U.S. tobacco situation and outlook – production statistics 1974 through 1990; prices; marketing quotas and 1992 price support levels – U.S. Dept. of Agriculture. Economic Research Service report
U.S. tobacco production is likely down 1 percent from 1990. Effective quotas for flue-cured were down 5 percent, but were up 14 percent for burley. Total acreage was up 4 percent from 1990 and 13 percent from 1989. The average yield for all tobacco fell 5 percent, with a 5.5-percent decrease for flue-cured and a 4-percent decline for burley. As measured by official grades, the overall quality of the 1991 flue-cured crop was a little higher than a year earlier. Burley quality appears good. With a smaller crop and lower carryin, flue-cured supplies are down about 6 percent. Despite a larger crop, burley supplies are 1 percent lower. Supplies of most other types are down from 1990. [Tabular Data Omitted]
Prices for all tobacco may average about 5 cents a pound higher than last season. Higher prices for flue-cured and burley resulted from higher support prices, relatively good quality crops, and tight supplies.
The volume of flue-cured tobacco placed under loan fell this season, and with continuing sales of old crops, flue-cured loan holdings have declined from a year earlier. Higher prices and a larger crop mean 1991 cash receipts from tobacco rose from a year earlier. However, net returns per acre may have declined because of lower yields and higher costs.
1992 Marketing Quotas and Allotments
The 1992 national basic quota for flue-cured tobacco is up from a year earlier. When undermarketings from the 1991 crop are added, the effective quota (sum of individual quotas) is up 1 percent.
Marketing quotas for flue-cured and burley in 1992 are set by totaling (1) intended purchases by domestic cigarette manufacturers from the 1992 crop; (2) average exports for the 1989/90, 1990/91, and 1991/92 marketing years; and (3) an adjustment to maintain loan stocks at the specified reserve-stock level of 15 percent of basic quota, or a minimum of 100 million pounds of flue-cured or 50 million pounds of burley.
The six domestic cigarette manufacturers (each with more than 1 percent of U.S. cigarette production and sales) are required to submit to the Secretary of Agriculture a statement of flue-cured and burley intentions 15 days before the national quota announcement deadline. Intended purchases of flue-cured in 1992 total 497.2 million pounds, up 3 percent from a year ago. Burley purchase intentions are due by January 15.
For 1992, the flue-cured marketing quota was set at the three-component formula total of 891.8 million pounds. USDA did not use the discretionary adjustment of as much as 3 percent upward or downward. The 1992 flue-cured quota and national acreage allotment are 1.6 percent above the 1991 levels. In a referendum on January 6-9, 1992, flue-cured growers will vote whether to accept marketing quotas on an acreage-poundage basis on their next three crops.
By February 1, the USDA will announce the 1992 burley poundage quota, and by March 1, it will announce the 1992 acreage allotments for other kinds of tobacco under the production control program. Shortly after the announcements, growers of burley, Virginia sun-cured, and Puerto Rican filler types will vote 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 for the 1992 crop in previous referenda.
Maryland, Pennsylvania filler, and Connecticut and Massachusetts binder tobacco growers, who will also vote in other referenda, 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 and for Connecticut and Massachusetts binder, quotas last applied in 1983.
1992 Price Support Levels
USDA has set the 1992 flue-cured support level at $1.56 per pound, 3.2 cents above 1991. The 1992 price support for flue-cured and burley (to be announced later) is the preceding year’s support adjusted by changes in the 5-year moving average of prices, excluding the highest and lowest (two-thirds weight), and changes in a cost-of-production index (one-third weight). Costs include variable expenditures, but exclude costs of land, quota, risk, overhead, management, marketing contributions, and other items not directly related to tobacco production.
The Secretary of Agriculture has discretionary authority to adjust the price support between 65 and 100 percent of the calculated increase or decrease. The 5-year moving average of prices and changes in a cost-of-production index resulted in an increase in the price support for flue-cured. The flue-cured support was set at 100 percent of the calculated increase. Price supports for other types in 1992 have not been set.
For types other than flue-cured and burley, maximum increases in support levels will continue to be based on changes in the average parity index during the 3 previous years, compared to 1959. But loan associations can request reduced support levels if market conditions warrant.
For the 1992 flue-cured support price calculation (omitting high and low years), the 1987-91 prices averaged 165.3 cents a pound, 2.9 cents higher than the 1986-90 average. Using trend yields to minimize the effects of weather, the cost of production in 1991 is estimated to have increased 3.9 cents per pound. The weighted average of the market price and cost increases was 3.2 cents.
Data in table A-1, showing estimated burley production costs for 1991, are expected to be used by the Agricultural Stabilization and Conservation Service in determining the cost components for the 1992 burley support price. The combined effect of price and cost changes likely will result in an increase in the burley support price in 1992.
The marketing assessment under the Omnibus Budget Reconciliation Act of 1990 will total 1.56 cents per pound (divided equally between growers and buyers) for the 1992 crop of flue-cured tobacco. The marketing assessment for other kinds and no-net-cost assessments for all kinds will be announced later.
Foreign Leaf Production
Global leaf production for 1991 is forecast at 15.4 billion pounds (6.97 million metric tons), slightly below last year’s 15.6 billion (7.06 million metric tons). Output is down 1 percent in the United States and 6 percent in China. Higher production in Argentina, Zimbabwe, Malawi, and Greece more than offset lower production in the United States, China, India, Brazil, and Italy. Flue-cured production is about the same but burley is up around 11 percent. Oriental and dark air- and sun-cured production are down. Cigar leaf and dark fire-cured production are up.
Export Reporting Changed
Beginning January 1, 1991, U.S. exporters began to declare the foreign-grown content of U.S. flue-cured and burley tobacco exports. Flue-cured and burley exports converted to a farm sales weight basis published in this report reflect an adjustment for the foreign leaf content. Through September, about 2 percent of flue-cured and 3 percent of burley exports as reported by the Bureau of the Census were foreign-grown.
Technical Correction Legislation Enacted
Legislation (P.L. 102-237) became effective December 13 that corrected technical erros and clarified various provisions of the 1990 Food, Agriculture, Conservation and Trade Act. It contained a number of provisions. Among them was the repeal of the Tobacco Seed and Plant Exportation Act (P.L. 76-543), lifting constraints on U.S. exports of tobacco seeds and plants. Another provision permits lease and transfer of burley tobacco quota across county lines in Virginia. Virginia becomes the second State, after Tennessee, where transfer of quota across county lines will be permitted if active burley producers approve such in a statewide referendum. In addition, the Tobacco Adjustment Act of 1983 is amended to exempt reporting requirements for tobacco used in cigars, pipes, and chewing tobacco and snuff in retail packages.
PHOTO : Figure 4 Tobacco Acreage, Yield, and Production
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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