TOBACCO -- SUMMARY September 16, 1997 September 1997, TBS-239 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of TOBACCO will be available 1-2 weeks following this summary release. ----------------------------------------------------------------------------- Tobacco Production Forecast Up 6 Percent U.S. tobacco production is forecast at 1.61 billion pounds as of September 1, 1997. The 1997 crop is up 6 percent from last year because of higher acreage. Flue-cured auctions are currently underway, with about 42 percent of estimated production sold through September 11th. The supply of U.S.-grown tobacco for 1997/98 will likely decrease slightly as lower carryin more than offsets increased production. Carryin of U.S.-grown stocks (July 1 for flue-cured and cigar wrapper types, October 1 for all other types) is likely to decline about 4 percent from a year earlier. Total stocks of imported leaf advanced 13 percent to 1.26 billion pounds on July 1, 1997, compared with July 1, 1996. Estimated U.S.-grown leaf use advanced about 12 percent to 1.65 billion pounds in 1996/97 from 1995/96's 1.47 billion pounds. The growth in U.S.- grown leaf use in 1996/97 results from larger cigarette production and domestic in cigarette production is expected to decrease slightly. U.S. leaf tobacco exports in 1996/97 (July-June) increased 9 percent, reaching 534 million pounds, declared weight. In 1997, U.S. cigarette production is expected to decline to 733 billion pieces, down from 755 billion a year ago. Domestic consumption and exports are expected to decrease in 1997. Cigarette exports declined during the first half of 1997 due to greater offshore production by U.S. manufacturers. In 1996, per capita consumption fell from 2,482, to 2,399 cigarettes per person 18 years or older. Price increases by manufacturers and impending tax increases will dampen future cigarette consumption. The Federal excise tax will increase by 10 cents per pack in 2000 and 5 cents in 2002. Six States will raise excise taxes in 1997. As of September 1, the 1997 flue-cured crop was estimated at 964 million pounds, up 6 percent from 1996. On-farm carryover this year was about 17.6 million pounds. Consequently, this season's marketings may exceed production. Beginning stocks on July 1 were 1.12 billion pounds, 4 percent below 1996. The total 1997 supply of U.S.-grown flue-cured was estimated at 2.08 billion pounds, up slightly from 1996. Total use this season may decline from 1996/97's 947 million pounds because of expected lower cigarette production. Flue-cured sales began July 22 and by September 11 growers had sold 464 million pounds of leaf, with 15 percent going under loan. Quality is good, but not as good as the past few years. After 30 days of selling, flue-cured auction prices are 13 cents per pound lower than last season. Sales through September 11 averaged $1.64 per pound. Cash receipts should advance in 1997/98 as more marketings offset lower prices. This year's burley crop is expected to be 8 percent above last season's due to greater harvested acreage. Beginning stocks in 1997 may be about 100 million pounds less than in 1996 due to increased use. Burley supplies on October 1 will be lower than a year earlier as larger 1997 production is more than offset by lower carryin. Larger crops are forecast for Maryland, dark air-cured, and cigar types, while dark fire-cured tobacco production is expected to decline. The national marketing quota for the 1998 flue-cured crop must be announced by December 15, 1997. Individual farm quotas and allotments will reflect undermarketings and overmarketings for the current crop. For burley, the marketing quota will be announced by February 1, 1998, and allotments for other types will be announced by March 1, 1998. Price supports for 1998 flue-cured and burley tobaccos 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. This issue contains three special articles: "Costs of Producing and Selling Flue-cured Tobacco: 1995, 1996, and Preliminary 1997;" "U.S. Tobacco Import Update;" and "Tobacco Dollars and Jobs." For more information contact Tom Capehart (202) 219-0890. END_OF_FILE