dark tobacco trends, issues and outlook will snell, university of ky
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Dark Tobacco Trends, Issues and
Outlook
Will Snell, University of KY
U.S. Tobacco BuyoutOctober 2004
… would lead to challenges and opportunities which would vary by type and geographic location
0
10000
20000
30000
40000
50000
60000
70000
1992 1997 2002 2007
Agricultural Economics
Number of Farms Growing Tobacco in KYNumber of Farms Growing Tobacco in KY
Source: USDA AG Census
Adair
Allen
Anderson
Ballard
Barren
Bath
Bell
Boone
Bourbon
Boyd
Boyle
Bracken
Breathitt
Breckinridge
Bullitt
ButlerCaldwell
Calloway
Campbell
Carlisle
Carroll
Carter
Casey
Christian
Clark
Clay
Clinton
Crittenden
Cumberland
Daviess
Edmonson
Elliott
Estill
Fayette
Fleming
Floyd
Franklin
Fulton
Gallatin
Garrard
Grant
Graves
Grayson
Green
Greenup
Hancock
Hardin
Harrison
Hart
Henderson
Henry
Hickman
Hopkins
Jackson
Jefferson
Jessamine Johnson
Kenton
Knott
Knox
Larue
Laurel
Lawrence
Lee
Leslie Letcher
Lewis
Lincoln
Livingston
Logan
LyonMccracken
Mccreary
Mclean
MadisonMagoffin
Marion
Marshall
Martin
Mason
MeadeMenifee
Mercer
Metcalfe
Monroe
Montgomery
Morgan
Muhlenberg
Nelson
Nicholas
Ohio
Oldham
Owen
Owsley
Pendleton
Perry
Pike
Powell
Pulaski
Robertson
Rockcastle
Rowan
Russell
ScottShelby
Simpson
Spencer
Taylor
ToddTrigg
Trimble
Union
Warren
Washington
Wayne
Webster
Whitley
Wolfe
Woodford
Harlan
Purchase11% (+5%)
Mid Western19% (+5%)
Northern KY10% (-1%)
Central KY25% (+3%)
Bluegrass30% (-6%)
Eastern KY6% (-6%)
Distribution of Total (Burley + Dark)Tobacco Production (Pre vs Post- Buyout)
Top 7 Value of Tobacco Producing Counties:Pre (1980-2004) vs Post Buyout (2007)
Adair
Allen
Anderson
Ballard
Barren
Bath
Bell
Boone
Bourbon
Boyd
Boyle
Bracken
Breathitt
Breckinridge
Bullitt
ButlerCaldwell
Calloway
Campbell
Carlisle
Carroll
Carter
Casey
Christian
Clark
Clay
Clinton
Crittenden
Cumberland
Daviess
Edmonson
Elliott
Estill
Fayette
Fleming
Floyd
Franklin
Fulton
Gallatin
Garrard
Grant
Graves
Grayson
Green
Greenup
Hancock
Hardin
Harrison
Hart
Henderson
Henry
Hickman
Hopkins
Jackson
Jefferson
Jessamine Johnson
Kenton
Knott
Knox
Larue
Laurel
Lawrence
Lee
Leslie Letcher
Lewis
Lincoln
Livingston
Logan
LyonMccracken
Mccreary
Mclean
MadisonMagoffin
Marion
Marshall
Martin
Mason
MeadeMenifee
Mercer
Metcalfe
Monroe
Montgomery
Morgan
Muhlenberg
Nelson
Nicholas
Ohio
Oldham
Owen
Owsley
Pendleton
Perry
Pike
Powell
Pulaski
Robertson
Rockcastle
Rowan
Russell
ScottShelby
Simpson
Spencer
Taylor
ToddTrigg
Trimble
Union
Warren
Washington
Wayne
Webster
Whitley
Wolfe
Woodford
Harlan
Agricultural Economics
Post-Buyout Pre-Buyout
Includes both burley and dark tobaccos
Note Barren County was also in the top 7 pre-buyout
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Flue-Cured Burley Dark
Source: NASS/USDA
Agricultural Economics
Percentage Change in Acres Percentage Change in Acres Since the Tobacco BuyoutSince the Tobacco Buyout
0
5000
10000
15000
20000
25000
30000
2000 2002 2004 2006 2008
Dark AirDark Fire
Source: NASS/USDA
Agricultural Economics
US Dark Tobacco AcresUS Dark Tobacco Acres
+21%
+38%
Agricultural Economics
Issues Affecting Expansion of U.S. Dark Tobacco Production
• Growing Smokeless Tobacco Consumption (smoking restrictions, effective marketing, health issues)
• Profitability of Dark Tobacco Production• Grower Confidence and Trust with Buyers• Entry of New Dark Tobacco Companies
(Cigarette Mfgs) and New Tobacco Products
Increasing Dark Acres at the Expense of Burley Acres
Source: Universal Leaf
Agricultural Economics
Share of World Dark Fire-Cured Production – 2008Share of World Dark Fire-Cured Production – 2008
U.S44%
Africa21%
Indonesia14%
Italy6%
Others15%
0
20
40
60
80
100
1990 1995 2000 2005
Mill
ion
Lb
s
Agricultural Economics
U.S. Snuff Tobacco Consumption
Source: USDA/ERS and TMA
+4% to +7% Annual Growth
Value of Kentucky Dark Tobacco Value of Kentucky Dark Tobacco ProductionProduction
0
25
50
75
100
125
150
2000 2001 2002 2003 2004 2005 2006 2007 2008
Agricultural Economics
Source: Ky Ag Stats/NASS, 2008 Estimate by UK
Million Dollars
Value of Kentucky Tobacco ProductionValue of Kentucky Tobacco Production
0
100
200
300
400
500
600
2000 2001 2002 2003 2004 2005 2006 2007 2008
Dark
Burley
Agricultural Economics
Source: Ky Ag Stats/NASS, 2008 Estimate by UK
Million DollarsDark will likely account for more than 30% of Kentucky’s total tobacco value in 2008 vs its
historic level of 5 to 7%
Value of Tennessee Tobacco ProductionValue of Tennessee Tobacco Production
0
25
50
75
100
125
150
175
200
2000 2001 2002 2003 2004 2005 2006 2007 2008
Dark
Burley
Agricultural Economics
Source: Ky Ag Stats/NASS, 2008 Estimate by UK
Million DollarsDark now accounts for well over ½ of
Tennessee’s total tobacco value
0102030405060708090
100
2002 2004 2006 2008
Million Lbs
Dark AirProduction
Dark FireProduction
Total DarkUse
Agricultural Economics
U.S. Dark Tobacco Production vs. UseU.S. Dark Tobacco Production vs. Use
Source: ERS/NASS/USDA, 2008 Estimates Based on September Crop Report
Is This ExpansionToo Much?
0
10
20
30
40
50
60
70
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Million Lbs
Agricultural Economics
Dark Fire-Cured: Production vs. UseDark Fire-Cured: Production vs. Use
Production
Use
Source: FSA/ERS/USDA
0
5
10
15
20
25
30
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Million Lbs
Agricultural Economics
Dark Air-Cured: Production vs. UseDark Air-Cured: Production vs. Use
Production
Use
Source: FSA/ERS/USDA
0
50100
150200
250300
350400
450
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Million
Lb
s
DomesticUseExports
Production
Agricultural Economics
Source: NASS/ERS/USDA2006-2008 Disappearance Estimates by UK/UT
U.S. Burley Disappearance (Exports + Domestic Use) vs. Production
Potential Needs for 2008-09? 200 Mil lbs ???
U.S. Tobacco BuyoutOctober 2004
• FDA ???
• Tobacco Taxes ???
• Smoking Restrictions ???
Tobacco Policy2009
Issues Affecting Dark Tobacco OutlookIssues Affecting Dark Tobacco Outlook
• Supply Side:
– Contract Levels/Prices– Input Prices
» Fertilizer» Labor» Credit
– Profitability of Other Crops/Enterprises
• Demand Side– Recession– Smoking Restrictions– Consumer Acceptance of
New Products– Tax Increases/FDA
What does the future hold?
• Acres will decline from 2008 levels, but remain relatively high• Management expertise will keep acres located in this area … but others will try•Will company/grower relations remain strong?• Health debate holds the potential for continued expansion•Will an export market materialize for dark tobacco/products?
Average Tobacco YieldsAverage Tobacco Yields
0
500
1000
1500
2000
2500
3000
3500
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Po
un
ds
Pe
r A
cre
Burley Dark Fire Dark Air
Agricultural Economics
Source: NASS/USDA
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