TOBACCO OUTLOOK -- SUMMARY April 15, 2004 April 2004, ERS-TBS-256s 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 Steady for 2004 On March 1, 2004, tobacco growers indicated intentions to harvest 414,550 acres during the upcoming 2004 season, 1,660 acres less than was harvested last season. Last season, March 1 intentions were 417,510 acres, and 416,210 acres were actually harvested. If yields are average, production is expected to be around 875 million pounds. Tobacco leaf production in 2003 is estimated at 831.2 million pounds. Marketings of flue-cured totaled 507.7 million pounds and burley reached 271.7 million pounds. Marketings of other types are estimated at about 65 million pounds. With beginning stocks of 1.6 billion pounds, total estimated supply for 2003 will be about 2.4 billion pounds, 240 million pounds less than last season. Supply in 2002 was 2.7 billion pounds. Burley sales for the 2003 season ended on February 20, 2004, after 57 sales days. Final gross marketings reached 272.5 million pounds (gross auction sales combined with contract sales) and averaged $197.95 per hundredweight, a record-high price. Last season, gross volume reached 303.7 million pounds and averaged $197.55 per hundredweight. Producer sales in 2003 are estimated at 271.7 million pounds, 28.1 million pounds less than the 2002 season’s 299.8 million pounds. Burley contract centers opened on November 10, 2003, and concluded on February 20, 2004 after operating 57 days, 6 days more than last season. Seventy-six percent of producer sales were sold directly using contracts compared with 74 percent last season. Contract sales totaled 208.3 million pounds valued at $413.6 million. The season average price for contracts was $198.61 per hundredweight compared with $198.51 last season. During the 2002 season, contract sales totaled 219.5 million pounds compared with 224.5 million pounds in 2001. Burley auction markets for 2003 opened November 17, 2003, and closed February 20, 2004, after 38 days of sales. Gross volume of 64.2 million pounds was even smaller than last season’s, which itself was an all-time low. This season’s sales value was $125.7 million. Average auction price was $195.79 per hundredweight, besting last season’s record high of $194.97. Burley cooperatives took 40.2 million pounds, 64 percent of producer sales. Last season, 32 percent, or 24.3 million pounds, of net auction sales went under loan. On February 1, USDA announced 2004 quotas, no-net-cost assessments, and price supports for burley tobacco. The national marketing quota for the 2004 crop is 302.1 million pounds, 5 percent greater than 2003. The 2004 quota is based on the following: (1) cigarette manufacturers’s purchase intentions of 194.6 million pounds, unmanufactured exports (3-yr. average) of 144.5 million pounds, and a reserve stock adjustment of –25.4 million pounds. For each farm, the 2004 basic quota will increase approximately 5 percent from 2003. The effective quota is expected to be about 331.0 million pounds, about the same as 2003. The tobacco balance of trade--the value of manufactured and unmanufactured exports less manufactured and unmanufactured imports (arrivals)—continued its rapid decline in 2003, slipping $100 million to end at $1.6 billion. Values for unmanufactured and manufactured exports both declined. Unmanufactured export value declined slightly but manufactured export value fell due to lower values for cigarettes, cigars, and smoking tobacco in bulk. Although unmanufactured export volume advanced slightly, lower unit values caused a 1-percent decline in value. Product export value fell due to lower cigarette volume and cigar unit values. The value of unmanufactured imports (arrivals or general imports) declined 2 percent or $12 million while manufactured import value declined slightly. Imports of unmanufactured products for the calendar year fell slightly, by only $7 million. Calendar year unmanufactured tobacco exports advanced slightly in 2003, rising 5 million pounds. At 342.7 million pounds (155,326 metric tons), exports were up 1.3 percent. In 2003, U.S. shipments accounted for about 7 percent of total world exports. The United States was the second largest exporter, following Brazil, which accounted for 22 percent of world exports and shipped just over a billion pounds. On a farm-sales-weight basis, total calendar 2003 exports were 482.9 million pounds compared with 477.3 million pounds a year earlier. Imports for consumption (duty paid) continued to advance in 2003, exceeding 600 million pounds for the first time since 1997. At 638.3 million pounds, shipments were 60 million pounds over 2002. Oriental leaf slipped 7 percent to reach 116.8 million pounds. Stemmed flue-cured leaf imports advanced 42 percent to 172.7 million pounds, of which 72 percent was from Brazil. Burley import volume advanced 8 percent to 143.2 million pounds, about the same level as 1997. Cigar leaf imports increased 32 percent to 76.4 million pounds, also the highest since 1997. Imports of stems slipped 7 percent to 113.2 million pounds, half of which was shipped from Brazil. Cigarette consumption in the United States continued its fall, dropping 4 percent in 2003. At 400 billion cigarettes, U.S. consumption has declined by nearly 100 billion cigarettes over the past decade. Year-end taxable removals are estimated at 375 billion pieces. Output for calendar 2003 is estimated at 497 billion cigarettes, the lowest since 1958. Per capita consumption (18 years old and older) in 2003 was 1,903 pieces, 1 percent below 2002. For those 16-years old and older, per capita consumption in 2003 fell to 1,833, from 1,906 pieces in 2002. Cigarette exports in 2003 slipped about 5 percent to 121.4 billion cigarettes from 127.4 billion the previous year. Japan, at 79.3 billion cigarettes, was the largest export market for U.S. cigarettes, taking slightly more than last year. Saudi Arabia and Israel maintained their second and third positions with imports of 11.5 and 4.9 billion U.S. cigarettes, respectively. Following in order of magnitude were Lebanon, Iran, and the European Union. The total value of cigarettes shipped was $1.4 billion. Unit value was $12 per 1,000 cigarettes, compared with $11 the previous year. Fiscal year 2003 (October 2002-September 2003) Federal cigarette excise tax collections are estimated at $7.9 billion compared with $8.3 billion the previous year. State tax collections in calendar 2002 increased by $1.1 billion to $9.5 billion. Sixteen States have cigarette excise taxes of $1.00 per pack or more and 34 have taxes of 50 cents per pack or more. During 2003, excise tax hikes ranged from 70 cents per pack in New Mexico to 9 cents in Kansas. END_OF_FILE