TOBACCO OUTLOOK -- SUMMARY April 16, 2003 April 2003, ERS-TBS-254 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 2003 To Decline 3 Percent On March 1, 2003, tobacco growers indicated intentions to harvest 417,510 acres, nearly 13,000 acres below last year’s actual acreage. Lower flue-cured and burley quotas are behind most of the decline. Last season, March 1 intentions were 429,410 acres and 430,280, acres were actually harvested. U.S. leaf production in 2002/03 is estimated at 889.6 million pounds, about 102 million pounds below 2001. Production was the lowest since 1908. Yields in 2002 were 2,068 pounds per acre, down due to drought and extreme heat. Yields reached 2,293 pounds per acre in 2001. Burley sales ended March 13th. Gross marketings reached 303.7 million pounds. Gross auction sales combined with contract sales averaged $197.5 per hundredweight (cwt), the highest on record. Producer sales (net auction, contract and 'farmgate' sales) were 299.8 million pounds, compared with 343.7 million pounds last season. Contract centers began receiving burley tobacco on November 18, 2002, and were open 51 days before closing on February 21, 2003. Seventy-four percent of producer sales were sold using contracts. Contract sales totaled 219.5 million pounds valued at $435.7 million. The season-average price was $198.5 per cwt compared with $199.0 last season. Last season, contract volume accounted for 224.5 million pounds and in 2000, contract sales were 87.5 million pounds. Burley auction markets opened November 18, 2002, and closed March 13, 2003, after 44 days of sales. Gross volume of 82.8 million pounds was the smallest on record. Sales totaled $161.4 million. The average price was the highest on record at $197.5 cents per pound. The Burley Cooperatives took 31.9 percent, or 24.3 million pounds, of net auction sales under loan, compared with 12.4 million pounds in 2001. Net (producer) sales at auction were 78.3 million pounds, compared with 113.4 million pounds last season. On February 1, the United States Department of Agriculture announced 2003 quotas, no-net-cost assessments, and price support for burley tobacco. The national marketing quota for the 2003 crop is 287.8 million and is based on the following: (1) cigarette manufacturers’ purchase intentions of 184.9 million pounds, unmanufactured exports (3-year average) of 137.9 million pounds, and a reserve stock adjustment of -35 million pounds. The Secretary of Agriculture made no discretionary adjustment this year. For each farm, the 2003 basic quota will decline approximately 11.1 percent from 2002. The effective quota is expected to be about 320.2 million pounds, 19 million pounds less than in 2002. The tobacco balance of trade--the value of manufactured and unmanufactured exports less imports (arrivals)--continued its sharp decline. The 2002 balance of trade fell to $1.7 billion, the lowest level since 1977, and $4.2 billion below the peak in 1995 of $5.9 billion. High-valued cigarette exports boosted the balance of trade during the mid-1990s. Cigarette exports have since declined, and the trade balance has been further exacerbated by the decline in leaf exports and the surge in leaf imports that have occurred in the late 1990s. After a slight upward bump in calendar 2001, unmanufactured tobacco exports fell 18 percent in 2002. At 338.0 million pounds (153,314 metric tons), exports were the lowest since the mid- 1970s. U.S. shipments accounted for about 8 percent of total world exports. The United States was the second largest exporter, following Brazil, which accounted for 21 percent of world exports and shipped 987.0 million pounds. Ranked by volume, Zimbabwe, China, India, and Malawi were major exporters in 2002. On a farm-sales-weight basis, total calendar 2002 exports were 476.9 million pounds compared with 578.7 million pounds a year earlier. Imports (consumption, duty paid) continued to advance in 2002, gaining 12 percent to reach 578.1 million pounds. This is the highest level since 1997’s 676.5 million pounds. Oriental leaf slipped 10 percent to reach 125.4 million pounds. Shipments from Turkey declined due to a poor crop there. Stemmed flue-cured leaf imports advanced 17 percent to reach 120.5 million pounds. Burley import volume rose slightly. Cigar leaf imports slipped 3 million pounds to 85.0 million pounds. Imports of stems rebounded after a slight decline last year, ending at 121.6 million pounds, just over 50 percent compared with 2001. Consumers in the United States smoked an estimated 420 billion cigarettes in 2002, about 1.2 percent less than the previous year. Year-end taxable removals are estimated at 400 billion pieces. Continued increases in taxes and restrictions on where people can smoke were the main factors behind the decline. Cigarette exports in 2002 slipped slightly to 127 billion cigarettes from 134 billion cigarettes the previous year. Japan, at 78 billion cigarettes, was overwhelmingly the largest destination for U.S. cigarettes. Saudi Arabia received 12 billion cigarettes followed by Israel with 5 billion. The European Union, at 4 billion pieces is no longer a major importer of U.S. cigarettes. The total value of cigarettes shipped was $1.5 billion. Unit value was $11 per 1,000 cigarettes, compared with $16 the previous year.