December 10, 2003 | By: Haven Miller

Although the tobacco industry did not see a buyout plan materialize in 2003, Kentucky burley producers still had some positives for the year.

“We saw a slight rebound in exports, imports were down, and even though we had an 11 percent quota cut this year the higher yields resulted in higher production levels and prices were at record levels,” said Will Snell, Extension tobacco marketing specialist in the University of Kentucky College of Agriculture.

In comments to Kentucky Farm Bureau members meeting in Louisville, Snell said cash receipts for tobacco should stabilize around $450 million in 2003 compared to $443 million for last year.  He said growers also will benefit from $130 million in Phase II payments and share in the recent $200 million grower lawsuit settlement agreement.

On the negative side, U.S. tobacco producers have seen a 15 percent drop in domestic cigarette sales since 1997, and have experienced a 17 percent decrease in exports over the last six years. 

The problem not only is the level of cigarette sales, but who is selling the product, Snell said.  He noted that importers and deep-discount companies now control a greater market segment than before.

“We’ve gone from a situation where historically we’ve had 6 or 7 tenths of a pound of U.S. burley in every 1,000 cigarettes to now less than 3 tenths of a pound,” he said.  “This increase in the utilization of foreign tobacco has implications on company purchase intentions, and purchase intentions of course affect quota.”

Snell said based on a 10 percent drop in flue-cured intentions, flue-cured farmers could see around a 20 percent drop in quota for 2004.

If burley intentions fall by the same percent as flue-cured, burley farmers could see as much as a 10 to 15 percent quota reduction for 2004.

“After seeing receipts go from $900 million in 1998 to nearly half that figure now, there’s no doubt we need a tremendous change in our tobacco policy, we need to get a large number of people out of the sector by compensating them for their quota assets, and we need to create a new market opportunity for those who remain as active growers in order to regain some of the market,” he said.

This year’s U.S. burley basic quota totaled 288 million pounds, which is 60 percent below the near-record high 1997 quota.


Source: Will Snell, 859-257-7288