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December, 2006

U.S. Tobacco Cooperative

United States
Tobacco acres, production on upswing
Atlanta — Two years removed from the government buyout, U.S. tobacco acreage and production appear to be on the upswing, at least in some parts of the country, according to a report in the Farm Press.

“Looking at overall tobacco production, now that we’re two years from the buyout, overall U.S. acreage and production are increasing. They’re not back yet to those pre-buyout levels, and they’re not expected to be back at those levels in the foreseeable future, but it does appear that things have hit the bottom and have started back up somewhat,” said Kelly Tiller, University of Tennessee Extension economist, at the recent Southern Region Agricultural Outlook Conference in Atlanta.

Most of the tobacco produced in the United States is used in cigarette consumption — about 92%, she said. “It’s important to look at the trends and the cigarette and the tobacco industry in general. It can give us an idea about what we can expect in the near future,” she added.

Looking at what has happened in the past, she says, the production of cigarettes has declined by about 34% in the last 10 years. But a majority of that has been in a reduction in the export of cigarettes. “This is primarily because a lot of the cigarette manufacturers are finding it more efficient to produce cigarettes overseas than to produce them in the United States and ship them out.”

A significant decline in the exports of cigarettes is evident, but the United States has also seen significant declines in consumption, says Tiller — down by about 24% over the past 10 years, to about 370 bn sticks consumed in the United States in 2006, according to estimates.

The brightest spot for the U.S. tobacco industry is in moist snuff consumption. While cigarette consumption has been declining and is expected to continue to decline, the consumption of moist snuff has increased by 41% over the past decade. Per-capita consumption is increasing as well as overall consumption. But a different type of tobacco is used for moist snuff — a dark tobacco rather than burley or flue-cured. Snuff consumption is expected to continue to increase at a rate of about 5% annually, which is fairly significant.

Looking at the worldwide situation for flue-cured tobacco, says Tiller, China produces a large amount of flue-cured, but most of it is consumed internally, and it’s not in competition with U.S. flue-cured tobacco. For the United States, there is a projection for a slight increase in flue-cured acres over the next year, and that will help regain some of that worldwide market share, according to Tiller.

Last Australian tobacco crop plowed under
Queensland — The last tobacco to be legally grown in Australia was recently plowed into the ground at Beerwah, Queensland, reported the Sunshine Coast Daily.

The destruction brought to an end an industry that started in the 1950s and in its heyday supported 70 farms in Southeast Queensland.

The closure of the industry was inevitable after deregulation in 1996 saw Australian content in cigarettes drop from a mandated 55% to less than 20%.

In September, British American Tobacco Australia, which controlled 65% of Australian production, announced that it would not extend contracts due to expire in 2008. It also offered its growers a closure package based on the remainder of their contracts.

Philip Morris decided to also close local production.

BAT increases tobacco prices
Kampala City —British American Tobacco Uganda announced an increase in the price of tobacco, with the incoming leaf director, Serhat Eroglu, saying that prices are for tobacco to be grown in 2007. Flue-cured Virginia tobacco will go for 3,300 shillings instead of 3,000, while top-grade burley tobacco will go for 2,450 shillings instead of 2,400.

“We will pay higher prices for higher-quality tobacco as our strategy is to maintain Uganda’s position as a producer of world-class tobacco. The continuous price increases are partly as a result of improved quality brought about by innovations such as the Centralized Purchasing Points,” Eroglu said in a statement.

The announcement comes ahead of the 2007 growing season, which begins mid-December with the preparation of seedbeds. The sh300 increment will largely benefit tobacco farmers in West Nile, Middle North and North Kigezi regions. The regions comprise Yumbe, Koboko, Arua, Lira, Pader, Kitgum, Gulu, Kanungu, and Rukungiri districts where flue-cured Virginia is predominantly grown. Burley is grown in Bunyoro region, which includes Hoima, Masindi, Kibaale, Kiboga, and Mubende districts. The number of farmers currently requesting contracts from BAT to grow tobacco in 2007 has increased significantly because of the high prices paid in 2006, the statement said. BAT area leaf growing manager Pedro Seambelar said the farmer base in 2007 is estimated to increase significantly from 26,000 in 2006.

Tobacco International - December, 2006
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