TOBACCO OUTLOOK -- SUMMARY September 17, 2004 September 2004 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 report will be available electronically about 1 week following this summary release. ------------------------------------------------------------ Leaf Production Projected Up 10 Percent U.S. tobacco production for the 2004 season was forecast at 882.6 million pounds as of September 1. The crop is expected to be 10 percent greater than last year’s 802.7 million pounds. Acreage is projected at 413,550 acres, just 1 percent above the 2003 season. Flue-cured acreage slipped by 2,400 to 231,000 acres, but production is estimated at 511.7 million pounds, an 11-percent gain over 2003. Adequate rainfall and a relatively disease-free crop have raised expected yield, a welcome respite after last season’s flooding. Hurricane Francis caused some alteration in sales schedules but little damage. Through September 9th, (33 sales days), flue-cured producers sold 261.3 million pounds or 51 percent of estimated production. Burley sales for the 2004 season begin in November. Burley acreage is expected to advance 3 percent to 156,300 acres, after declining 3 percent from 2002 to 2003. Production is expected to be 307.8 million pounds on higher yields. Acreage for Maryland, dark fire-, and air-cured leaf advanced, while cigar tobacco acreage slipped. Supplies of U.S.-grown tobacco in 2004 are projected to change very little at 2.4 billion pounds. Production is expected to advance 10 percent while beginning stocks are projected to slip 4 percent, to an estimated 1.5 billion pounds. Disappearance (use) of U.S.-grown leaf is expected to slip about 15 percent by the end of the 2003-04 marketing year to reach 873 million pounds. Use in 2002-03 was 1,026 million pounds. Both domestic use and exports are expected to decline, about 15 and 17 percent, respectively. Cigarette production and exports are both projected lower in 2004, resulting in domestic use of 535 million pounds. Domestic disappearance was 642 million pounds during the 2002-03 season. Export disappearance should reach 338 million pounds, compared with 383 million last season. U.S. leaf exports in 2003-04 (July-June) fell 6 percent from the previous year, reaching 486 million pounds, farm-sales weight. Cigarette output in calendar 2003 slipped 6 percent to 500 billion cigarettes. Taxable removals ended the year at 377.2 billion pieces. Domestic consumption in 2003 slipped to 400 billion pieces, a 4-percent decline. Exports at year-end were 121.5 billion, 5 percent below the previous year. Per capita consumption (18 years old and over) slid to 1,837 cigarettes, from 1,979 cigarettes in 2002. For 2004, U.S. cigarette output is expected to decline about 1 percent from 2003 to finish at 495 billion pieces. Domestic removals are expected to reach 377.2 billion cigarettes, and exports are projected to increase slightly to 125.0 billion cigarettes. Consumption is projected at 390 billion pieces, down 3 percent. Cigarette exports during the first 6 months of 2004 reached 65.4 billion pieces, compared with 64.4 billion for the 6-month period last year. Cigarette imports during the first 6 months of 2004 slipped 8 percent, reaching 10.9 billion pieces, compared with 11.8 billion pieces last year. If this trend continues, imports at year-end will be about 21.3 billion pieces. At the beginning of the flue-cured season, growers carried only 4.4 million pounds available for marketing from previous crops. Last year carryover was 55.3 million pounds. The effective quota for the 2004 crop is 500 million pounds, compared with 536.2 million pounds last season. Production plus carryover totals about 504.4 million pounds, so on-farm carryover at the end of the 2004 season is expected to remain small. Gross sales through the seventh week (September 9th) reached 261.6 million gross pounds and averaged $178.96 per cwt. At the same point last season, 246.5 million pounds had returned an average of $181.87 per cwt. Eighty percent, or 197.1 million pounds, were sold under contracts. At auction, sales of 48.6 million pounds resulted in loan takings of 39.1 million pounds or 16 percent of total flue-cured sales. At this point in the season, 81 percent of auction marketings went to the cooperative. Beginning flue-cured stocks on July 1, 2004, were 822.8 million pounds, compared with 837.7 million pounds on July 1, 2003. Total reported supply of U.S.-grown flue-cured in 2004 is about 1.3 billion pounds, the same as in 2003. Use in 2003 totaled 522.5 million pounds, 19 percent short of the previous season. As of September 1, burley production in 2004 is estimated at 301.5 million pounds, compared with actual production of 281.7 million pounds last season. Marketings this year will likely be about 285 million pounds, 14 percent below the effective quota of 331.0 million pounds, resulting in projected supplies of about 880 million pounds, assuming normal on-farm carryover levels. According to the September 1 crop production forecast, smaller crops are forecast for Maryland, dark air-cured, dark fire-cured, and cigar tobacco. January-June 2004 exports of flue-cured leaf (declared- weight) slipped 12 percent to 61.7 million pounds. Burley shipments advanced 12 percent to 77.2 million pounds. Total leaf shipments during the first 6 months of calendar 2004 were 184.1 million pounds, about a million pounds less than last year. Belgium, Germany, Japan, and Switzerland were the leading destinations for U.S. leaf. Leaf imports during the first 6 months of 2004 reached 279.5 million pounds (imports for consumption), compared with 284.4 million pounds during the same period last year. Cigarette tobacco imports gained while cigar and stem imports declined. By December 15, 2004, the U.S. Department of Agriculture (USDA) will announce the flue-cured poundage quota and matching acreage allotment for the 2005 marketing year. Individual farm quotas and acreage allotments for the next year will reflect this year’s overmarketings and undermarketings. By February 1, 2005, USDA will announce the 2005 burley poundage quota, and by March 1 it will announce the 2005 acreage allotments for other kinds of tobacco. Price supports for 2005-crop 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.