November 7, 2001 | By: Haven Miller
LEXINGTON, KY.

Increased competition, a higher price support, and declining world production will contribute to favorable burley tobacco prices for 2001-2002.

Burley farmers can expect the overall market price to be better than last year's record average of $1.95 per pound, with contract prices again exceeding auction prices.

"Just looking at what happened with flue-cured this summer, the contract price was about four cents a pound above the auction price, so I think we may see a similar trend with burley," said Will Snell, Extension agricultural economist with the University of Kentucky College of Agriculture. "Given the structure of contract prices, farmers with a decent quality crop will see their tobacco average near or slightly above $2 a pound."

Snell said intense competition by tobacco companies to attract growers boosted contract prices for most grades. For tobacco being sold on the auction market, the average price support for the 2001 crop increased more than two cents per pound, with some of the more typical grades up two to four cents per pound.

Worldwide burley production has declined in recent years. Consequently the balance between supply and demand has improved.

"If supplies for some grades are tightening as reported, this should have a positive impact on price," said Snell. "Growers will also benefit from a one-cent per pound no-net cost fee on the 2001 crop, down from three cents per pound assessed on last year's crop."

Nearly 65 percent of the 2001 burley crop will be sold under contract directly to cigarette manufacturers and leaf export dealers. This compares to 27 percent sold under contract last season.

Production estimates coupled with projected carryover burley from the 2000 crop likely will result in around 400 million pounds available for the 2001-2002 market. However, quota limitations are expected to constrain marketings to around 340 to 350 millions pounds.

"Even though we had over a 30 percent increase in basic quota this year, the quota still remains about half of what it was back in 1997," Snell said. "Incoming revenue is price times quantity and the price will be good, but I'm sure we would like to have some more pounds available to sell."

Snell said demand conditions are favorable for the possibility of buyers purchasing most of the 2001 burley crop. Therefore, pool stocks are not expected to increase significantly above their present level of about 125 million pounds.

Contact: 

Will Snell, (859) 257-7288