CAAP 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.
Tobacco Leaf Supply & Demand Tobacco Merchants Association
Annual Meeting Williamsburg, VA May 8, 2007 Kelly Tiller University
of Tennessee Agricultural Policy Analysis Center Slide 2 CAAP U.S.
Cigarette Production, Consumption & Exports Source: USDA,
Economic Research Service (-24%) (-55%) (-36%) Slide 3 CAAP U.S.
Moist Snuff Consumption Source: USDA, Economic Research Service 46%
Slide 4 CAAP Per Capita Consumption Source: USDA, Economic Research
Service, Sept. 2006 Slide 5 CAAP Change in Total Tobacco Acreage
Still not back to pre- buyout acreage North Carolina just over 2004
level Burley generally down more than flue Burley expansion into
Pennsylvania Acreage out of Florida 2004 to 2007 12.3% -100% -17.4%
-23.0% -1.6% 10.3% 1.6% -37.5% 135.0% -25.9% -37.0% -30.4% Source:
USDA, National Ag. Statistics Service Slide 6 CAAP Change in Total
Tobacco Acreage 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. 4.1% -56.0%
6.3% 4.1% -3.4% 11.1% 26.0% 2.9% 58.0% 21.1% -13.7% 14.6% 2005 to
2006 Source: USDA, National Ag. Statistics Service Slide 7 CAAP US
Tobacco Production Source: USDA, NASS, Crop Production Reports
Slide 8 CAAPFlue-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 Slide 9 CAAP Change in
Flue-Cured Acreage 2005 to 2006 -100% -17.4% 2.4% -25.9% -21.7%
2004 to 2007 -56.0% 6.3% 26.0% 21.1% 21.4% Source: USDA, National
Ag. Statistics Service Slide 10 CAAPBurley 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
Slide 11 CAAP Change in Burley Acreage 2005 to 20062004 to 2007
-27.4% 10.3% -23.4% -37.5% -45.8% -61.0% 4.3% 11.1% 26.7% 2.9%
-17.6% -17.9% 150.0% Source: USDA, National Ag. Statistics Service
Slide 12 CAAP 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
Slide 13 CAAP Change in Dark-Fired Acreage 2005 to 20062004 to 2007
-50.7% 35.8% -3.8% 2.9% -0.0% -3.6% Source: USDA, National Ag.
Statistics Service Slide 14 CAAP Change in Dark Air-Cured Acreage
2005 to 20062004 to 2007 17.8% 1.9% 8.1% 11.1% Source: USDA,
National Ag. Statistics Service Slide 15 CAAP 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 Slide 16 CAAP 06 Production & Acreage No 54% Yes 46% 3%
11% 23% 62% Average planted acreage among growers producing in 2006
Last year growing, among growers not producing in 2006 Slide 17
CAAP Likelihood of Producing 2007 2010 2015 Among respondents
producing tobacco in 2006 Slide 18 CAAP Why NOT Producing in 07?
Not profitable enough Shortage of affordable and/or legal labor
Age, near retirement Too risky without a price guarantee Producer
mail survey, May 2006 Slide 19 CAAP 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%) Producer mail survey, May 2006 Slide 20 CAAP
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 Producer mail survey, May
2006 Slide 21 CAAP Likelihood of Producing 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 Factors/characteristics
increasing the probability of producing in 2007*
Factors/characteristics increasing the probability of exiting in
2007* * 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) Slide 22 CAAP County Extension Agent Survey 64 Counties
49 Counties 22 Counties 10 Counties 4 Counties 44-B, 8-DF, 4-DAC
18-B, 20-FC 10-B, 4-FC, 4-DF, 1-DAC 58-B, 4-DF, 9-DAC 4-FC Slide 23
CAAP 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 Slide 24 CAAP Selected State Results
North Carolina 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 76-90% of
burley growers exited 2000-2006 Another 10-24% will exit after 2006
Acreage expected to increase 21- 29% in 2007 About 25-40% of dark
growers exited since 2000 Virginia About a third of burley and flu-
cured 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 Slide 25 CAAP Biggest
Challenges Next 2-5 Years 1.Shortage of affordable and/or legal
labor (4 th ) 2.Increased costs of hiring labor (2 nd ) 3.Contract
prices are too low (1 st ) 4.Increasing costs of nitrogen
fertilizer (3 rd ) 5.Increasing costs of other production inputs (5
th ) County Extension agent survey, December 2006 Slide 26 CAAP
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
