Tobacco: U.S. tobacco leaf situation and outlook – efforts to eliminate unauthorized pesticides continue; program on nested tobacco continues; 1992 marketing quotas and price supports

U.S. tobacco leaf situation and outlook – efforts to eliminate unauthorized pesticides continue; program on nested tobacco continues; 1992 marketing quotas and price supports – U.S. Dept. of Agriculture, Economic Research Service report

During the past marketing year (1990/91), about 66 percent of U.S.-grown tobacco leaf was used for domestic manufacture and 34 percent was exported. Disappearance of U.S. leaf rose 8 percent to 1.81 billion pounds.

For 1991, effective quotas are lower for flue-cured but higher for burley tobacco. Yields are lower, but acreage is higher, resulting in a September production forecast of 1.63 billion pounds. This is about the same as last year (table 12). Even so, disappearance is expected to be somewhat above production, so stocks will be further reduced.

Efforts To Eliminate Unauthorized Pesticides Continue

Pesticide use on U.S. tobacco has been restricted for several years. Furthermore, the Food Security Act of 1985 extended adherence standards. The act requires USDA to inspect both domestic and imported flue-cured and burley tobaccos to determine if pesticides have been used improperly.

Before selling their tobacco, growers must certify to the Agricultural Stabilization and Conservation Service (ASCS) that any pesticides used in production have been approved by the Environmental Protection Agency (EPA) for use on tobacco and were applied in accordance with labeled directions. Growers lose price support if they falsify the certification, fail to certify, or refuse to provide samples for testing. Growers who are found filing a false report will be required to refund any price support advances that have been received on the current tobacco crop. In addition, violators are subject to $10,000 fine, 5 years in prison, or both.

To ensure the integrity of U.S.-grown tobacco, efforts to eliminate unauthorized pesticides include: 1) tests of samples taken from auction warehouse floors, 2) stepped-up efforts in recent years to educate growers about nonapproved pesticides, and 3) intensified monitoring of pesticide use and penalties for misuse.

Program on Nested Tobacco Continues

A program dealing with “nested” flue-cured tobacco was implemented during the 1989 marketing season by the Flue-Cured Tobacco Advisory Committee and continues this season. Nested tobacco is defined as any pile of leaf that contains “inferior or damaged” tobacco intentionally concealed “within sound or superior tobacco.” To curtail nesting, each tobacco lot is being randomly inspected by USDA graders as part of a program to maintain and improve the quality of U.S. flue-cured leaf.

Violators convicted of nesting can be sentenced up to 1 year imprisonment, a $1,000 fine, or both, under existing law. Growers who nest may also be denied price support on their tobacco.

Both farmers and resellers are required to certify that they have not nested their tobacco. Any pile of tobacco found to be nested cannot be sold on the day the nest is discovered. The nested pile must be taken from the auction sales floor and nested material removed. The tobacco must be reweighed and reinspected before it can be offered for sale at a later date.

For a penalty to be imposed, a nest must be discovered before the pile of tobacco leaves the auction warehouse. The final determination of a nest is made by the USDA grader in charge of the sale where the nesting is discovered.

Purchasers of nested tobacco are encouraged to inform ASCS about farmers and resellers who nest tobacco. ASCS administers the price support program and can deny price support to tobacco nesters.

1992 Marketing Quotas and Price Supports

By December 15, USDA will announce the flue-cured quota (acreage-poundage) and the matching acreage allotment for 1992. Within 30 days of the announcement, flue-cured growers will vote whether to continue acreage-poundage quotas for another 3 years. The program was overwhelming approved by allotment holders in the last vote. Individual farm quotas and acreage allotments for next year will reflect this year’s overmarketings and undermarketings. Marketings this year are forecast to fall below the effective quota (table 15).

By February 1, 1992, USDA will announce the burley poundage quota, and by March 1, it will announce 1992 acreage allotments for other kinds of tobacco. Shortly after the announcements, growers of flue-cured, burley, Virginia sun-cured, Maryland, Pennsylvania filler, Connecticut binder and Puerto Rican filler types will vote in referendums for or against marketing quotas on their next three crops. Producers of fire-cured, dark air-cured, Ohio filler, and Wisconsin binder types approved marketing quotas applicable to the 1992 crop in previous referendums.

The quota law provides that flue-cured and burley quotas equal the sum of buying intentions of domestic cigarette manufacturers, the average of unmanufactured tobacco exports, and adjustments of loan association inventories needed to reach the reserve stock level. The Secretary of Agriculture may adjust the three-part total up to 3 percent.

Support levels for 1991 average $1.528 per pound for flue-cured and $1.584 for burley. Grade loan rates for flue-cured range from $1.03 to $1.93 per pound, but USDA is still reviewing the burley rates for the 1991 crop. Price support levels for kinds other than flue-cured and burley average from 5.2 to 7.0 cents per pound higher in 1991.

For 1992, the flue-cured and burley price support will be the level for 1991 adjusted by changes in the 5-year moving average of prices (two-thirds weight) and changes in a cost of production index (one-third weight). Costs include general variable expenditures, but exclude costs of land, quota, risk, overhead, management, marketing contributions, and other costs not directly related to tobacco production. The Secretary of Agriculture can set the price support between 65 and 100 percent of the calculated increase or decrease.

For other kinds, changes in support prices will continue to be based on the average of the parity index during the 3 previous years compared with 1959. However, loan associations can request lowered support levels if market conditions warrant. Data in table A-1, showing estimated flue-cured production costs for 1991, are expected to be used by ASCS in determining the cost component for the 1992 support level. The combined effect of price and cost changes will likely result in a hike in the flue-cured support level in 1992.

Growers of Maryland, Pennsylvania, and Connecticut binder tobaccos turned down marketing quotas in their last referenda (1989), so Government price support is not available for their 1991 crops. Pennsylvania filler has never had marketing quotas. For Maryland, quotas last applied to the 1965 crop. For Connecticut binder, quotas last applied to the 1983 crop. Shade produced wrapper (types 61-62) is not covered by marketing quota legislation. [2]All quantities in this section are stated in farm-sales weight unless otherwise noted. [Table 12 Omitted]

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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