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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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slide1

Burley and Dark Tobacco Outlook:

Thoughts and Observations for 2013

Economics

Will Snell

Ag Economist,

University of KY

slide2

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
slide3

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

value of kentucky tobacco production
Value of Kentucky Tobacco Production

Economics

Source: Ky Ag Stats/NASSK

slide7

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
slide9

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

slide10

World Burley Production

Economics

Source: Universal Leaf, September 2012

slide11

U.S. Burley Export Value vs

Brazilian Import Value

Source: USDA/TMA

Agricultural Economics

slide12

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

slide14

What About Dark Tobacco?

U.S. Snuff Production

us dark tobacco acres
US Dark Tobacco Acres

Economics

Source: NASS/USDA

slide16

U.S. Dark Tobacco Use vs Production

Economics

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

slide17

Dark Tobacco Prices

Source: NASS/USDA

Agricultural Economics

slide18

Number of Farms Growing Tobacco

in the U.S and Kentucky

FSA “Reported” Farms

for Burley Only

Source: USDA Ag Census

Agricultural Economics

slide19

Kentucky Buyout Dollars (2005-2014)

Economics

Source: ERS, UK Estimates for 2013 and 2014

slide20

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