| OU 296 | February 12, 1996 |
Buying intentions for next year were submitted at 475.5 million pounds. This was one of the last unknowns and had a major impact in determining the flue-cured tobacco formula estimates for the 1996-97 national marketing quota. After several years of highs and lows in buying intentions, this estimate was in the middle of previous estimates and keeps quota levels fairly stable. After 1993 intentions of 473 million pounds (see table 1), the 1994 intentions were only 288 million; however, the 10 percent reduction limit was in place and basic quota was only reduced by 10 percent. After expectations of a possible disaster in 1995, a buy-out agreement was reached and the 1995 intentions were 569.9 million pounds. This resulted in a basic and effective quota increase of about 16 percent for 1995 (basic +16.4 percent and effective +15.8 percent).
The formula components and calculations for 1993-1996 are presented in table 1. There are two different quotas included in formula calculations -- basic and effective quota. Basic quota is the actual quota (statutory) figure which is calculated in the formula; basic quota plus or minus the Secretary's discretionary adjustment is the national marketing quota. Effective quota is the basic quota plus or minus quota carryover from last year. The calculations shown are for the total flue-cured belt. For individual farmers, the important figure is the quota for their own farm or quotas they rent.
Several farm/tobacco groups and farmers had indicated they would like to see the 1996 quota close to 1995. Based on this, it was likely the Secretary would choose an adjustment around the -3 percent discretion. This finalized the 1996 flue-cured basic quota of 973.6 mil. lbs. (- 6.5 percent) and an effective quota of 943.6 mil. lbs. (+ 2 percent).
| Item | 1993 | 1994 | 1995 | 1996 |
|---|---|---|---|---|
| Buying Intentions | 473.0 | 288.0 | 569.9 | 475.5 |
| 3 Year Avg. Exports | 405.6 | 391.3 | 371.5 | 344.8 |
| Total | 878.6 | 679.3 | 941.4 | 820.3 |
| Reserve Supply | 133.8 | 133.8 | 120.4 | 140.2 |
| Dec. Loan Stocks | 124.2 | 316.8 | 98.3 | 59.9 |
| Mkt'g Adjustment | 9.6 | -183.0 | 22.1 | 80.3 |
| 3 Part Total | 888.2 | 496.3 | 963.5 | 900.6 |
| Sec. Discretion | ||||
| Quantity | 3.6 | 0.0 | -28.9 | -27.0 |
| Percentage | 0.4 | 0.0 | -3.0 | -3.0 |
| Basic Quota | 891.8 | 802.6 | 934.6 | 873.6 |
| Percentage | 0.0 | -10.0 | 16.4 | -6.5 |
| Quota Carryover | -2.2 | -4.1 | -9.7 | 70.0 |
| Effective Quota | 889.6 | 798.5 | 924.9 | 943.6 |
| Percentage | -1.0 | -10.2 | 15.8 | 2.0 |
| Note: 1994 Basic Quota limited by law to 10 percent maximum decrease. | ||||
With the certainty of 1996 quota levels, the South Carolina tobacco industry started preparations for producing the crop. This past winter saw several new greenhouses built for transplant production. Much of this was prompted by the terrible 1995 plant situation for traditional plant beds.
The 70 million pounds of 1995 under-marketings will be added to the 1996 basic quota to derive the actual quota available for planting, or the effective quota. These are primarily from North Carolina followed by Georgia. It is currently estimated that South Carolina will only have about a 3 mil. lb. increase in effective quota. One implication of this may be the need to shift buyers during this next marketing year. If there are any changes in buyers, it would not likely benefit this state.
Another issue with this large carry-over may be the concentration of these pounds in a region and on individual farms. This could mean that individual producers may be limited by their fixed assets ( plants, harvesters, barns, labor, etc.) on a single year basis. This could tend to cause another year of production short-falls and more carry-over in the future.
One important issue within the state has been the possibility of changing marketing rates. Another discussion is a check-off program to fund tobacco research in the state. These are under consideration at the present.
At this time, it seems that the world situation for flue-cured tobacco still remains rather tight. Assuming normal weather and quality, we should see at least another year of moderate to excellent demand for the 1996 crop.
1996 by Department of Agricultural and Applied Economics, Clemson
University.
