Transcript PowerPoint - Agricultural Policy Analysis Center

U.S. Tobacco
Leaf Supply
& Demand
Kelly Tiller
University of Tennessee
Agricultural Policy Analysis Center
Tobacco Merchants Association
Annual Meeting
Williamsburg, VA
May 8, 2007
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Agricultural Policy Analysis Center - University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996-4519
www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298
U.S. Cigarette Production,
Consumption & Exports
800
700
Billion Pieces
600
500
755
(-36%)
563
487
484
(-24%)
425
371
400
300
244
200
(-55%)
134
110
100
0
Production
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Consumption
1996
2001
Exports
2006
Source: USDA, Economic Research Service
U.S. Moist Snuff Consumption
100.0
 46%
90.0
Million Pounds
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1996
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1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: USDA, Economic Research Service
Per Capita Consumption
3,000
0.40
0.35
0.30
2,000
0.25
1,500
0.20
0.15
1,000
Pounds of Snuff
Number of Cigarettes
2,500
0.10
500
0.05
0
0.00
1996
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1997
1998
1999
2000
2001
Cigarettes
2002
2003
2004
2005
2006
Snuff
Source: USDA, Economic Research Service, Sept. 2006
Change in Total Tobacco Acreage
2004 to 2007
• Still not back to prebuyout acreage
-1.6%
– North Carolina just
over 2004 level
• Burley generally down
more than flue
• Burley expansion into
Pennsylvania
• Acreage out of Florida
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135.0%
12.3%
-37.5%
-30.4%
10.3%
-23.0%
1.6%
-37.0%
-25.9%
-17.4%
-100%
Source: USDA, National Ag. Statistics Service
Change in Total Tobacco Acreage
2005 to 2006
• Flue-cured states up
– North Carolina up
considerably, stable in
2007
– Florida way down
• Mix in burley
– Kentucky up some
– Tennessee down 13%
– Expanding in Penn.
-3.4%
58.0%
4.1%
2.9%
14.6%
11.1%
4.1%
26.0%
-13.7%
21.1%
6.3%
-56.0%
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Source: USDA, National Ag. Statistics Service
US Tobacco Production
1,200
Million Pounds
1,000
800
600
400
200
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Flue-Cured
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Burley
Other Types
Source: USDA, NASS, Crop Production Reports
Flue-Cured
• 2006 flue-cured production 446 million lbs
– Up 17% over 2005
• Acreage higher in 2006, still not up to 2004 levels
– Up significantly (26%) in North Carolina, mostly in Eastern NC
– Moving out of Florida
– Smaller expansions in Virginia, Georgia, South Carolina
• 2007 acreage near level
– Up in Georgia, Virginia, down in South Carolina
• 2006 prices slightly higher than 2005, average around
$1.50/lb
– Prices still about 20% below pre-buyout levels
– Contract price range appears to have narrowed in 2006, some
lower priced companies increased prices
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Change in Flue-Cured Acreage
2004 to 2007
2005 to 2006
-21.7%
21.4%
2.4%
26.0%
-25.9%
21.1%
-17.4%
6.3%
-100%
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-56.0%
Source: USDA, National Ag. Statistics Service
Burley
• 2006 burley production 217 million pounds
– Up 7% over 2005
• Acreage
– Moving out of Tennessee and traditional areas of North Carolina
and Virginia
– Shifting from East/Central to Western Kentucky
– New production in Piedmont and Eastern North Carolina,
Pennsylvania
• Additional price incentives offered in 2006
– Higher prices brought in more acreage
• 2006 prices higher than 2005
– Averaged around $1.56 per pound in 2005
– Averaged around $1.64 per pound in 2006
– Still ~20% below pre-buyout levels
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Change in Burley Acreage
2004 to 2007
2005 to 2006
150.0%
-37.5%
2.9%
-61.0%
10.3%
-27.4%
-45.8%
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-17.9%
11.1%
-23.4%
4.3%
-17.6%
26.7%
Source: USDA, National Ag. Statistics Service
Other Tobacco Types
• Less dramatic price declines post-buyout for
dark-fired tobacco
– Averaged about $2.39 for dark-fired, $2.20/lb for dark
air-cured
• Adjustment to post-buyout market has been less
dramatic
• Strong demand for domestic use in smokeless
tobacco products
• Little movement in production areas
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Change in Dark-Fired Acreage
2004 to 2007
2005 to 2006
-50.7%
35.8%
-3.8%
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2.9%
-0.0%
-3.6%
Source: USDA, National Ag. Statistics Service
Change in Dark Air-Cured Acreage
2004 to 2007
17.8%
1.9%
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2005 to 2006
8.1%
11.1%
Source: USDA, National Ag. Statistics Service
2006 Tobacco Production Surveys
• Mail-based survey of 6,000
burley growers
– Traditional production regions
in TN, VA, and NC
– Survey conducted May 2006
– 813 completed responses
• Follow-up web-based survey
of county Extension agents
– All types, in 7 major states
– Conducted Dec. 2006
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’06 Production & Acreage
Yes
46%
Planted Acres
No
54%
# Respondents Exiting
250
200
62%
150
10
9
8
7
6
5
4
3
2
1
0
All
TN
VA
NC
23%
100
Average planted acreage among
growers producing in 2006
11%
50
3%
0
2002
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2003
2004
2005
Last year growing, among growers
not producing in 2006
Among respondents producing tobacco in 2006 …
Likelihood of Producing
2010
2007
Definitely Not
Probably Not
Definitely Yes
2015
Not Sure
Probably Yes
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Producer mail survey, May 2006 …
Why NOT Producing in ’07?
• Not profitable enough
• Shortage of affordable
and/or legal labor
• Age, near retirement
• Too risky without a price
guarantee
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Producer mail survey, May 2006 …
Biggest Challenges Next 2-5 Years
• Contract prices too low
(66%)
• High costs of hiring labor
(58%)
• High costs of nitrogen
fertilizer (52%)
• Shortage of affordable
and/or legal labor (35%)
• High costs of other
production in puts (26%)
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Producer mail survey, May 2006 …
Investment Priorities
1. Curing barns
2. Upgrading equipment
or new equipment
3. Market prep facilities
and baling equipment
4. Acquiring more good
land
5. Field curing structures
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Likelihood of Producing in 2007
Factors/characteristics
increasing the probability of
producing in 2007*
Factors/characteristics
increasing the probability of
exiting in 2007*
– Received sale price of
$1.65/lb or more
– Farm in excess of 250 acres
– Tobacco gross receipts were
less than 10% of total gross
farm receipts
– 34 years of age or younger
– Earned a graduate or
professional degree
– Total gross agricultural
receipts were lower than
$10,000
– Had higher amounts of net
household income
– Indicated that their primary
farming operation was in North
Carolina
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* Factors statistically significant at the 10% level or greater, in an
ordered logit model with a chi-square value of 50.6 (p=0.067)
County Extension Agent Survey
64 Counties
10 Counties
58-B, 4-DF, 9-DAC
10-B, 4-FC, 4-DF, 1-DAC
49 Counties
44-B, 8-DF, 4-DAC
22 Counties
18-B, 20-FC
4 Counties
4-FC
4 Counties
4-FC
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Extension Agent Survey Results
• Flue-Cured
– 10-24% will not return in 2007
– Expect acreage to increase 11-15% in 2007
• Burley
– 10-24% of burley growers exited after 2005
– Another 10-24% will exit after 2006
– Expect acreage to increase 16-20% in 2007
• Dark-Fired
– 50-74% of the active producers in 2000 are still growing
– 2007 acreage expected to remain near 2006
– 2006 prices averaged $2.00-$2.04/lb
• Dark Air-Cured
– 50-74% of the active producers in 2000 are still growing
– 2007 acreage expected to increase 6-10%
– 2006 prices averaged $2.10-$2.19/lb
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Selected State Results
•
North Carolina
•
– 76-90% of burley growers exited
2000-2006
– Another 10-24% will exit after
2006
– Acreage expected to increase 2129% in 2007
– About 25-40% of dark growers
exited since 2000
– 26-50% of flue-cured growers
have exited since 2000
– Expect 2007 burley acreage to
increase 11-15%
– 2006 burley yields ranged from
1,750-1,999 lbs/ac
•
Kentucky
– 51-75% of burley growers have
exited since 2000
– 2007 burley acreage expected to
increase 16-20%
– More than two-thirds of dark
producers in 2000 still growing
– Dark acreage expected to
increase some in 2007
Tennessee
•
Virginia
– About a third of burley and flucured growers have exited
– Virginia Sun-Cured nearly gone
•
Georgia
– Less than 25% of flue-cured
producers remain
•
South Carolina
– Nearly 50% of flue-cured growers
have exited
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County Extension agent survey, December 2006 …
Biggest Challenges Next 2-5 Years
1. Shortage of affordable
and/or legal labor (4th)
2. Increased costs of hiring
labor (2nd)
3. Contract prices are too low
(1st)
4. Increasing costs of nitrogen
fertilizer (3rd)
5. Increasing costs of other
production inputs (5th)
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Summary & Concerns
• Tobacco markets beginning to stabilize following the
buyout
• Concerns about labor availability and affordability,
particularly in burley
• Working toward more mechanization in burley harvest
• High fuel prices particularly a problem for flue-cured
• Ethanol boom affecting all of agriculture, tobacco
somewhat insulated for now
• To date, 2007 Farm Bill proposals appear to have
marginal impact on tobacco
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