An Overview

Tobacco Programs

The 2000 effective flue-cured tobacco quota reached another historical low at 561 million pounds, down from 671 million pounds in 1999. The 2000 basic quota was 543 million pounds, down from 668 million in 1999 and a 44 percent decline since 1997.

As the 2000 markets closed, Stabilization held about 202 million pounds in inventory, 102 million pounds over the required reserve. At the time of writing, efforts were in progress in Congress to obtain forgiveness from the government for the 1999 loan stocks of 88 million pounds. This would reduce the quota formula adjustment for Stabilization stocks from -102 to -14 million pounds.

The national basic quota is the sum of purchase intentions announced on December 1, a three-year average of unmanufactured exports, and an adjustment for the difference between Stabilization inventories and the required reserve level. Purchase intentions for the 2000 quota were 286 million pounds. The export average for the 2000 quota was 334 million pounds but was expected to decline to less than 300 million pounds for the 2001 quota.

Outlook

Disappearance of flue-cured tobacco for 1999 totaled about 699 million pounds, down from 834 million pounds the previous season. Domestic use declined from 492 million pounds in 1998 to 435 million in 1999. Unmanufactured exports declined from 342 million pounds in 1998 to about 263 million pounds in 1999.

U.S. cigarette production in 2000 was expected to be about 580 billion pieces, down from 637 billion in 1999. Both cigarette exports and cigarette production for the domestic market continued to decline. Cigarette exports were expected to be around 143 billion cigarettes, down from 177 billion in 1999. Production for the domestic market was expected to be about 420 billion cigarettes, down from 435 billion in 1999 and 465 billion in 1998.

The Tobacco Budget

Table 1-1. Flue-Cured Tobacco, U.S.

Year	Basic Quota	Effective Quota	Producer Sales	Total Supply	Domestic Use	Exports	Total Disappearance	Average Market Price	Price Support Rate	Stabilization Receipts		Acres Harvested	Yield	U.S. Cigarette Output
	-------------------------------------------------- (Mil. lb) --------------------------------------------------							($/lb)	($/lb)	(Mil. lb)	(% crop)	(1,000)	(lb/a)	(billions)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000	877 878 892 892 803 934 874 974 814 668 543	936 891 899 890 798 925 944 1,020 820 671 561	920 882 901 892 807 854 897 985 815 654 563	2,228 2,098 2,125 2,087 2,102 2,041 2,063 2,068 1,888 1,786	609 471 509 433 569 531 555 543 492 435	403 403 420 359 345 345 391 334 342 263	1,012 875 929 792 915 875 946 877 834 699	1.67 1.72 1.73 1.68 1.70 1.79 1.84 1.72 1.75 1.74 1.79	1.488 1.528 1.56 1.577 1.583 1.597 1.60 1.62 1.63 1.63 1.64	74 50 81 204 98 12 0 160 82 136 27	8 6 9 23 12 1 0 16 10 21 5	417 403 401 400 360 386 422 454 367 304 254	2,253 2,265 2,257 2,217 2,420 1,933 2,151 2,144 2,117 2,162 2,462	685 706 684 713 669 746 755 733 713 637 580

Source: Various tables in Tobacco Situation and Outlook Report, September 2000, USDA, Economic Research Service. Most of the data for 2000 are estimates.

Table 1-2. Flue-Cured Tobacco Revenue and Cost Estimates (per acre) for 40 Acres of Production

Category	Units	Price	Quantity	Value	Your Value
Receipts
Operating Inputs: Lime Applied FC Tobacco Seed Custom Fumigation 12-6-6, Bagged, P.B. 16-0-0, Bagged, P.B. Blue Mold Cntl.,P.B. Insecticide, P.B. Fld. Blue Mold Nematicide/Insect. Herbicide, Preplant 8-8-24, Bagged 16-0-0, Bagged Insecticide Contact, Suckers Systemic, Suckers Loc. Systemic, Suckers Cover Crop Curing Fuel Electricity Crop Insurance Building Insurance Selling Charges Market Assessment Tractor Fuel and Lube Tractor Repair Cost Mach. Fuel and Lube Mach. Repair Cost Equip. Repair Cost Total Operating Cost	Tons Oz Sq yd Cwt Cwt Gal Lb Gal Acre Gal Ton Ton Lb Gal Gal Gal Acre Gal Acre $ Acre $ Lb Acre Acre Acre Acre Acre	30.00 58.76 30.60 10.13 11.82 153.82 11.02 153.82 89.91 29.92 277.20 257.25 11.02 11.55 13.60 51.97 12.62 0.99 51.38 0.033 83.20 0.03 0.01	0.405 0.15 0.80 0.40 0.04 0.004 0.016 0.375 1.00 0.187 0.25 0.088 2.00 4.50 1.50 0.50 1.2 258.00 1 2898.00 1 3910.00 2300.00	$12.15 8.81 24.48 4.05 0.47 0.62 0.18 57.68 89.91 5.61 71.90 20.69 22.04 51.98 20.40 25.99 15.14 256.11 51.38 95.63 83.20 117.30 23.00 20.12 18.06 129.64 70.63 55.05 $1352.22	________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Returns to Land, Labor, Capital, Machinery, Quota, Overhead, and Management				$2557.58	________
Capital Costs Annual Oper. Cap. Tractor Investment Machinery Investment Equipment Investment Total Interest Charge		0.09 0.10 0.10 0.10	455.74 212.63 550.81 1160.44	41.02 21.26 55.08 116.04 $ 233.40	________ ________ ________ ________ ________
Returns to Land, Labor, Machinery, Quota, Overhead, and Management				$2324.18	________
Ownership Cost (Depreciation, Taxes, Insurance) Tractor Machinery Barns and Equipment Total Ownership Cost	$ $ $			16.68 86.25 150.59 $ 253.52	________ ________ ________ ________
Returns to Land, Labor, Quota, Overhead, and Management				$2070.66	________
Labor Cost: Machinery Labor Other Labor Total Labor Cost	Hr Hr	$ 6.75 5.50	23.42 121.07	158.08 665.88 $ 823.96	________ ________ ________
Returns to Land, Quota, Overhead, and Management				$1246.70	________
Prepared by G.F. Peedin and D. Smith, Crop Science Extension Specialists, and A. B. Brown, Extension Economist, November, 1996.

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