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Dark Tobacco Trends, Issues and Outlook Will Snell, University of KY

Dark Tobacco Trends, Issues and Outlook Will Snell, University of KY. U.S. Tobacco Buyout October 2004. … would lead to challenges and opportunities which would vary by type and geographic location. Number of Farms Growing Tobacco in KY. Source: USDA AG Census. Agricultural Economics.

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Dark Tobacco Trends, Issues and Outlook Will Snell, University of KY

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  1. Dark Tobacco Trends, Issues and Outlook Will Snell, University of KY

  2. U.S. Tobacco Buyout October 2004 … would lead to challenges and opportunities which would vary by type and geographic location

  3. Number of Farms Growing Tobacco in KY Source: USDA AG Census Agricultural Economics

  4. Distribution of Total (Burley + Dark)Tobacco Production (Pre vs Post- Buyout) Northern KY 10% (-1%) Bluegrass 30% (-6%) Central KY 25% (+3%) B o o n e C a m p b e l l K e n t o n G a l l a t i n P e n d l e t o n B r a c k e n C a r r o l l G r a n t Mid Western 19% (+5%) T r i m b l e M a s o n G r e e n u p O w e n R o b e r t s o n L e w i s H a r r i s o n H e n r y Eastern KY 6% (-6%) O l d h a m F l e m i n g B o y d C a r t e r N i c h o l a s S c o t t F r a n k l i n S h e l b y B o u r b o n R o w a n J e f f e r s o n B a t h Purchase 11% (+5%) E l l i o t t M o n t g o m e r y L a w r e n c e W o o d f o r d S p e n c e r A n d e r s o n F a y e t t e C l a r k M e a d e B u l l i t t M e n i f e e M o r g a n J e s s a m i n e H a n c o c k M e r c e r J o h n s o n N e l s o n P o w e l l M a r t i n B r e c k i n r i d g e H e n d e r s o n W a s h i n g t o n W o l f e M a g o f f i n D a v i e s s H a r d i n M a d i s o n E s t i l l U n i o n G a r r a r d B o y l e L e e M a r i o n M c l e a n L a r u e B r e a t h i t t F l o y d W e b s t e r O h i o P i k e G r a y s o n L i n c o l n O w s l e y J a c k s o n C r i t t e n d e n K n o t t T a y l o r R o c k c a s t l e H o p k i n s H a r t C a s e y P e r r y G r e e n M u h l e n b e r g B u t l e r E d m o n s o n L i v i n g s t o n C a l d w e l l C l a y P u l a s k i L a u r e l L e s l i e L e t c h e r A d a i r M c c r a c k e n B a l l a r d L y o n W a r r e n M e t c a l f e R u s s e l l B a r r e n M a r s h a l l C h r i s t i a n K n o x C a r l i s l e L o g a n H a r l a n T o d d T r i g g W a y n e C u m b e r l a n d A l l e n S i m p s o n W h i t l e y B e l l C l i n t o n M c c r e a r y M o n r o e G r a v e s H i c k m a n C a l l o w a y F u l t o n

  5. Top 7 Value of Tobacco Producing Counties:Pre (1980-2004) vs Post Buyout (2007) B o o n e C a m p b e l l K e n t o n Includes both burley and dark tobaccos G a l l a t i n P e n d l e t o n B r a c k e n C a r r o l l G r a n t e T r i m b l M a s o n G r e e n u p O w e n R o b e r t s o n L e w i s H a r r i s o n H e n r y O l d h a m F l e m i n g B o y d C a r t e r N i c h o l a s S c o t t F r a n k l i n S h e l b y B o u r b o n R o w a n J e f f e r s o n B a t h E l l i o t t M o n t g o m e r y L a w r e n c e W o o d f o r d S p e n c e r A n d e r s o n F a y e t t e C l a r k M e a d e B u l l i t t M e n i f e e M o r g a n J e s s a m i n e H a n c o c k M e r c e r J o h n s o n N e l s o n P o w e l l M a r t i n B r e c k i n r i d g e H e n d e r s o n W a s h i n g t o n W o l f e M a g o f f i n D a v i e s s H a r d i n M a d i s o n E s t i l l U n i o n G a r r a r d B o y l e L e e M a r i o n M c l e a n L a r u e B r e a t h i t t F l o y d W e b s t e r O h i o P i k e G r a y s o n L i n c o l n O w s l e y J a c k s o n C r i t t e n d e n K n o t t T a y l o r R o c k c a s t l e H o p k i n s H a r t C a s e y P e r r y G r e e n M u h l e n b e r g B u t l e r E d m o n s o n L i v i n g s t o n C a l d w e l l C l a y P u l a s k i L a u r e l L e s l i e L e t c h e r A d a i r M c c r a c k e n B a l l a r d L y o n W a r r e n M e t c a l f e R u s s e l l B a r r e n M a r s h a l l C h r i s t i a n K n o x C a r l i s l e L o g a n H a r l a n d T o d T r i g g W a y n e C u m b e r l a n d A l l e n S i m p s o n W h i t l e y B e l l C l i n t o n M c c r e a r y M o n r o e G r a v e s H i c k m a n C a l l o w a y F u l t o n Post-Buyout Pre-Buyout Note Barren County was also in the top 7 pre-buyout Agricultural Economics

  6. Percentage Change in Acres Since the Tobacco Buyout Source: NASS/USDA Agricultural Economics

  7. US Dark Tobacco Acres +38% +21% Source: NASS/USDA Agricultural Economics

  8. Issues Affecting Expansion of U.S. Dark Tobacco Production Growing Smokeless Tobacco Consumption (smoking restrictions, effective marketing, health issues) Profitability of Dark Tobacco Production Grower Confidence and Trust with Buyers Entry of New Dark Tobacco Companies (Cigarette Mfgs) and New Tobacco Products Increasing Dark Acres at the Expense of Burley Acres Agricultural Economics

  9. Share of World Dark Fire-Cured Production – 2008 Source: Universal Leaf Agricultural Economics

  10. U.S. Snuff Tobacco Consumption +4% to +7% Annual Growth Source: USDA/ERS and TMA Agricultural Economics

  11. Value of Kentucky Dark Tobacco Production Million Dollars Source: Ky Ag Stats/NASS, 2008 Estimate by UK Agricultural Economics

  12. Value of Kentucky Tobacco Production Million Dollars Dark will likely account for more than 30% of Kentucky’s total tobacco value in 2008 vs its historic level of 5 to 7% Source: Ky Ag Stats/NASS, 2008 Estimate by UK Agricultural Economics

  13. Value of Tennessee Tobacco Production Million Dollars Dark now accounts for well over ½ of Tennessee’s total tobacco value Source: Ky Ag Stats/NASS, 2008 Estimate by UK Agricultural Economics

  14. U.S. Dark Tobacco Production vs. Use Is This Expansion Too Much? Source: ERS/NASS/USDA, 2008 Estimates Based on September Crop Report Agricultural Economics

  15. Dark Fire-Cured: Production vs. Use Production Use Source: FSA/ERS/USDA Agricultural Economics

  16. Dark Air-Cured: Production vs. Use Production Use Source: FSA/ERS/USDA Agricultural Economics

  17. U.S. Burley Disappearance (Exports + Domestic Use) vs. Production Potential Needs for 2008-09? 200 Mil lbs ??? Source: NASS/ERS/USDA 2006-2008 Disappearance Estimates by UK/UT Agricultural Economics

  18. Tobacco Policy 2009 U.S. Tobacco Buyout October 2004 • FDA ??? • Tobacco Taxes ??? • Smoking Restrictions ???

  19. Issues Affecting Dark Tobacco Outlook Supply Side: Contract Levels/Prices Input Prices Fertilizer Labor Credit Profitability of Other Crops/Enterprises Demand Side Recession Smoking Restrictions Consumer Acceptance of New Products Tax Increases/FDA

  20. What does the future hold? • Acres will decline from 2008 levels, but remain relatively high • Management expertise will keep acres located in this area … but others will try • Will company/grower relations remain strong? • Health debate holds the potential for continued expansion • Will an export market materialize for dark tobacco/products?

  21. Average Tobacco Yields Source: NASS/USDA Agricultural Economics

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