TOBACCO -- SUMMARY September 20, 2001 September 2001, ERS-TBS-250 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 Leaf Production Down 3 Percent as Contracts Become Predominant Method of Selling U.S. tobacco production for the 2001 season was forecast at 1.02 million pounds as of September 1. The crop is 3-percent lower than last year. Quota levels did not change substantially as they did the previous season. Acreage in 2001 is projected at 451.3 thousand acres, down 4.5 percent from 2000s 472.4 thousand acres. Flue-cured and burley effective quotas fell 2 and 4 percent, respectively. The resulting downward shift in acreage was small compared with last season when flue-cured and burley effective quotas plunged 32 percent. Acreage for Maryland, dark fire-and air-cured tobacco slipped while acreage advanced for cigar types. Direct contracting between producers and manufacturers or leaf dealers will play a major role in marketing tobacco for the first time since the existence of the tobacco program. Flue-cured growers are expected to sell 80 percent of their crop through contracts, and burley growers will likely sell 60 percent under contracts. Flue-cured auctions and contract sales are currently under way, with 409.4 million pounds or 70 percent of estimated production sold through September 14. The supply of U.S.-grown tobacco in 2001 will likely decrease due to slightly lower production and lower beginning stocks. Carry-in is likely to slip 10 percent in 2001. However, taking into account loan forgiveness for 1999 flue-cured and burley stocks reduces effective stocks by an additional 300 million pounds farm-sales weight. Estimated use of U.S.-grown leaf is expected to gain about 5 percent by the end of the 2000-01 marketing year. Domestic use will gain and exports will decline. U.S. leaf tobacco exports in 2000-01 (July-June) fell 2 percent, reaching 380.7 million pounds, declared weight. Cigarette output in 2000 reached 594.7 billion pieces, less than 1999 but higher than expected. Domestic taxable removals totaled 423.3 billion pieces compared with 434.5 billion in 1999. Exports for the year were 148.3 billion pieces, 3.1 billion fewer than during 1999. The cigarette industry has stabilized after higher prices and tax increases caused adjustments during the past few years. Expectations for 2001, based on limited data, are for a 3-percent decline in cigarette output, to about 580 billion pieces. Taxable removal data for first quarter 2001 are not yet available, but they are likely to mirror the decline in output. Exports through June 2001 were 69.6 billion pieces compared with 71.9 billion during the same period in 2000, down 3.2 percent. The 2001 flue-cured crop is forecast at 582.2 million pounds as of September 1. On-farm carryover this year is estimated at 66 million pounds. Marketings are expected to total nearly 560 million pounds. The effective quota is 545.0 million pounds, so on-farm carryover into 2002 could be significant. Through September 14 (47 days of sales, 29 days of auction sales), total flue-cured sales for the season have reached 409.4 million pounds and returned $184.36 per hundred pounds. Beginning flue-cured stocks on July 1, 2001, were 1,036 million pounds, compared with 1,189 million pounds on July 1, 2000. Total reported supply of U.S.-grown flue-cured in 2001 is about 1,600 million pounds, compared with 1,754 million pounds in 2000. However, taking into account 1999 loan-forgiveness stocks, beginning stocks in 2001 are effectively about 1,420 million pounds. Use in 2000 totaled 717.2 million pounds, 3 percent greater than the previous season and is not expected to change significantly in 2001. As of September 1, burley production in 2001 is estimated at 372.0 million pounds, 3 percent ahead of last year's production. Marketings this year could reach 360 million pounds, resulting in supplies of 1.021 million pounds, 9 percent below 2000. However, accounting for loan-forgiveness tobacco, stocks may fall to nearly 650 million pounds, 18 percent below a year earlier. Smaller crops are forecast for Maryland, dark air-cured, and dark fire-cured, while cigar tobacco production will rebound. To date, 69 percent of tobacco growers in Maryland have opted to participate in that State's buyout program, accounting for 82 percent of production. An estimated 3,700 acres of low-nicotine tobacco is being grown in Pennsylvania. By December 15, 2001, USDA will announce the flue-cured poundage quota and matching acreage allotment for 2002. Individual farm quotas and acreage allotments for the next year will reflect this years overmarketings and undermarketings. By February 1, 2002, USDA will announce the 2002 burley poundage quota, and by March 1, it will announce the 2002 acreage allotments for other kinds of tobacco. Price supports for 2001 flue-cured and burley tobacco 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 Thomas C. Capehart 202-694-5311. This issue contains a special article, Ownership and Rental of Tobacco Quota by Tobacco Farmers. The full text of the report will also be available electronically via the ERS website at www.ers.usda.gov. END_OF_FILE