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Burley and Dark Tobacco Situation and Outlook for 2010 Will Snell, University of Kentucky. Significant Increase in Tobacco Taxes Additional Smoking Restrictions FDA Regulation Passes Canadian Flavorings Ban U.S./World Economic Slump Significant Increase in World Burley Production

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Presentation Transcript
slide2
Significant Increase in Tobacco Taxes

Additional Smoking Restrictions

FDA Regulation Passes

Canadian Flavorings Ban

U.S./World Economic Slump

Significant Increase in World Burley Production

High Moisture Season Impacting Both Quantity and Quality

Declining U.S. Dollar

Looking Back at 2009

Agricultural Economics

us burley acres
US Burley Acres
  • Loss of Off-farm Jobs
  • Limited Alternative Ag Enterprises Opp.
  • Available Labor/Infrastructure
  • Success of Non-Contact Tobacco in 2008
  • Buyout dollars spent

Significant Increase in Non-Contract Acres

1000 Acres

+4.5%

Source: NASS/USDA

Agricultural Economics

slide4

U.S. Burley Production

Lower than expected yields limited production expansion in 2009

Source: NASS/USDA

Agricultural Economics

slide5

Average U.S. Burley Prices

Production levels prevented prices from slumping in 2009

slide6
Domestic Cigarette Consumption/Production

FDA

Inventory Adjustments

Value of the Dollar

World Burley Production

Factors Impacting

2010 Tobacco Situation

Agricultural Economics

u s cigarette production consumption and exports
U.S. Cigarette Production, Consumption and Exports

Source: USDA/ERS/TMA

Agricultural Economics

slide8

Total World Burley Production

+14%

- 8%

+19%

Source: Universal Leaf, May 2010

Agricultural Economics

slide9

Price Competitiveness of U.S. Burley

Value of the U.S. Dollar vs Brazil

U.S. Burley Export Value vs Brazilian Import Value

Source: St. Louis Federal Reserve Bank

Source: USDA/TMA

Agricultural Economics

slide10

U.S. Burley Disappearance (Use)

Estimated Use for 2010-11: 150-175 Mil lbs ???

Source: NASS/ERS/AMS

2009-2011 Disappearance Estimates by UK

Agricultural Economics

us burley acres what about 2010
US Burley Acres – What about 2010?
  • Domestic Issues:
    • Continued Expected Declines in U.S. Cigarette Consumption
    • Cost Conscious Consumers
    • FDA Uncertainty

1000 Acres

  • International Issues:
    • Production May Decline
    • Dollar Still Weak

Inventory Adjustments for All Companies

Source: NASS/USDA

Agricultural Economics

us burley acres what about 201012
US Burley Acres – What about 2010?

Domestic and Export Buyers Will in Aggregate

Contract for Less Acres in 2010

-20 to -30% ???

1000 Acres

  • Wildcard Issues:
  • How Will 2009 Non-Contract Growers Respond?
    • Off-Farm Income Opportunities
    • Anticipated Beef Profits
    • Past Success in Non-Contract Sales
  • How Much Excess Plantings Will Occur to Meet Contract?

Source: NASS/USDA

Agricultural Economics

us burley acres13
US Burley Acres

1000 Acres

March 1st USDA Planting Intentions Survey

- 4.0%

+4.5%

Source: NASS/USDA

Agricultural Economics

slide14

U.S. Burley Production

Source: NASS/USDA

Agricultural Economics

slide15

U.S. Burley Disappearance (Use)

vs. Production

Estimated Use for 2010-11: 150-175 Mil lbs ???

Source: NASS/ERS/AMS

2009-2011 Disappearance Estimates by UK

Agricultural Economics

slide17
High Quality (#1 and #2s) Contract Lbs -- $1.70s and $1.80s

Medium/Low Quality (#3 and #4s) Contract Lbs and High Quality Non-Contract Lbs -- $1.40s - $1.60s

All Inferior Quality Lbs -- <$1.00/lb

Potential Three Tier Price Structure

for 2010

Agricultural Economics

slide18
Domestic Market

Cigarette Consumption (Taxes, Smoking Restrictions, Health)

Composition and Consumer Acceptance of Reduced Risk Tobacco Products

FDA

Inventory Adjustments

International Market

Value of the Dollar

World Burley Production

International Blending Regulations

Inventory Adjustments

Factors Impacting Burley Outlook

Agricultural Economics

slide21

Number of Farms Growing Tobacco in KY

  • 2007 Census: 8,113 tobacco farms in KY
  • 2012: 80,000 acres at 20 acres/farm = 4000 farms

Source: USDA Ag Census

Agricultural Economics

slide23

U.S. Snuff Tobacco Consumption

+4% to +7% Annual Growth

Source: USDA/ERS and TMA

Agricultural Economics

us dark tobacco acres
US Dark Tobacco Acres

+38%

+21%

Source: NASS/USDA

Agricultural Economics

slide25

U.S. Dark Tobacco Production vs. Use

Is This Expansion

Too Much?

Source: ERS/NASS/USDA

Agricultural Economics

us dark tobacco acres26
US Dark Tobacco Acres

2009: -20%

Source: NASS/USDA

Agricultural Economics

slide27

U.S. Dark Tobacco Production

Is Supply Still too Much Relative to Demand???

Source: ERS/NASS/USDA, 2009 Estimates Based on January 2010 Crop Report Summary

Agricultural Economics

us dark tobacco acres28
US Dark Tobacco Acres

March 1st USDA Planting Intentions Survey

- 2%

Source: NASS/USDA

Agricultural Economics

value of kentucky tobacco production
Value of Kentucky Tobacco Production

Source: Ky Ag Stats/NASS, 2010 Estimates by UK

Agricultural Economics