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Burley and Dark Tobacco Situation and Outlook for 2010 Will Snell, University of Kentucky

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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Burley and Dark Tobacco Situation and Outlook for 2010 Will Snell, University of Kentucky

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  1. Burley and Dark Tobacco Situation and Outlook for 2010 • Will Snell, University of Kentucky

  2. 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

  3. 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

  4. U.S. Burley Production Lower than expected yields limited production expansion in 2009 Source: NASS/USDA Agricultural Economics

  5. Average U.S. Burley Prices Production levels prevented prices from slumping in 2009

  6. Domestic Cigarette Consumption/Production FDA Inventory Adjustments Value of the Dollar World Burley Production Factors Impacting 2010 Tobacco Situation Agricultural Economics

  7. U.S. Cigarette Production, Consumption and Exports Source: USDA/ERS/TMA Agricultural Economics

  8. Total World Burley Production +14% - 8% +19% Source: Universal Leaf, May 2010 Agricultural Economics

  9. 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

  10. 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

  11. 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

  12. 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

  13. US Burley Acres 1000 Acres March 1st USDA Planting Intentions Survey - 4.0% +4.5% Source: NASS/USDA Agricultural Economics

  14. U.S. Burley Production Source: NASS/USDA Agricultural Economics

  15. 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

  16. 2010 Contract Price Schedules (Various Companies) Agricultural Economics

  17. 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

  18. 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

  19. UK 2009 Burley Cost of Production Study(Detailed Cost Analysis on 20 Farms)

  20. UK 2009 Burley Cost of Production Study Agricultural Economics

  21. 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

  22. What About Dark Tobacco?

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

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

  25. U.S. Dark Tobacco Production vs. Use Is This Expansion Too Much? Source: ERS/NASS/USDA Agricultural Economics

  26. US Dark Tobacco Acres 2009: -20% Source: NASS/USDA Agricultural Economics

  27. 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

  28. US Dark Tobacco Acres March 1st USDA Planting Intentions Survey - 2% Source: NASS/USDA Agricultural Economics

  29. Value of Kentucky Tobacco Production Source: Ky Ag Stats/NASS, 2010 Estimates by UK Agricultural Economics

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