1997. State excise taxes have risen dramatically in the past 5 years due to the number of States that increased taxes. Sixteen States currently impose taxes of 50 cents or more per pack. The average State tax (weighted by sales) is 39.1 cents. Calendar 1999 exports totaled 151 billion cigarettes, down from 201 billion in 1998. Shipments peaked in 1996 after rising for nearly a decade. In 1999, the value of U.S. cigarette shipments declined from $4.2 billion to $3.2 billion. Shipments to the European Union (EU-15) fell 60 percent. Shipments to Japan, the second largest export market, were nearly steady, and overall shipments to Asia were virtually unchanged as well. Shipments to the New Independent States continued their sharp decline, but are offset slightly by increased shipments to Azerbaijan, especially in 1998. Cigarette production in the New Independent States has increased, reducing demand for U.S. cigarettes. Cigarette export volume losses of 7 percent were only partially offset by slightly higher unit values, resulting in a total 1999 cigarette export value of $3,232 million, compared with $4,166 million in 1998. The annual Economic Research Service (ERS) survey of manufacturers indicated that filter-tip cigarette production rose about one-half percent to 98.7 percent of total output in 1999, from 98.3 percent in 1998. The change was concentrated in the 100 millimeter filter-tip size, which made up about 36 percent of 1999 output (table 3). Cigarette Prices Increase Manufacturers increased wholesale cigarette prices once in 1999. In August, the wholesale price rose 18 cents per pack. In January 2000, another price increase of 13 cents per pack occurred. These price increases boosted the wholesale price (including Federal excise tax) by 18 percent. The wholesale price of cigarettes (including Federal excise tax) at the end of January 2000 was $117.70 per 1,000 cigarettes compared with $97.20 per 1,000 at the beginning of 1999. Grey Market Takes Off in 1999 During 1998/99, the large differential between the manufacturer's wholesale price and the export price of U.S. cigarettes has created an opportunity for arbitrage. Independent traders export U.S. manufactured cigarettes and then re-import them into the United States, paying import duties and excise taxes. Because cigarettes sold for export are priced so low, it is possible to import the cigarettes into the United States in this fashion and make a profit, while selling them at a lower price than cigarettes produced for the domestic market. In 1999, grey market imports were estimated at 3-4.5 billion pieces, less than 1 percent of total consumption. Legislation prohibiting grey-market sales became effective in January 2000, and grey market sales are expected to cease. Cigar, Snuff, and Smoking Tobacco Use Advance Estimated consumption of large cigars (including cigarillos) increased once again in 1999, gaining 2 percent, but less than the gain in 1998. U.S. smokers consumed about 3.7 billion large cigars. Production of small cigars (those using less than 3 pounds of tobacco per 1,000 cigars) rose sharply, to an estimated 2,185 million, 28 percent above 1998. Snuff consumption rose in 1999. Output of snuff advanced 2 percent to 67.0 million pounds. During the past 5 years, snuff consumption advances have averaged 2 percent each year. Output of chewing tobacco fell 5 percent in 1999 as did taxable removals. Smoking tobacco output advanced for the second straight year, reaching 14.7 million pounds, 18 percent over 1998 and 29 percent over record-low levels in 1997. This is the first time since 1950 that smoking tobacco output has risen for two consecutive years. Taxable removals of smoking tobacco reached 13.4 million pounds, 12 percent above 1998. Much of the gain may be due to the growing roll-your-own (RYO) segment. Higher retail prices and taxes have encouraged some consumers to roll their own cigarettes. Cut leaf, the type mostly used in RYO, increased 21 percent in 1999. Use of other tobacco products, mostly chewing tobacco, is expected to continue declining. U.S. Exports and Imports U.S. Tobacco Trade Balance Slips $1 Billion The tobacco balance of trade-the value of manufactured and unmanufactured exports less imports (arrivals)-fell by $1 billion or 20 percent in 1999. Lower export values for manufactured products were the main factor in the sharp decline. The value of U.S. leaf imports (arrivals) fell 3 percent to $760 million from $780 million. Imported product imports reached $450 million, compared with $483 million in 1998. Exports of unmanufactured tobacco and tobacco products were down sharply at $5.2 billion in calendar 1999 from $6.3 the previous year. The total tobacco balance of trade surplus fell from $5.0 billion to $4.0 billion. Tobacco leaf export value fell 11 percent compared with the previous year. Cigarette export value fell due to lower volume despite slightly higher unit values. The Bureau of the Census recorded 142 countries as destinations for U.S. leaf and product exports in 1999. General imports (arrivals) of unmanufactured tobacco fell 3 percent in value to $754 million, the biggest shift in the trade picture, and tobacco product imports slipped 5 percent to $413 million. Leaf Tobacco Export Volume Slips Again in Calendar 1999 The volume of U.S. exports of unmanufactured tobacco in 1999 fell 11 percent compared with a year earlier to 417 million pounds, declared weight (189,375 metric tons) (table 11). Declines were widespread. Only the Netherlands showed significant gains. Japan lowered purchases by 25 million pounds. On a farm-sales weight basis, total leaf exports were about 586 million pounds. Exports of all types except unstemmed flue-cured, cigar binder, and "other leaf" declined. Export demand dampened because of declining smoking rates in some major importing countries and abundant world supplies of flue-cured leaf. European markets, which typically buy more than half of U.S. leaf exports, purchased 223 million pounds of 1999 U.S. leaf. Japan purchased 60 million pounds. Lower supplies, higher prices, and declining demand in some countries dampened calendar 1999 flue-cured exports, which declined from 244 million pounds in 1998 to 189 million pounds in 1999. Burley export volume slid 4 percent from 111 million pounds to 107 million pounds. Flue-cured export unit values declined, while burley unit values advanced. Maryland exports rose, ending at 4.9 million pounds. Kentucky-Tennessee fire-cured exports increased to 14.7 million pounds and Virginia fire- and sun-cured volume nearly doubled to 1.6 million pounds. Blackfat volume was less than 10,000 pounds. Cigar wrapper exports fell, and binder exports advanced. Shipments of stems and refuse increased, and other leaf slipped. Calendar Year Imports Steady at Nearly 500 Million Pounds Total imports of tobacco for consumption (duty paid) were virtually unchanged at 498 million pounds. Last year, imports fell 24 percent. Imports are still at historically high levels. In 1999, the United States imported 10 percent more cigarette leaf and 15 percent less cigar leaf, while stems slipped 26 percent. Cigarette scrap imports were nil, and cigar scrap imports were higher but less than 1 million pounds. U.S. stocks of imported cigarette tobacco were 86 million pounds lower on January 1, 2000, than a year earlier (table 15). Imported flue-cured stocks fell 7 percent, and burley stocks fell 4 percent. Oriental stocks fell 14 percent. Imported cigar leaf stocks fell 3 percent. Tariff-Rate Quota Activity President Clinton proclaimed a tariff-rate quota (TRQ) effective September 13, 1995, for certain types of imported tobacco, primarily flue-cured and burley. The proclamation also eliminated duties on Oriental and cigar wrapper, binder, and filler tobacco. The total quantity allowed under the tariff-rate quota is 333 million pounds, declared weight, for September 13, 1999, through September 12, 2000. Through April 18th, 25 percent of the total quota allocation had been imported. The TRQ is designed to manage U.S. cigarette leaf tobacco imports, particularly flue-cured and burley type tobaccos, which are imported for the purpose of manufacturing cigarettes in the United States. Imports of cigarette leaf tobaccos (excluding Oriental) that exceed predetermined quota are subject to an import duty of 350 percent ad valorem, although a drawback provision allows most of the duty to be refunded if the imported leaf is re-exported as leaf or manufactured products such as cigarettes. U.S. Tobacco Leaf Situation and Outlook 1----- ------- 1/ All quantities in this section are in farm-sales weight unless otherwise noted. Years refer to marketing years; July-June for flue-cured and cigar wrapper (type 61) and October-September for all other types, unless otherwise noted. ------- Domestic Supplies Increase in 1999/2000 Higher beginning stocks offset lower marketings, boosting the supply of domestic leaf up 400 million pounds for 1999/2000 (July-June for flue-cured and October-September for burley and other kinds) to 4.1 billion pounds. On January 1, 1999, domestic leaf stocks were down 6 percent from a year earlier. However, by the end of the current marketing year, stocks are expected to be higher than the 2.3 billion pound carryover on July 1, 1999, (October 1 for _______________________________ burley and other kinds). With average yields, 2000 U.S. tobacco production will be about 1.0 billion pounds, 18 percent lower than last year. Auction marketings of flue-cured slipped 21 percent (table 25) in 1999/2000 from a year earlier. Burley marketings fell about 7 percent. Sales of Maryland are up, and fire-cured and dark air-cured are down sharply. Cigar tobacco production is expected to slide by 3 million pounds. All tobacco types other than Maryland, Pennsylvania filler, Connecticut binder, shade-grown wrapper, and Perique are under quotas. Except for farms on which producers in recent years have planted or received planted credit of less than 75 percent of the farm's acreage allotment, 1999 tobacco allotments are lowered 5 percent for Virginia fire-cured; unchanged for Virginia sun-cured; up 5 percent for dark air-cured, and 7.5 percent higher for Kentucky-Tennessee fire-cured tobacco, reaching 17,201 acres. Cigar filler and binder tobacco allotments fell 17.5 percent. Acreage allotments unused in recent years were adjusted downward. As of March 1, U.S. tobacco growers indicated they intended to harvest 500,700 acres of tobacco in 2000, 22 percent less than last year. Reacting to an 18-percent decrease in the 2000 effective quota (similar to last season), flue-cured growers indicated they would harvest 253,900 acres, down 16 percent from last season. Burley growers are planning to harvest 207,700 acres, about 31 percent less than last season. In 1999, intentions were 4 percent less than the final harvested acreage and, in 1998 they were 1 percent more. Costs Expected To Rise Production and marketing costs of flue-cured tobacco will increase in 2000, as costs of most inputs likely will rise. Total costs per acre (excluding land, quota, and the no-net-cost and marketing assessments) are expected to increase 2 to 4 percent from a year ago. Similar increases are expected for variable costs. Burley costs are also expected to increase 2 to 4 percent. Quota rental rates in 2000/01 are likely to increase substantially due to lower flue-cured and burley quotas and cross county lease and transfer in some burley States. Since lease and transfer of flue-cured quotas were eliminated in 1988 (except when a farm experiences a natural disaster), growers have used other options to obtain quotas. These options include: (1) cash or share renting the quota and growing the tobacco on the farm to which the quota is established; (2) purchasing quota; and (3) combining more than one farm into a single farming unit. To combine farms, the operator must have complete control over the entire farm operation. Also, the same accounting system and management must be used on all tracts. Furthermore, the rental agreement must last more than one year and include a rotation of one or more program, allotment, or other crops among tracts. Since 1991, burley growers can both lease and transfer and purchase quota within counties throughout the Burley belt. Furthermore, since 1991, Tennessee growers can lease and transfer burley quota across county lines within the State. Cross County Leasing for Burley The U.S. Department of Agriculture announced on February 1, 2000, that results from a mail referendum held January 10 through 14 in Indiana, Kentucky, and Ohio show burley quota growers voted to approve lease and transfer of burley quota across county lines within the State. Beginning with the 2000 crop year, producers in Indiana, Kentucky, and Ohio will be allowed to lease and transfer burley quota across county lines within the respective State. Previously, such leasing within those States was only allowed within the same county. Referenda were previously allowed in Tennessee and Virginia in which Tennessee growers favored cross-county-line leasing, whereas Virginia growers opposed such leasing. Price Supports and Assessments in 2000 Price supports are available to eligible growers through government loans to producer associations. To be eligible, producers must pay assessments to the no-net-cost account established by the associations. Producers and buyers share the assessments for flue-cured and burley tobaccos. Growers of other kinds pay the full amount. From 1991 through 1998, growers and purchasers of tobacco under the price support program were required to pay a marketing assessment. Grower and buyer contributions were equal to 1 percent of the loan rate and are divided equally. Growers must also certify that any pesticides applied to the tobacco crop were EPA-approved and used according to label directions. To obtain price support for flue-cured tobacco, USDA requires that growers designate to USDA a warehouse where they intend to sell the tobacco. 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 this year. Growers of Virginia fire-cured, Kentucky-Tennessee fire-cured, and Kentucky-Tennessee dark air-cured voted to accept marketing quotas for the 2000, 2001, and 2002 marketing years in two referenda held on March 20-24, 2000. 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 2000 flue-cured no-net-cost assessment is 5 cents per pound; 2.5 cents for producers and 2.5 cents for purchasers. The no-net-cost assessment for burley tobacco is 6 cents per pound for the 2000 crop, split evenly between producers and purchasers. The Agricultural 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. No-net-cost assessments for other kinds of tobacco will be announced later. USDA has set the 2000 flue-cured support level at $1.640 per pound, 0.8 cent above 1999, and the burley support at $1.805, 1.6 cents above 1999. Price supports for flue-cured and burley are calculated using the level of the preceding year, adjusted by changes in the 5-year moving average of market prices, excluding the highest and lowest (two-thirds weight) and changes in a cost-of-production index (one-third weight). For other types, maximum support rates continue to be based on changes in the average of the parity index during the three previous years compared with 1959. But loan associations can request reduced support if warranted by market conditions. Supports for Virginia sun- and air-cured, Kentucky-Tennessee fire-cured and dark air-cured, and cigar filler and binder types are unchanged for the 2000 marketing year. Flue-Cured Disappearance in 1999/2000 To Fall Total disappearance of U.S.-grown flue-cured tobacco (types 11-14) in 1999/2000 will slide about 7 percent from last year's 834 million pounds to about 775 million pounds (table 25). During the first half of the marketing year (July-December 1999), domestic disappearance slipped 8 percent compared with the same period last season, while exports fell 5 percent. Domestic use is expected to continue its downward trend due to declining cigarette production. During the first 6 months of this marketing season (July-December), flue-cured exports to European countries declined 32 percent, while Asian countries were almost half the previous year. Exports were 100 million pounds (farm-sales weight). January 2000 flue-cured exports were lower than the previous January, bringing the July-January total to 150 million pounds, 34 percent below the 7-month period last year. Carryover Slips Estimated disappearance in 1999/2000 exceeds marketings by over 100 million pounds. Consequently, the flue-cured carryover on July 1, 2000, is projected to fall more than 100 million pounds from the 1,234 million pounds of July 1, 1999. Crop Projected To Shrink in 2000 The national basic marketing quota for the 2000 crop flue-cured tobacco is 543.0 million pounds, 18 percent below 1999. The quota fell by a similar percentage last season. The basic quota fell due to a sharp decline in cigarette manufacturer purchase intentions. Overmarketings through 1999 caused an 18-percent decline in the effective quota, which is about 553 million pounds. The effective quota is obtained by adjusting the basic quota by net undermarketings. Based on the effective quota, marketings should fall in 2000. According to the March planting intentions report, 253,900 acres are expected to be harvested, 20 percent below last year's harvested acres. On this acreage, a normal yield would produce about 550 million pounds, or about the same as the effective quota. Only 103 percent of the effective quota can be marketed without penalty, so marketings are limited to 570 million pounds. In 1999, growers marketed 97 percent of the effective quota. In 1997 and 1998, growers marketed nearly 100 percent of the effective quota. The level is likely to be higher this year. Growers marketed 95 percent of the effective quota in 1996 and 92 percent in 1995. In 1994, growers marketed 101 percent of poundage quota and about 100 percent in 1992 and 1993. Given projected flue-cured marketings, plus anticipated carryover, 1999/2000 supply is expected to slide about 10 percent from the 1.9 billion pounds available in the current marketing year, to about 1.7 billion pounds. This represents about 1.9 years' use, below the traditional benchmark level and the lowest in 10 years. Burley Effective Quota Drops 47 Percent to 367 Million Pounds The effective quota for the 2000 burley crop plunged 322.7 million pounds to 367.4 million pounds. High loan stocks and reduced manufacturers intentions caused the decline. The 2000 basic quota for burley totals 247.4 million pounds, 45 percent below 1999. Marketings in 1999/2000 totaled 550.0 million pounds, 7 percent below 1998/99. Manufacturers' purchase intentions for the 2000 crop are 242.5 million pounds, compared with 291.0 million pounds in 1999. The reserve stock adjustment was negative 161.4 million pounds. This year's price support has been set at $1.805 per pound, 1.6 cents above the 1998/99 level. Around March 1, farmers said they intended to set 207,700 acres, about 3 percent less acreage than was harvested last year. Preliminary data indicate that in 1999/2000, growers marketed 84 percent of their quota, up from 74 percent the previous season. In 1997/98, growers marketed 71 percent of their quota. In 1996/97, growers marketed 73 percent of their effective quota, which until last year was the lowest percentage since 1990. They marketed 83 percent in 1995/96, 84 percent in 1994/95, and 87 percent in 1993/94. Of the two major growing States, undermarketings were somewhat greater in Tennessee than in Kentucky. With normal yields, 2000 production will reach 400 million pounds, 6 percent short of 1999 net marketings. Quota should be sufficient to market tobacco produced in 1999. Sufficient quota may not be available to market all leaf produced in 2000. Current harvesting intentions, with average yields, would result in a crop 22 million pounds over the effective quota, including the 3 percent allowed for overmarketings. Supply Rises in 1999/2000 The 1999/2000 domestic supply was 1.451 billion pounds on October 1, 2 percent above a year earlier (table 25). The supply equals about 2.5 times the estimated disappearance, slightly higher than the traditional benchmark level and in line with recent years. By October 1, 1999, total burley stocks advanced 8 percent. Crop Volume and Value Down in 1999/2000 Opening sales for the 1999/2000 burley crop were held November 29, 1999, and the market ended on March 16, 2000. There were 43 sales days, 2 less than the previous year when markets opened on November 23, 1998, and the season closed on March 11, 1999. Prices averaged $1.898 per pound in 1999 compared with 1.903 in 1998. Auction sales, including resales, totaled 580.7 million pounds, compared with 638.6 million pounds last season. Net sales (those sold by producers) were 549.7 million pounds. Burley cooperatives received 230.6 million pounds, or 41.9 percent of net sales this season, the second highest in history. Last year cooperatives took 73.2 million pounds, or 12.4 percent of net sales. Demand was weak and grade loan averages were low during the 1999 marketing season. A greater proportion of marketings were lower and middle stalk offerings. The proportion designated as fair and low quality constituted 74 percent, the same as last year. Tan and reddish-tan tobacco decreased for the second year. More buff-colored leaf was sold. Southern Maryland Prices Rally Maryland auctions for the 1999 crop (sold in 2000) of Maryland tobacco (type 32) opened March 23, 2000, and closed April 13, after being open for 15 sales days. Marketings were 9.4 million pounds, 200,000 below 1999. Prices averaged $1.658 per pound, 2.8 cents per pound higher than last year. For the 1998 crop (marketed mostly in 1999), growers received $1.630 per pound at the Maryland auction. Since quotas have been disapproved by growers, Maryland tobacco does not receive price support. In a 1982 referendum, growers rejected USDA grading and its required fee. The Agriculture and Food Act of 1981 mandated penalties for growing and marketing Maryland tobacco in quota areas. However, quotas do not apply to Pennsylvania seedleaf (type 41) tobacco, and since seedleaf prices are lower, seedleaf growers have switched to producing Maryland tobacco. Maryland tobacco is also grown in Pennsylvania--also a non-quota State. In 1998, some Maryland growers in Pennsylvania formed a cooperative and established an auction market. Demand for Maryland tobacco grown in Pennsylvania has been limited by the absence of major buyers. In 1999, Pennsylvania produced 37 percent of total Maryland-type production, compared with 41 percent in 1998. Supply Falls Acreage continued declining in 1999, and lower yields resulted in a crop of 14.4 million pounds, about 1 million pounds smaller than the previous season. However, the decline was less than the previous season. Yields declined due to drought. For 1999, production remained steady in Maryland and declined in Pennsylvania. The supply of Maryland tobacco for marketing year 1999/2000 is 4.5 million pounds below 1998/99. However, increased exports may reduce supplies the following season (table 28). Farmers' March harvest intentions indicate another 900-acre decline in 2000, as was the case in 1999. Yields may improve in 2000. Supplies should therefore decline little in 2000/01. Fire-Cured Kentucky-Tennessee Fire-Cured Prices Down Demand for most grades of Kentucky-Tennessee fire-cured (type 22-23) improved. However, overall prices fell slightly. Volume fell sharply, as only 26 percent of production crossed the auction floor. Auction sales totaled 9.2 million pounds for an average price of $1.94 per pound, compared with $2.04 last season. Quality was down. Volume at auction was down about 10 million pounds. Country sales are estimated to be slightly greater than auction sales at 24-25 million pounds. Cooperatives received only 28,440 pounds in 1999. For the 1998 crop, cooperatives received 1.2 percent of sales. Auction prices for types 22-23 averaged $1.942 per pound, down from $2.037 in 1998. Including barn door sales, prices for types 22-23 averaged $2.225 per pound in 1998. Farm sales prices are not available for 1999. Auctions for Kentucky-Tennessee (types 22-23) began January 24 and ended on April 6, after 30 sales days, the same as last season. This season's auction prices were mixed, ranging from $2.53 per pound for the best wrapper and heavy leaf grades to $1.07 a pound for the poorest nondescript. Virginia Fire-Cured Prices Continue To Slide Hot and dry weather during the growing and curing seasons again substantially reduced the quality of the Virginia fire-cured tobacco crop. Again this year, increases in auction volume offset lower prices, resulting in a gain in total value sold. Loan receipts increased from 7 percent last season to 16 percent of the 1999 crop. When sales ended on January 13 after 14 days, volume totaled 2.5 million pounds, 16 percent more than 1999. Prices fell 12.7 cents per pound to $1.809 cents. Output of snuff, which constitutes the principal domestic use of fire-cured tobacco, rose during the past year, and should continue rising in 2000. So far this season (October-January), leaf export volume is below last season by about 3.7 million pounds, a 40-percent decline. However, export volume is much lower than in 1996/97 and prior years. For the 1999/2000 season, total use should increase, as lower exports are offset slightly by steady to higher domestic use. Supplies in 2000/01 are likely to increase due to higher production and beginning stocks. Fire-Cured Farm Acreage Allotments Allotments rose 7 percent for Kentucky-Tennessee fire-cured and fell 16 percent for Virginia fire-cured. This year's U.S. total farm allotment is 17,201 acres for Kentucky-Tennessee fire-cured and 1,365 acres for Virginia fire-cured. About 93 percent of all allotments of Kentucky-Tennessee fire-cured were produced in 1999, compared with 92 percent in 1998. For Virginia fire-cured, acreage harvested as a share of allotments was 92 percent in 1999, 88 percent in 1998, and 80 percent in 1997. When compared with effective allotments (allows for productivity adjustments on leased-in acres) the percentages are somewhat higher. In 1999, Kentucky-Tennessee fire-cured acreage is projected to increase by 1,000 acres and Virginia fire-cured acreage is projected to decline by 200 acres. Dark Air-Cured Demand Strong, Prices Up Demand for One Sucker (type 35) tobacco was good during the 1999/2000 marketing year. Lower sales volume and lower quality marked the 1999 Kentucky-Tennessee dark air-cured crop. Sales began December 1, 1999, and continued through February 18, 2000. Producers sold 2.8 million pounds of One Sucker tobacco at auction at $1.747 per pound. Prices for One Sucker were up from last season. Cooperatives received less than 1 percent of sales. Country sales are not yet available. Net sales of Green River tobacco auction sales (type 36) gained, reaching 3.6 million pounds, compared with 2.9 million last season. Prices rose 1 cent per pound. Country (non-auction) sales are not available yet. Marketings were again not quite as desirable as last year, with more fair quality tobacco sold. Loan receipts were 27,010 pounds for the1999 Green River crop. Virginia Sun-Cured Prices Down on Higher Loan Receipts Volume and value rose for most grades, but overall prices declined by the end of the 1999 season. Leaf quality improved. Loan receipts totaled 21,720 pounds, or 15.4 percent of gross sales. Gross sales reached 141,043 pounds, averaging $1.591 per pound, compared with a record high of $1.908 per pound in 1997. Sales last year totaled 140,225 pounds. Fair and low quality offerings were 64 percent of sales. Sales lasted 3 days. This season's supply of dark air- and sun-cured tobacco totals 34.5 million pounds, about 1.7 million pounds greater than 1998 (table 30). Most dark air-cured tobacco goes into plug and twist chewing. Output of both plug and twist chewing fell in 1999. Disappearance of dark air-cured tobacco is likely to be greater than 1999 production, and carryover will decrease again. National Acreage Allotments Gain Larger 1999 production will offset lower carryin stocks, raising supplies for 1999/2000. Acreage allotments for growers of dark air-cured will increase from a year earlier. Total allotments for 2000 of dark air-cured (types 35-36) are 5,830 acres, 4 percent above last year. Based on harvesting intentions, production in 2000 should rise 10 percent given normal yields. Growers intend to harvest 5,330 acres in 2000, compared with 5,000 last season. Virginia sun-cured acreage allotments, at 122 acres, are nearly the same as last season. Harvesting intentions are unchanged from last year's harvested acres at 100 acres. Cigar Tobacco Wrapper Demand Up, Other Types Mixed Most cigar tobacco producers received slightly higher prices for their 1999 crop than a year earlier (prices are no longer reported for wrapper tobacco). Most cigar leaf had been sold by early March, although Wisconsin binder markets are open in April. Prices averaged $1.49 per pound for Northern Wisconsin cigar binder (type 55). Quality was very good-about the same as last year. Some Wisconsin cigar binder was damaged by storms and not harvested. Overall cigar binder quality was excellent. Connecticut binder prices have risen in recent years because of increased snuff production, and crops have been of good quality. Production in 1999 is expected to be up over 50,000 pounds because of increased acreage and higher yields, rising for the third season. The Agricultural Statistics Board will release season-average prices and production data for the 1999 crop in the May 2000 Crop Production Report. Overall, price support levels for this year's crop of cigar tobacco are unchanged. Again this season, there are no price supports for Pennsylvania filler (type 41), Connecticut binder (types 51-52), or shade-grown tobacco (type 61). No-net-cost assessments for cigar binder types in 1999 will be announced shortly. High no-net-cost assessments for cigar filler types 42-44 have essentially eliminated production of these kinds. Growers of cigar filler and binder (types 42-44 and types 54-55) voted to accept quotas for the 1999-2001 crops at referenda held in March 1999. In separate referenda held March 1998, growers of Pennsylvania filler and Connecticut binder voted against marketing quotas for the 1998, 1999, and 2000 crop years. Supplies Decline Total supplies of U.S. cigar tobacco for 1999/2000 through December are down 3 million pounds from the previous season. Production and beginning stocks were lower than the previous season. Carryin was lower for all types. Cigar filler supplies fell 23 percent, binder supplies fell 3 percent, and wrapper supplies rose 8 percent. Cigar leaf imports for consumption (duty paid) fell 15 percent to 55.0 million pounds (declared weight) for calendar year 1999. Cigar wrapper, binder, and scrap arrivals all gained. On January 1, 2000, foreign-origin leaf stocks totaled 111.2 million pounds, 3 percent below a year earlier. Domestic Use Declines Through the early 1980's, demand for domestically produced cigar filler and binder had declined as demand for loose-leaf chewing tobacco and cigars fell. Skyrocketing production of cigars since 1996 has increased the use of wrapper. However, overall cigar tobacco use continues to slide. Most cigar leaf is imported. In 1999, over 80 percent of tobacco used to make cigars and loose-leaf chewing tobacco was foreign-grown. U.S. cigar leaf use will not change much in 2000. Use will probably exceed 1999 production, so carryin may fall from the 31 million pounds available at the beginning of 1999/2000. Cigar Filler and Binder Acreage Lower in 2000 Cigar filler and binder (types 42-44 and 53-55) acreage allotments for 2000 were lowered 489 acres. Based on March harvesting intentions, growers estimated cigar filler and binder acreage will decline 11 percent from last year. The price support level in 2000 is unchanged at $1.238 cents per pound for cigar binder (type 54) tobacco grown in Southern Wisconsin and for cigar binder (type 55) tobacco grown in Northern Wisconsin. Pennsylvania filler acreage is expected to fall about 19 percent, and binder acreage is expected down 4 percent. Connecticut binder (types 51-52) acreage is expected to increase 50 acres, a little less than last year's gain, but Wisconsin binder (types 54-55) acreage is expected to fall 210 acres, according to March intentions. Shade-grown wrapper acreage will likely slip 260 acres after gaining 200 acres in 1999. Given average yields, cigar tobacco production in 1999/2000 is expected to decline 10 percent from last year's crop. Combined with smaller carryover, supplies likely will decrease. END_OF_FILE