TOBACCO -- SUMMARY April 21, 1999 April 1999, ERS-TBS-243 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 2 weeks following this summary release. --------------------------------------------------------------------------- Cigarette Consumption Continues To Slide U.S. smokers consumed an estimated 470 billion cigarettes in 1998, 2 percent less than a year earlier. Price increases, higher State taxes, expanding regulation, and consumer awareness of links between smoking and disease combined to reduce cigarette use. Consumption per person based on a population 18 years and older declined 3 percent. Consumption is expected to decline further in 1999. Taxable removals in 1998 were about steady at 470 billion. Exports dropped from 217 billion pieces in 1997 to 201 billion. Cigarette output fell 6 percent to an estimated 680 billion pieces, about the same as in 1990. Increases in cigar consumption slowed to an estimated 6 percent in 1998 to 3.7 billion cigars. Snuff continued to gain in 1998, while use of smoking and chewing tobacco fell. In 1999, cigar use will increase at about the same rate as last year, 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 they intended to harvest 647,850 acres of tobacco in 1999, 11 percent less than last year. Reacting to a 19-percent decrease in the 1999 effective quota, flue-cured growers indicated they would harvest 319,000 acres, down 14 percent from last season. Burley growers are planning to harvest 289,800 acres, about 8 percent less than last year. Assuming average yields, 1999 production would total 1.4 billion pounds (farm-sales weight), about 150 million less than in 1998. The lower production, however, will be partially offset by slightly higher beginning stocks anticipated for the the 1999/2000 marketing year, resulting in decreased supplies. Price supports for the 1999 crop are up 0.4 cent per pound for flue-cured and 1.1 cents for burley. Price supports for other kinds under quotas are up 2.0 to 3.5 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 up 11 percent on January 1, 1999, from a year earlier, while stocks of foreign-grown leaf were down 100 million pounds (8 percent) from a year earlier. Production shortfalls in 1998 led to a lower supply in spite of higher beginning stocks. Lower use will generate an even higher carryin in 1999. The value of U.S. leaf exports in 1998 declined due to lower volume, while the value of tobacco product exports fell because of lower cigarette shipments. The value of total exports exceeded imports (arrivals) by $5.0 billion, and was $137 million above 1997 but $900 million below 1996's record $5.9 billion. Cigarette exports declined 7 percent to 201 billion pieces--17 percent below 1996's peak of 243.9 billion. Exports of unmanufactured leaf declined 4 percent to 467 million pounds. Abundant supplies of leaf worldwide will dampen export prospects in 1999. In 1998, unmanufactured tobacco imports (arrivals) plunged 20 percent to 544 million pounds, falling for the second year. Lower cigarette production has dampened demand for foreign leaf. Imported leaf accounted for about 26 percent of total U.S. leaf stocks on January 1, 1999, 6 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 877 million pounds. Both domestic use and exports are expected to decline. Disappearance in 1998/99 will likely exceed marketings, so carryover stocks at the beginning of 1999/2000 will decline. Production in 1999 will likely fall from 1998's 815 million pounds due to lower effective quota. Disappearance of U.S.-grown burley tobacco in 1998/99 is expected to decline from 1997/98's 548 million pounds, mostly due to lower domestic use. Exports are unchanged for the first 4 months of the marketing year. Burley auction sales in 1998/99 totaled 588.3 million pounds, 39 million less than last season. Production in 1998 will exceed total use and 1999 carryin is expected to increase. USDA set this season's burley marketing quota at 453 million pounds, 160 million pounds below last season. The 1999 effective quota, which reflects last year's over- and under-marketings, totals about 690 million pounds, about 20 percent below last year's. Mixed market prices in 1998 for other quota kinds had various impacts on 1999 allotments. The 1999 acreage allotments fell 5 percent for Kentucky-Tennessee fire-cured and remained unchanged for Virginia fire-cured. Allotments for dark air-cured types gained 10 percent and Virginia sun-cured allotments were about the same as the previous season. Allotments for cigar filler and binder tobacco fell 35 percent. Producers who did not plant tobacco in recent years may have had their individual allotments adjusted downward. This issue of Tobacco Situation and Outlook includes a special article entitled "U.S. Tobacco Farming Trends," which provides recently released data from the Census of Agriculture on the number, size, and sales of U.S. tobacco farms. Printed copies of the Tobacco Situation and Outlook will be available in about two weeks. For more information, contact Tom Capehart (202) 694-5311. The text of the full report will also be available electronically via the ERS website at www.econ.ag.gov. END_OF_FILE