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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 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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  1. Burley and Dark Tobacco Outlook: Thoughts and Observations for 2013 Economics Will Snell Ag Economist, University of KY

  2. 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

  3. U.S. Burley Prices Economics Source: ERS/ NASS/USDA Avg. Prices Up 15-20+ Cents/Lb

  4. 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

  5. Kentucky Tobacco, Prices, Value for 2012 Economics Source: NASS/USDA

  6. Value of Kentucky Tobacco Production Economics Source: Ky Ag Stats/NASSK

  7. 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

  8. 2013 Planting Intentions Economics

  9. 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

  10. World Burley Production Economics Source: Universal Leaf, September 2012

  11. U.S. Burley Export Value vs Brazilian Import Value Source: USDA/TMA Agricultural Economics

  12. U.S. Burley Exports Source: ERS/AMS/TMA Agricultural Economics

  13. 2013 Burley Contract Price Schedules Based on the following crop throw 10%Xs, 20% Cs, 40% Bs, 10% BRs and 20% Ts Agricultural Economics

  14. What About Dark Tobacco? U.S. Snuff Production

  15. US Dark Tobacco Acres Economics Source: NASS/USDA

  16. U.S. Dark Tobacco Use vs Production Economics Source: NASS/ERS/AMS, UK Disappearance Estimates for 2011-2012

  17. Dark Tobacco Prices Source: NASS/USDA Agricultural Economics

  18. Number of Farms Growing Tobacco in the U.S and Kentucky FSA “Reported” Farms for Burley Only Source: USDA Ag Census Agricultural Economics

  19. Kentucky Buyout Dollars (2005-2014) Economics Source: ERS, UK Estimates for 2013 and 2014

  20. 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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