TOBACCO OUTLOOK -- SUMMARY April 15, 2005 April 2005, ERS-TBS-258 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 Plunges for 2005 Crop Year On March 1, 2005, tobacco growers indicated intentions to harvest 319,860 acres during the upcoming 2005 season, the lowest since the 1800s, and 22 percent less than was harvested in 2004, the last season for marketing quotas and price supports. Assuming average yields, production is expected to be around 683 million pounds, as much as 200 million pounds below 2004. Tobacco leaf production in 2004 is estimated at 883.2 million pounds, 10 percent higher than in 2003. Marketings of flue-cured totaled 499.3 million pounds and burley reached 298.8 million pounds. Marketings of other types are estimated at about 68 million pounds. With beginning stocks of 1.5 billion pounds, total estimated supply for 2004 will be about 2.4 billion pounds, 33 million pounds less than 2003. Supply in 2003 was 2.4 billion pounds. The final burley auction sales under the tobacco program took place on March 16, 2005. Contract sales ended February 25. Final gross marketings reached 281.4 million pounds (gross auction sales combined with contract sales) and averaged $198.59 per hundredweight, a record-high price. Last season, gross volume reached 272.5 million pounds and averaged $197.94 per hundredweight. Because of higher yields, sales in 2004 are estimated at 298.8 million pounds, 10 percent greater than the 2003 season’s 271.7 million pounds due mostly to higher yields. Burley contract centers opened on November 8, 2004, and concluded on February 25, 2005, after operating 50 days, 7 days less than in 2003. Seventy-seven percent of producer sales were sold directly using contracts compared with 76 percent last season. Contract sales totaled 216.6 million pounds valued at $430.5 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 208.3 million pounds and in 2001, they totaled 219.5 million pounds. Burley auction markets for 2004 opened November 15, 2004, and closed March 16, 2005, after 43 days of sales, five more than last season. Gross volume of 64.8 million pounds was 600,000 pounds more than 2003’s record low sales. Gross sales value was $128.3 million. The average auction price of $198.08 once again set a record compared with last season’s 195.79 per hundredweight, itself a record. Burley cooperatives took 48.0 million pounds, 76 percent of producer sales. In 2003, 64 percent, or 40.2 million pounds, of net auction sales went under loan to cooperatives. There are no quota announcements due to the termination of the USDA tobacco program at the end of the 2004 season. Beginning with the 2005 season, growers are free to produce any quantity of any type of tobacco anywhere. The tobacco balance of trade--the value of manufactured and unmanufactured exports less manufactured and unmanufactured imports (arrivals)—continued its rapid decline in 2004, slipping $112 million to end at $1.5 billion. Values for unmanufactured leaf increased slightly as manufactured export value declined. Smoking tobacco in bulk export value fell by 55 percent, and the value of cigarettes dropped by 8 percent. Cigars, both large and small, gained in value. Unmanufactured export volume and value both advanced. The value of unmanufactured imports (arrivals or general imports) declined 13 percent or $89 million, while manufactured import value slipped 11 percent or $68 million. Unmanufactured tobacco exports advanced slightly in calendar 2004, rising 18 million pounds due to robust burley shipments. At 361.0 million pounds (163,747 metric tons), exports were up 5.2 percent. In 2004, U.S. shipments accounted for about 8 percent of total world exports, about the same as in 2003. The United States was the third largest exporter, following Brazil, which accounted for 27 percent of world exports and shipped just over a billion pounds and China, which barley edged out the United States for second place for the first time in 2004. On a farm-sales-weight basis, total calendar 2004 unmanufactured tobacco exports were 520.9 million pounds compared with 483.7 million pounds in 2003. Imports for consumption (duty paid) reversed an upward trend and slipped 12 percent in 2004, ending at 561.4 million pounds, after exceeding 600 million pounds in 2003. Shipments were 77 million pounds below 2003. Oriental leaf imports advanced to reach 118.2 million pounds. Stemmed flue-cured leaf imports slipped 23 percent to 131.5 million pounds. Burley import volume slipped to 123.1 million pounds, 14 percent less than last year, with Brazil accounting for about a third of such imports. Cigar leaf imports increased 3.8 percent to 79.3 million pounds. Imports of stems, supplied mainly by Brazil, slipped 22 percent to 88.7 million pounds. Cigarette consumption in the United States continued to fall during 2004, dropping 3 percent. At 388 billion cigarettes, U.S. consumption continues declining steadily, averaging about 2 percent per year for the past decade. Year-end taxable removals were 375 billion pieces. Output for calendar 2004 is estimated at 492.6 billion cigarettes, about the same as the late 1950’s. Per capita consumption (18 years old and older) in 2004 was 1,791 pieces, 3 percent below 2003. Cigarette exports in 2004 slipped about 2 percent to 118.7 billion cigarettes from 121.5 billion the previous year. Japan, at 71.0 billion cigarettes, was the largest export market for U.S. cigarettes, taking 60 percent of total shipments. Iran (14.5 billion cigarettes) edged into second place, shifting Saudi Arabia and Israel to third and fourth. They were followed by Lebanon, Hong Kong, and Kuwait. Shipments to the European Union have declined to less than a billion cigarettes. The total value of cigarettes shipped was $1.3 billion. Unit value was $11 per 1,000 cigarettes, compared with $12 the previous year. Fiscal year 2004 (October 2003-September 2004) Federal cigarette excise tax collections were $7.9 billion, about the same as the previous year. State excise tax collections in calendar 2004 increased by $1.2 billion (or 20 percent) to $12.6 billion. Currently, 18 States have cigarette excise taxes of $1.00 per pack or more, and 37 have taxes of 50 cents per pack or more. The median State excise tax is 69.5 cents per pack. END_OF_FILE