TOBACCO OUTLOOK – SUMMARY April 21, 2006 April 2006, ERS-TBS-260s 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. ----------------------------------------------------------------- Slight Gain for Harvest Intentions for 2006 On March 1, 2006, tobacco growers indicated intentions to harvest 306,630 acres during the upcoming 2006 season, a 3-percent gain over 2005. Last season, harvest intentions were 319,860 acres, and 298,020 acres were actually harvested. Assuming average yields, production is expected to be around 650 million pounds, about 10 million pounds over last season. Growers are responding to favorable contract prices and adjusting to the post-buyout environment. Tobacco leaf production during the current (2005) season is estimated at 639.7 million pounds, 27 percent lower than in 2004. Marketings of flue-cured, burley, and most other types are not yet known due to the termination of market news for tobacco. However, marketings are expected to be close to production since most sales are through contracts. With beginning stocks of 1.5 billion pounds, total estimated supply for 2005 will be about 2.1 billion pounds, 312 million pounds less than 2004. Supply in 2004 was 2.4 billion pounds. The tobacco balance of trade—the value of manufactured and unmanufactured exports less manufactured and unmanufactured imports (arrivals)—fell below $1 billion for the first time since 1975, slipping $345 million to end at $973 million. The value of product imports and exports both declined. Leaf export value declined, but imports increased. The value of imports (arrivals or general imports) gained 2 percent or $20 million. The value of exports slipped 12 percent or $325 million. Unmanufactured tobacco export volume declined in calendar 2005, slipping 7 percent. Burley shipments advanced, but not as much as last year, and all other major categories, except cigar wrapper, declined. At 335.5 million pounds (152,197 metric tons), exports were down 26 million pounds. On a farm-sales-weight basis, total calendar 2005 unmanufactured tobacco exports were 491.2 million pounds compared with 520.9 million pounds in 2004. The United States exported tobacco to 86 countries during 2005. Germany was the major buyer of U.S. tobacco, followed by Russia, Japan, Switzerland, and the Dominican Republic. Imports for consumption (duty paid) slipped 12 percent in 2005, the same percentage decline as last year and ended at 495.4 million pounds, compared with 561.4 million pounds in 2004. Volume was 143 million pounds below 2003. Oriental leaf imports slipped 8 percent to reach 108.3 million pounds. Stemmed flue- cured leaf imports slipped 29 percent to 93.7 million pounds. Burley import volume fell 12 percent to reach 108.3 million pounds, with Brazil accounting for 60 percent. Cigar leaf imports declined 10 percent to 71.1 million pounds. Imports of stems, supplied mainly by Brazil, advanced 14 percent to 100.8 million pounds. The long-term decline in cigarette consumption continued in 2005 as 378 billion cigarettes were consumed, 3 percent below 2004. Yearend taxable removals were 363 billion pieces. Output for calendar 2005 was 489.4 billion cigarettes. Per capita consumption (18 years old and older) in 2005 was 1,716 cigarettes, 90 below 2004. Cigarette exports in 2005 slipped about 5 percent to 113.1 billion cigarettes from 118.7 billion the previous year. Japan, at 83.0 billion cigarettes, was the largest export market for U.S. cigarettes. Saudi Arabia and Iran followed. The total value of cigarettes shipped was $1.2 billion. Unit value was $11 per 1,000 cigarettes, about the same as last year. Fiscal year 2005 (October 2004-September 2005) Federal cigarette excise tax collections were $7.8 billion, slightly below last year’s. State excise tax collections in calendar 2005 increased by $0.8 billion to $13.5 billion. Currently, 19 States have cigarette excise taxes of $1.00 per pack or more, and five are over $2.00. The weighted (by packs taxed) average State excise tax is 78.59 cents per pack, up from 63.28 cents in 2004. The annual Economic Research Service (ERS) survey of manufacturers indicated that filter-tip production comprised 99.2 percent of total cigarette output in 2005, compared with 98.9 percent in 2004. Cigar consumption in 2005 was 5,084 million cigars, 3 percent greater than the previous year. Consumption of little cigars reached 4,037 million cigars, compared with 2,917 million in 2004. Popularity of little cigars increased in part due to lower tax rates than cigarettes and because Master Settlement Agreement payments are not accessed on small cigars as they are with cigarettes. Snuff output for 2005 climbed to 86.7 million pounds, and taxable removals continued to increase, reaching 79.1 million pounds. Smoking tobacco output was 17.4 million pounds, 8 percent over 2004, and consumption advanced 14 percent to 19.4 million pounds. Output and taxable removals of chewing tobacco changed little at 39.2 and 37.7 million pounds, respectively.