Dark Tobacco Trends, Issues and Outlook

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Dark Tobacco Trends, Issues and Outlook Will
Snell, University of KY
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U.S. Tobacco Buyout October 2004
would lead to challenges and opportunities
which would vary by type and geographic location
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Number of Farms Growing Tobacco in KY
Source USDA AG Census
Agricultural Economics
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Distribution of Total (Burley Dark)Tobacco
Production (Pre vs Post- Buyout)
Northern KY 10 (-1)
Bluegrass 30 (-6)
Central KY 25 (3)
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Top 7 Value of Tobacco Producing CountiesPre
(1980-2004) vs Post Buyout (2007)
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Includes both burley and dark tobaccos
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Post-Buyout
Pre-Buyout
Note Barren County was also in the top 7
pre-buyout
Agricultural Economics
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Percentage Change in Acres Since the Tobacco
Buyout
Source NASS/USDA
Agricultural Economics
7
US Dark Tobacco Acres
38
21
Source NASS/USDA
Agricultural Economics
8
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
Agricultural Economics
9
Share of World Dark Fire-Cured Production 2008
Source Universal Leaf
Agricultural Economics
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U.S. Snuff Tobacco Consumption
4 to 7 Annual Growth
Source USDA/ERS and TMA
Agricultural Economics
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Value of Kentucky Dark Tobacco Production
Million Dollars
Source Ky Ag Stats/NASS, 2008 Estimate by UK
Agricultural Economics
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Value of Kentucky Tobacco Production
Million Dollars
Dark will likely account for more than 30 of
Kentuckys total tobacco value in 2008 vs
its historic level of 5 to 7
Source Ky Ag Stats/NASS, 2008 Estimate by UK
Agricultural Economics
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Value of Tennessee Tobacco Production
Million Dollars
Dark now accounts for well over ½ of Tennessees
total tobacco value
Source Ky Ag Stats/NASS, 2008 Estimate by UK
Agricultural Economics
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U.S. Dark Tobacco Production vs. Use
Is This Expansion Too Much?
Source ERS/NASS/USDA, 2008 Estimates Based on
September Crop Report
Agricultural Economics
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Dark Fire-Cured Production vs. Use
Production
Use
Source FSA/ERS/USDA
Agricultural Economics
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Dark Air-Cured Production vs. Use
Production
Use
Source FSA/ERS/USDA
Agricultural Economics
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U.S. Burley Disappearance (Exports Domestic
Use) vs. Production
Potential Needs for 2008-09? 200 Mil lbs ???
Source NASS/ERS/USDA 2006-2008 Disappearance
Estimates by UK/UT
Agricultural Economics
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U.S. Tobacco Buyout October 2004
Tobacco Policy 2009

• FDA ???
• Tobacco Taxes ???
• Smoking Restrictions ???

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Issues 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

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• 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?

21
Average Tobacco Yields
Source NASS/USDA
Agricultural Economics