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Situation and Outlook Report: Tobacco

Tobacco: Burley – burley tobacco use up in 1990/91; disappearance up; world production rises; supplies to decline; carryover lower but production up; bill would permit broader lease and transfer of burley quota in Virginia; rules for disaster lease and transfer of burley quotas authorized for 1991 under certain conditions

Burley – burley tobacco use up in 1990/91; disappearance up; world production rises; supplies to decline; carryover lower but production up; bill would permit broader lease and transfer of burley quota in Virginia; rules for disaster lease and transfer of burley quotas authorized for 1991 under certain conditions – U.S. Dept. of Agriculture, Economic Research Service report

Burley tobacco (type 31) use is up in 1990/91. In the marketing year ending September 30, 1991, about two-thirds of the crop will be used for cigarettes, while exports will take about one-fourth and other products will use the rest.

Disappearance Up

For the year ending September 30, 1991, domestic use of U.S. burley is expected to rise about 14 percent from the 446 million pounds used in 1989/90 (table 16). Exports also are likely to be higher and disappearance is estimated to rise about 12 percent from last year’s 614 million pounds. Carryover of domestic burley will probably fall about 12 percent because 1990 marketings were below use.

For the first 9 months of 1990/91 burley exports totaled 162 million pounds (farm sales weight), about 11 percent more than a year earlier. Japan, the Netherlands, and Switzerland took more, but Italy, Germany, Thailand, and Hong Kong took less. Exports are up despite tight supplies.

World Production Rises

World burley production rose 8 percent last year primarily because of a 24-percent increase in the United States. Production outside the United States rose 1 percent as increases in Malawi, China, Japan, and Italy offset declines in Mexico, Argentina, Brazil, South Korea, the Philippines, and Spain. This year, world production might increase, primarily because of expected increases in the United States, Mexico, Argentina, Malawi, South Korea, Thailand, and the Philippines. Production in China and Spain is expected to change little and Brazilian production may be down a little.

Supplies To Decline; Carryover Lower, But Production Up

The September forecast of the 1991 U.S. burley crop is 643 million pounds, 8 percent above last year. This season, the effective quota is bigger and larger acreage is offsetting lower yields. Maturation of the crop is ahead of normal and harvest is progressing more rapidly than in most years.

Marketings in 1991/92 are forecast to total about 645 million pounds. This is short of expected production and farm holdings because of quota constraints. The indicated carryover, plus projected marketings, are likely to lower the burley supply for 1991/92 about 3 percent from a year earlier. The prospective supply is only about two times the probable disappearance.

In 1991/92, marketings are estimated at 76 percent of the effective quota. Marketings have been considerably short of the effective quota the last 6 years. Legislation enacted in 1991 that permits lease and transfer of quotas across county lines in Tennessee (17 million pounds of quota was leased and transferred across county lines this season) and permits beltwide sale of quotas within counties has permitted greater production. Still, restrictions on leasing and transferring across county lines in other States, together with tight labor supplies, a shortage of barn space, and a big buildup of unused quota continue to hold production somewhat below the effective quota.

Excess burley supplies have been depleted and crops that fell somewhat below use have created shortages of good quality burley. Use of foreign-grown burley fell about 3.5 percent from a year earlier to 135 million pounds during July 1990-June 1991. However, stocks of foreign-grown burley rose 22 percent from July 1, 1990, to July 1, 1991.

U.S. auction sales usually begin in late November. The 1990 crop sold for $1.75 a pound, about 8 cents higher than the year before. Price supports for 1991 will average $1.584 a pound, 2.6 cents above 1990. The no-net-cost fee and the budget deficit assessment combined have been set at 1 cent a pound for both growers and purchasers in 1991, the same as the no-net-cost assessment in 1990. The budget deficit assessment was implemented in 1991.

Bill Would Permit Broader Lease and Transfer of Burley Quota in Virginia

A bill (H.R. 3029) was passed by the U.S. House of Representatives that would correct technical errors and clarify various provisions contained in the 1990 Food, Agriculture, Conservation, and Trade Act. Among other provisions, it would permit the lease and transfer of burley tobacco quota across county lines within Virginia. Currently, transfer of burley quota across county lines is permitted only in Tennessee.

Rules for Disaster Lease and Transfer of Burley Quotas

Disaster lease and transfer of burley quotas has been authorized for 1991 under certain conditions. Burley tobacco producers can lease and transfer unused quotas to other farms if production is expected to be less than 80 percent of the effective quota on the farm leasing in quota.

Producers must file an application for disaster credit with their county ASCS office before the crop is harvested. To receive disaster credit, sufficient acreage must have been planted to produce the farm’s effective quota under normal growing conditions. Furthermore, the reduction in crop expectancy must have been due to natural disaster and no other cause.

Table 20–Burley marketing quota, Kentucky, Tennessee, other States, 1989-91

Carryover Basic Effective

State (net) quota quota

Million pounds

1989

Kentucky 15.9 393.0 408.9

Tennessee 34.9 107.2 142.1

Other States 23.0 86.7 109.7

1990

Kentucky 47.3 402.5 449.8

Tennessee 60.4 109.4 169.8

Other States 34.2 88.5 122.7

1991

Kentucky 33.9 486.8 520.7

Tennessee 56.8 130.8 187.6

Other States 31.3 106.5 137.8

Compiled from records and reports of Commodity Analysis Division, ASCS, USDA.

Table 21–Burley tobacco: Percentage of selected groups, quality, and color categories of total, 1981-90

Mixed 1, 2, 3, Tan

Crop year group quality color

Percent

1981 29.1 24.4 48.2

1982 20.2 22.4 36.0

1983 6.7 13.3 37.4

1984 2.7 38.0 40.5

1985 2.5 37.9 40.1

1986 5.0 30.2 43.5

1987 6.0 32.5 38.3

1988 7.6 33.4 49.1

1989 16.2 40.7 43.8

1990 28.8 41.8 52.8

Compiled from reports of the Tobacco Division, Agricultural Marketing Service, USDA.

Table 22–Tobacco loan stocks, 1989-91 (farm-sales weight)

End of August

Type 1989 1990 1991 1/

Million pounds

Flue-cured, 11-14 329.0 314.6 172.4

Burley, 31 199.1 129.1 69.1

Virginia, 21 1.8 1.7 1.1

Kentucky-Tennessee,

22-23 13.8 9.9 8.6

Kentucky-Tennessee,

35036 11.7 9.3 0

Ohio, 42-44 .5 0 0

Puerto Rico, 46 .5 2/ 0 2/ 0

Conecticut Valley,

51-52 0 0 0

Wisconsin, 54 0 0 0

Wisconsin, 55 0 0 0

Totala 556.4 464.4 251.2

Uncommitted

Flue-cured, 11-14 189.2 162.9 3/ 126.5

Burley, 31 97.0 53.3 3/ 35.0

1/ July 32: 2/ Inventory remains but loan agreements with Commodity Credit Corporation cancelled. 3/ August 30. Compiled from records of the Tobacco and Peanuts Division, ASCS, USDA.

COPYRIGHT 1991 For more information, contact US Department of Agriculture Economic Research Service. Phone: 1-800-999-6779 (8:30-5:00 ET).

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