TOBACCO -- SUMMARY May 5, 1998 April 1998, TBS-238 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 1-2 weeks following this summary release. --------------------------------------------------------------------------- NOTICE: This release replaces the summary released on April 17, 1998. Data in the first paragraph of the report have been revised. --------------------------------------------------------------------------- Cigarette Consumption Slips Cigarette output fell 5 percent in 1997 to an estimated 719.6 billion pieces, about the level of 1992. Taxable removals slipped 3 percent to 471.4 billion. Exports dropped from last year's 243.9 billion pieces to 217 billion. U.S. smokers consumed an estimated 480 billion cigarettes in 1997, 1.5 percent less than a year earlier. Annual consumption per person 16 years and over declined 2.4 percent to 2,332 cigarettes. Higher prices are expected to result in a greater decline in 1998. Cigar consumption increased 19 percent to 3.6 billion cigars, and snuff also gained in 1997, while consumption of smoking and chewing tobacco fell. Use of cigars will increase in 1998, and snuff consumption is likely to rise also. Use of other tobacco products is expected to continue declining. As of March 1, U.S. tobacco growers indicated their intention to harvest 733,780 acres of tobacco, 8 percent less than 1997. Reacting to a 20-percent decrease in the effective quota, flue-cured growers indicated they will harvest 386,500 acres, 15 percent less than last season. Burley growers, with considerable carryover quota, are planning to harvest 305,100 acres, 2 percent more than in 1997. Harvesting intentions are about the same as in 1996. Tobacco growers generally plant the same acreage they intend to harvest. Total 1998 production, assuming average yields, would be 1.5 billion pounds, farm-sales weight, which is less than 1997. Lower production will dampen supply in the 1998/99 marketing year. Price supports for 1998 will rise 0.7 cent per pound for flue-cured and 1.8 cents for burley. Price supports for other types are up 3.4 to 5.8 cents per pound. Before the marketing season begins, the United States Department of Agriculture (USDA) sets grade loan rates for the various kinds of tobacco receiving support. Off-farm stocks of U.S.-grown leaf were down 0.1 percent on January 1, 1998, from a year earlier, while stocks of foreign-grown leaf were up 4.5 percent from a year earlier. With an anticipated increase in domestic use that more than offsets a small decline in leaf exports, total use of U.S.-grown tobacco in 1997/98 will likely be lower than a year earlier. Consequently, beginning 1998 carryover stocks of all U.S.-grown tobacco will probably decline. The value of U.S. leaf exports increased due to higher prices, while tobacco product exports fell in 1997 because of lower cigarette shipments. U.S. manufacturers moved some production overseas, causing the shift. The value of exports exceeded imports (arrivals) by $4.9 billion, $400 million less than last years and $1 billion below 1996's record $5.9 billion. Cigarette exports declined 11 percent to 217 billion from last year's peak of 243.9 billion. Exports of unmanufactured leaf declined 3.1 percent to 484 million pounds. Export leaf volume should level off in 1998 due to lower U.S. production offset by lower world stocks (excluding China) and steady world consumption. Lower flue-cured production in 1998 will curtail shipments during the last half of the calendar year. In 1997, unmanufactured tobacco imports (arrivals) slipped 6 percent to 676 million pounds after advancing 64 percent in 1996. Steady cigarette production and abundant domestic leaf supplies contributed to lower imports. Imported leaf accounted for about 32 percent of total U.S. leaf stocks on January 1, 1998, 3 percent more than a year earlier. Total disappearance of U.S.-grown flue-cured tobacco in the current marketing year is forecast down from last year's 947 million pounds. Reduced domestic use and projected lower exports account for the decline. Disappearance in 1997/98 will likely be short of marketings, so carryover stocks at the beginning of 1998/99 will rise. Production in 1998 will likely fall from 1997's 1,007 million pounds. Disappearance of U.S.-grown burley tobacco in 1997/98 is also expected to decline from 1996/97's 631 million pounds, mostly due to lower domestic use. Exports are lower for the first 4 months of the marketing year. Burley sales in 1997/98 totaled 628.8 million, over 100 million pounds more than last season. Decreased use may cause U.S. burley carryover next October 1 to be larger than the previous year. USDA set this season's burley marketing quota at 637.8 million pounds, 67 million pounds below last season. The 1998 effective quota, which reflects last year's over- and under-marketings, totals about 860 million pounds, below last year's record. Mixed market prices in 1997 for other types had various impacts on 1998 allotments. The 1998 acreage allotments were unchanged for Kentucky-Tennessee fire-cured and raised 15 percent for Virginia fire-cured. Allotments for dark air-cured types gained 20 percent and Virginia sun-cured rose 15 percent over the previous season. Allotments for cigar filler and binder tobacco fell 20 percent. Unused farm acreage allotments in recent years were adjusted downward. Printed copies of the Tobacco Situation and Outlook report will be available in about a week. This issue contains two special articles, "The Economic Structure of Tobacco-Growing Regions," and "The Structural and Financial Characteristics of Burley Tobacco Farms." For more information, contact Tom Capehart 202-694-5245. END_OF_FILE