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Burley and Dark Tobacco Outlook: Thoughts and Observations for 2013. Economics. Will Snell Ag Economist, University of KY. Burley Review of 2012. Economics. Higher Prices ($1.97/lb). USDA: U.S. Burley Acres +14%, Production +19% (207 mil lbs ???) Universal Leaf (190 mil lbs)

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Burley and Dark Tobacco Outlook: Thoughts and Observations for 2013

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Burley and dark tobacco outlook thoughts and observations for 2013

Burley and Dark Tobacco Outlook:

Thoughts and Observations for 2013

Economics

Will Snell

Ag Economist,

University of KY


Burley and dark tobacco outlook thoughts and observations for 2013

Burley Review of 2012

Economics

  • Higher Prices ($1.97/lb)

  • USDA: U.S. Burley Acres +14%, Production +19% (207 mil lbs ???)

  • Universal Leaf (190 mil lbs)

  • Overall Better Quality Crop

  • Leaf Exports Stable

    • Price competitive despite higher valued U.S. dollar

    • Exports limited due to supplies

  • Domestic Use Fairly Stable

    • Rate of Decline in US Cigarette Sales Near “Traditional Levels”

    • Increased Smoking Restrictions

  • Extremely Tight Supply/Demand Balance


Burley and dark tobacco outlook thoughts and observations for 2013

U.S. Burley Prices

Economics

Source: ERS/ NASS/USDA

Avg. Prices Up 15-20+ Cents/Lb


Tobacco prices vs prices of other enterprise and the cost of inputs 2012 as a of 2004 levels

Tobacco Prices vs Prices of Other Enterprise and the Cost of Inputs2012 as a % of 2004 levels

Source: Calculated from NASS/USDA data

Agricultural Economics


Burley and dark tobacco outlook thoughts and observations for 2013

Kentucky Tobacco, Prices, Value for 2012

Economics

Source: NASS/USDA


Value of kentucky tobacco production

Value of Kentucky Tobacco Production

Economics

Source: Ky Ag Stats/NASSK


Burley and dark tobacco outlook thoughts and observations for 2013

What about the 2013 U.S. Burley Outlook?

Economics

  • Look for Contract Lb Offers to Increase

  • How Will Tobacco Growers Respond?

    • Labor challenges

    • Crop Insurance Challenges

    • Aging infrastructure Continued Regulation uncertainty

    • GAP/Contract demands

    • Favorable Outlook for Other Ag Enterprises


Burley and dark tobacco outlook thoughts and observations for 2013

2013 Planting Intentions

Economics


Burley and dark tobacco outlook thoughts and observations for 2013

U.S. Burley Production vs

Disappearance (Use)

Economics

Can the Market Support a 210-220 Mil Lb US Burley Crop in 2013?

Source: NASS/ERS/AMS, UK Production Estimate for 2013


Burley and dark tobacco outlook thoughts and observations for 2013

World Burley Production

Economics

Source: Universal Leaf, September 2012


Burley and dark tobacco outlook thoughts and observations for 2013

U.S. Burley Export Value vs

Brazilian Import Value

Source: USDA/TMA

Agricultural Economics


Burley and dark tobacco outlook thoughts and observations for 2013

U.S. Burley Exports

Source: ERS/AMS/TMA

Agricultural Economics


2013 burley contract price schedules

2013 Burley Contract Price Schedules

Based on the following crop throw 10%Xs, 20% Cs, 40% Bs, 10% BRs and 20% Ts

Agricultural Economics


Burley and dark tobacco outlook thoughts and observations for 2013

What About Dark Tobacco?

U.S. Snuff Production


Us dark tobacco acres

US Dark Tobacco Acres

Economics

Source: NASS/USDA


Burley and dark tobacco outlook thoughts and observations for 2013

U.S. Dark Tobacco Use vs Production

Economics

Source: NASS/ERS/AMS, UK Disappearance Estimates for 2011-2012


Burley and dark tobacco outlook thoughts and observations for 2013

Dark Tobacco Prices

Source: NASS/USDA

Agricultural Economics


Burley and dark tobacco outlook thoughts and observations for 2013

Number of Farms Growing Tobacco

in the U.S and Kentucky

FSA “Reported” Farms

for Burley Only

Source: USDA Ag Census

Agricultural Economics


Burley and dark tobacco outlook thoughts and observations for 2013

Kentucky Buyout Dollars (2005-2014)

Economics

Source: ERS, UK Estimates for 2013 and 2014


Burley and dark tobacco outlook thoughts and observations for 2013

Emerging Issues/Questions for 2013 and Beyond

  • Regulation will come at a cost, but can it be a benefit to differentiate US tobacco

  • Will immigration reform happen? If so what will be the “cost”?

  • Will we be able to adopt more mechanization/lower labor requirements?

  • Can we increase yields w/o sacrificing quality or industry requirements?

  • Will crop insurance survive and it what form?

  • How long can the industry go w/o significant infrastructure reinvestment?

  • Will consumer-accepted alternative (reduced risk) tobacco products contain less or minimal tobacco?

  • China – Will it become a significant market for U.S. burley?

  • Can tobacco growers/leadership work with health community on “reasonable” tobacco regulation and control efforts?

  • Will adequate funds be available to support regional collaboration on tobacco grower research and extension activities and personnel?

  • Will profit incentives/overcoming challenges result in an adequate # of growers


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