TOBACCO OUTLOOK -- SUMMARY April 17, 2002 April 2002, ERS-TBS-252 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. ----------------------------------------------------------------------------- Tobacco Acreage in 2002 Nearly Unchanged from Last Season U.S. tobacco growers indicated on March 1 that they intend to harvest 429,410 acres of tobacco during the 2002/03 crop year. The intentions are slightly below last year's actual harvest of 432,640 acres. Lower quotas for some types resulted in the slide. However, compared with recent years, the decline was small. U.S. leaf production in 2001/02 is estimated at 1.0 billion pounds, about 9 million pounds below last season. Sales of flue-cured, including both auction and contract, reached 544.5 million pounds, while burley was 338 million pounds. Combined with beginning stocks of 1.8 billion pounds, total U.S. supplies are expected to be about 2.8 billion pounds for 2001/02, 15 percent below last season's 3.4 billion pounds. Burley marketings (auction and contract) reached 348.3 million pounds averaging $197.50 per hundredweight (gross auction sales combined with contract sales), the highest on record. Producer sales (net auction combined with contract sales) were 338.2 million pounds, compared with 310.9 million pounds last season. Nearly two-thirds of the estimated crop production was sold directly using contracts. Burley auction markets opened November 13 and closed February 21, 2002, after 44 days of sales. Gross volume of 123.6 million pounds sold for $240.5 million. Average price was the second highest on record. The Burley Cooperatives took 12.4 million pounds under loan, compared with 19.3 million pounds in 2000, which was 11 percent of producer sales. Net (producer) sales at auction were 113.4 million pounds, compared with 223.5 million pounds last season. At auction, the percentage of good and better quality tobacco increased slightly, while fair- and low-quality tobacco slipped. Contract centers began receiving on October 29, 2001, and were open 70 days before closing on February 28, 2002. Thirty-two contract centers operated in 22 markets. Sales totaled 224.5 million pounds valued at $447.1 million. The season average was $199.02 per hundredweight. Last season, contract volume reached 87.5 million pounds, out of producer sales of 310.9 million pounds. The national basic marketing quota for the 2002 flue-cured crop is 582.0 million pounds, compared with 548.9 million pounds in 2001. The increase is the result of slightly higher manufacturer purchase intentions and an upward adjustment reflecting lower reserve stocks on hand (due largely to the forgiveness of 1999 loan stocks). Compared with the sharp declines in the late 1990s, the quota continues to be relatively stable. Manufacturers' purchase intentions increased by 13 million pounds to 310.0 million pounds. The 3-year average export figure declined by nearly 50 million pounds, but the reserve stock adjustment component rose by 22 million pounds. There was no discretionary adjustment by the Secretary. The effective quota is obtained by adjusting each farm's basic quota by net undermarketings. Based on March 1 harvest intentions, flue-cured growers intend to plant 245,500 acres, compared with actual plantings of 238,500 acres last season. With normal yields, production in 2002 should be about 553 million pounds. The burley basic quota for 2002 is 324.2 million pounds, 7.8 million pounds below last season's 332.0 million pounds. As with flue-cured, the magnitude of the change is much less than experienced in recent years and signifies a return to stable markets. The 2002 basic quota is comprised of slightly (by 2.4 million pounds) higher manufacturer purchase intentions of 227.4 million pounds, declining 3-year average exports (by 5.6 million pounds) of 138.8 million pounds, and a larger negative reserve stock adjustment (by 4.6 million pounds) of 42 million pounds. At 344.0 million pounds, the 2001 effective quota is 24.8 million pounds below last season's 368.8 million pounds. Farmers indicated on March 1 their intention to harvest 158,600 acres of burley tobacco during the 2002 season. With normal yields, this would result in a crop of 325.4 million pounds, below the effective quota of 344 million pounds for the 2002/03 crop year. Last year intentions were 182,500 acres and actual harvested acres 164,500. The tobacco balance of trade--the value of manufactured and unmanufactured exports less imports (arrivals)--for 2001 slid below $3 billion for the first time since 1987. At $2.8 billion the sharp drop from 2000 was due to lower cigarette export volume and unit value combined with higher leaf import value. Cigarette exports fell almost 10 percent while value fell nearly 36 percent. The value of U.S. leaf exports rose by nearly 5 percent during the calendar year. Tobacco product imports (arrivals) fell nearly $30 million, mostly due to lower cigarette and cigar value. Leaf import value advanced $141 million. The volume of U.S. exports of unmanufactured tobacco rose to 410 million pounds in 2001 compared with 402.4 million pounds last year. Imports of unmanufactured leaf (arrivals) surged 127 million pounds to 560.7 million pounds compared with 439.7 million pounds in 2000. Duty-paid imports rose nearly 40 million pounds, ending at 516.2 million pounds for 2001. January 1, 2002, stocks of domestic leaf were 2.2 million pounds, 560 million pounds below January 2001. Flue-cured stocks dropped 17 percent to 1,182 million pounds and burley stocks slipped 30 percent to 817 million pounds. U.S. stocks of imported cigarette leaf were 8 percent lower on January 1, 2002, than the previous year and stocks of cigar leaf were 6 percent lower. Consumers in the United States smoked an estimated 422 billion cigarettes in 2001, about 2 percent less than the previous year. During the first quarter of 2001 (the latest official data available), taxable removals at the Federal level declined 2 percent compared with first quarter 2000. Year-end 2001 taxable removals are estimated at 420 billion pieces. Output during the first quarter 2001 slipped 4 percent compared with the previous year. End-of-year 2001 output is expected to reach 575 billion pieces. Because of the January 1, 2002 Federal tax increase, removals during the last months of the year were likely accelerated as manufacturers reduced floor stocks. Exports during 2001 reached 133.9 billion pieces, compared with 147.9 billion the previous year. Shipments to our largest buyers, the European Union and Japan declined by 60 percent and 2 percent respectively due to increased cigarette production in the United States' top markets coupled with flat demand. Sales to Saudi Arabia, South Korea, Lebanon, and Israel were up in 2001. END_OF_FILE