TOBACCO OUTLOOK -- SUMMARY September 18, 2003 September 2003, ERS-TBS-255 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. ----------------------------------------------------------------- U.S. Tobacco Leaf Production Lowest in 106 Years U.S. tobacco production for the 2003 season was forecast at 830.8 million pounds as of September 1. The crop is expected to be 6 percent smaller than last year's 880.7 million pounds. Acreage in 2003 is projected at 413,710 acres, 3 percent below the 2002 season. Flue-cured acreage slipped by 6,600 acres to 239,000 acres. Flue-cured production is estimated at 477.0 million pounds, compared with 517.0 million pounds during the 2002 season. Last season's drought was replaced with abundant rainfall this spring which delayed transplanting, fertilizing, and cultivation. Many growers were forced to replant, resulting in varying maturity throughout the flue-cured belt. Nevertheless, disease has not been as bad as last season and a high-quality crop is expected. Through the 8th week of 2003 season sales (40 sales days), flue-cured producer sales reached 320.3 million pounds or 67 percent of estimated production. Burley sales for the 2003 season begin in November. Burley acreage fell 6 percen t to 149,200 acres, after declining 3 percent from 2001 to 2002. Burley production is expected to be 290.5 million pounds. Acreage for Maryland tobacco slipped while dark fire- and air-cured, and cigar tobaccos advanced. Supplies of U.S.-grown tobacco in 2003 will likely slip about 7 percent. Both production and beginning stocks are lower. September 1 crop production estimates project production at 831 million pounds, the lowest since 1897. At an estimated 1.6 billion pounds, beginning stocks are expected to be about 8 percent lower than last season. U.S. leaf supplies are expected to fall 7 percent to 2.4 billion pounds. Disappearance (use) of U.S.-grown leaf is expected to slip about 9 percent by the end of the 2002-03 marketing year to reach 1,014 million pounds. Use in 2001-02 was 1,119 million pounds. Both domestic use and exports are expected to decline, about 7 and 14 percent, respectively. Lower cigarette production and exports will result in domestic use of 640 million pounds compared with 687 million pounds during the 2002-03 season. Export disappearance should reach 374 million pounds, compared with 433 last season. U.S. leaf exports in 2002-03 (July-June) fell 17 percent from the previous year, reaching 460 million pounds, farm sales weight. Based on limited data for 2002, cigarette output is expected to decline to about 546 billion pieces, 3 percent below 2001. Domestic consumption is expected to slide about 1 percent to 420 billion pieces. Exports during 2002 reached 127.2 billion pieces, about 5 percent below the previous year. Imports continued to advance, reaching 20.9 billion pieces, compared with 14.7 billion pieces the previous year. U.S. cigarette output in 2003 is expected to decline about 6 percent from 2002. Lower consumption and exports and increased imports have depressed projected output to about 515 million pieces. Consumption is projected at 410 billion pieces, down a little more than 2 percent. Cigarette exports during the first 6 months of 2003 reached 64.2 billion pieces, compared with 67.8 for the 6-month period last year. Imports during the first 6 months of 2003 advanced 33 percent, reaching 11.8 billion pieces. At the beginning of the flue-cured season, growers carried 55.3 million pounds over from previous crops, about half of last season's carryover, and this leaf is available for marketing. The effective quota for the 2003 crop is 552.6 million pounds compared with 545.3 million pounds last season. Production plus carryover totals about 532 million pounds, so on-farm carryover at the end of the 2003 season is expected to decline even further. Gross sales through the eighth week last season reached 321.1 million pounds, with the same proportion being sold under contracts. After 40 sales days last season, 257.7 million pounds had averaged $181.02 per hundred compared with $183.00 per hundred pounds this season. Contracts accounted for 86 percent of sales. Sales through the eighth week last season reached 317.3 million pounds, or 61 percent of estimated production with the same proportion being sold under contracts. Flue-cured yields fell 6 percent this season due to abundant moisture throughout much of the belt. Last year's yield was also low, as the crop was plagued by drought. The resulting yield for the entire belt is 1,996 pounds per acre, compared with 2,105 pounds last season, and 2,432 pounds in the 2001 season. Flue-cured loan takings in 2003 have been high, reaching 69 percent of the 45 million gross pounds sold at auction through the eighth week of sales. Last season, loan takings at this point in sales were 17.3 million pounds or 34.2 percent for the same number of sales days. Beginning flue-cured stocks on July 1, 2003, were 837.7 million pounds, compared with 915.9 million pounds on July 1, 2002. Total reported supply of U.S.-grown flue-cured in 2003 is about 1.3 billion pounds, compared with 1.5 billion pounds in 2002. Use in 2002 totaled 643.0 million pounds, 3 percent greater than the previous season. As of September 1, burley production in 2003 is estimated at 290.5 million pounds compared with actual production of 300.1 million pounds last season. Marketings this year will likely be about 285 million pounds, 14 percent below the effective quota of 331.7 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, and dark fire-cured tobacco. Cigar tobacco production will increase slightly. January-June 2003 exports of flue-cured leaf (declared-weight) slipped 11 percent to 69.9 million pounds. Burley shipments were nearly steady at 68.8 million pounds. Total leaf shipments during the first 6 months of calendar 2003 were 185.1 million pounds compared with 197.5 million pounds during the same period in 2002. Japan, Switzerland, and Germany were the leading destinations for U.S. leaf. Leaf imports during the first 6 months of 2003 reached 285.0 million pounds (imports for consumption) compared with 309.6 million pounds during the same period last year. Imports of Oriental and burley tobacco declined, and imports of flue-cured advanced. By December 15, 2003, the U.S. Department of Agriculture (USDA) will announce the flue-cured poundage quota and matching acreage allotment for 2004. Individual farm quotas and acreage allotments for the next year will reflect this year's overmarketings and undermarketings. By February 1, 2004, USDA will announce the 2004 burley poundage quota, and by March 1, it will announce the 2004 acreage allotments for other kinds of tobacco. Price supports for 2004 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.