TOBACCO YEARBOOK – SUMMARY December 15, 2004 ERS-TBS-2004 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 text of the yearbook will be available electronically about 1 week following this summary release. ----------------------------------------------------------------- Flue-cured Producer Sales for 2004 Slip Below 500 Million Pounds Final flue-cured sales were held November 10, 2004. Auctions were held for 55 days, beginning on August 2 in the Southern Area and August 3 in the Northern Area. Contract sales began on July 30 and closed on November 1 after 68 days. Favorable spring weather and an early start to the season were marred by hurricanes which brought excessive moisture to most growing areas later in the season. Producers’ sales totaled 499.3 million pounds, close to the effective quota for 2004. Carryover tobacco sold during 2004 amounted to 4.4 million pounds compared with 55.3 million pounds last season. The overall price was $184.40 per hundredweight (cwt) on gross sales of 500.6 million pounds. Last season, gross sales were 507.5 million pounds at an average of $185.17 per cwt. For 2004, auction sales accounted for 26 percent of total gross sales, 7 percent more than 2003. Thirty-nine warehouses held auction sales--with 14 of these acting as marketing centers for the Flue-Cured Stabilization Corporation. Auction sales totaled 129.1 million pounds and averaged $179.83 per cwt, 38 cents over last season’s $179.45. Stabilization took 94.9 million pounds under loan, 73 percent of producer sales at auction or 19 percent of total producer sales. Thirty-three contract centers purchased tobacco in 2004. Contract sales of 371.4 million pounds averaged $185.99 per cwt, compared with 411.9 million pounds averaging 186.50 per cwt last season. The 2004-05 burley tobacco marketing season began Monday, November 8th as contract centers began accepting deliveries. Auction sales opened November 15th. By the end of the week ending December 10 (15 auction sales days and 23 contract sales days), 53 percent of the latest production estimate had been sold. At auction, grade averages through the fourth week were $2.10 per cwt higher than last season at $198.84 per cwt. Auctions accounted for 22 percent of sales. Through the fourth week, 68 percent or 23.7 million pounds, of leaf sold at auction went under loan, compared with 52 percent, or 17.9 million pounds for the same period last season. Contract volume reached 124.2 million pounds averaging $198.85 per cwt compared with 92.5 million pounds averaging $199.10 per cwt at this point last season. As of October 1st, the burley crop is estimated at 301.7 million pounds, 91 percent of this season’s effective quota of 331.0 million pounds. As of October 1, total tobacco acreage for the 2004 marketing year was estimated to have slipped less than 1 percent from 2003 to 409,610 acres. Yields advanced 204 pounds per acre overall, reaching 2,156 pounds per acre for all types of tobacco, compared with 1,952 in 2003. Weather early in the season was favorable although moisture from hurricanes affected some growing areas. Production of all types is estimated at 883.2 million pounds, about 80.5 million pounds above last season. Based on October 1 estimates, 93 percent of U.S. leaf were types used for cigarettes, unchanged from last season. Cigar leaf, also used for other products such as chewing and smoking tobacco, accounted for 2 percent of production. Other types, mostly dark air- and fire-cured leaf, accounted for 5 percent of production. There will be no marketing quota or price support for 2005 and subsequent crops of tobacco. On October 22, 2004, President Bush signed into law the ‘American Jobs Creation Act of 2004’ which contains Title VI, titled Fair and Equitable Tobacco Reform, also known as the ‘tobacco quota buyout.’ Both tobacco quota owners and producers will be compensated for the changes brought about by the termination of the program. The cost of the buyout will be borne by assessments levied on manufacturers and importers of tobacco products. Unmanufactured tobacco exports advanced 7 percent during the January-September period. Shipments were 252.2 million pounds (declared weight) compared with 235.7 million pounds during the same period in 2003. Value advanced 2 percent, ending at $727 million. Flue-cured volume gained 6 percent and burley increased 20 percent. Shipments of fire-cured leaf and stems declined in volume while Maryland (type 32), fire-cured, and cigar wrapper all increased. Overall, 2004 calendar-year exports are projected to increase slightly by year end. U.S. burley continues to be the most competitive U.S. tobacco on the world market. Total 2003 exports will probably be near 375 million pounds, compared with last year's 343 million pounds. Unmanufactured tobacco imports (consumption) for January- September 2004 declined 7 percent, reaching 422.4 million pounds (declared weight). General imports slid 17 percent, ending at 349.1 million pounds. Stocks of imported cigarette leaf were 5 percent lower on October 1, 2004, compared with a year earlier at 715.6 million pounds (farm-sales weight). U.S.-cigarette output in 2003 was 500 billion cigarettes, down 6 percent from 2002. For 2004, expected output is 495 billion pieces, a 1-percent drop. Domestic consumption in 2003 slid 3 percent to 400 billion cigarettes. Consumption in 2004 is expected to shrink 3 percent again, to reach 390 billion pieces. During the first 9 months of 2004, 94.2 billion cigarettes were shipped overseas, compared with 93.8 billion during the 9-month period in 2003. Year-end shipments are expected to be close to last year’s at about 120 billion cigarettes. During January- September 2004, cigarette imports slipped to 16.4 billion pieces, compared with 17.5 billion pieces during the same 9-month period last year.