More declines in store for tobacco?

ARLINGTON, Va. – Fewer people smoking, declining exports of U.S. tobacco, and increasing use of imported tobacco by U.S. manufacturers all point to an ongoing decline of production for both flue-cured and burley tobacco over the next decade, USDA analysts say.

The two tobacco types accounted for 92 percent of total leaf production in 2003 and are grown under a quota program.

“Manufacturers’ purchase intentions have declined as cigarette output levels have fallen and imported tobacco use has risen,” the Interagency Agricultural Projections Committee noted in its analysis of baseline projections to 2013.

Additionally, exports of flue-cured and burley have slipped in the past five years as U.S. tobacco has faced strong price competition from foreign producers, particularly Brazil, which has boosted production substantially over the past 10 years. Adjustments for high reserve stocks have further reduced quota levels.

“Tobacco price supports will rise, reflecting increasing production costs,” the report says, “and prices will continue to edge up as price supports are raised.”

U.S. cigarette consumption is falling by 1 percent to 2 percent per year, and as smoking in public places becomes more restricted and cigarette prices and taxes increase, per capita and total consumption of tobacco in the U.S. is dropping, even though about the same proportion of the population continues to smoke.

Cigarette exports have declined steadily since their record high of 244 billion pieces in 1996, and exports during calendar 2003 are expected to be only about 120 billion pieces. Exports have declined at least 5 percent annually since 2000, but are expected to level off in coming years.

Use of imported cigarette leaf reached record high levels in the last few years. The imported component of U.S.-manufactured cigarettes exceeded 50 percent in 2002, as manufacturers used less expensive imported leaf to produce more economical blends and reduce costs. Imported leaf is expected to continue to displace domestic leaf in U.S. cigarettes.

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