Flue-cured buying intentions for next year were submitted to USDA on December 1st. Buying intentions for next year are 454.6 million pounds; given the Tobacco Agreement negotiations/ uncertainty and increasing world supplies, this was generally a positive figure.

Buying intentions was a major unknown in determining the flue-cured tobacco formula estimates for the 1998-99 national marketing quota. One large uncertainty still open is the "Secretarial Discretion" portion of the quota formula. Secretarial Discretion means that the Secretary of Agriculture has the option to raise or lower the base quota by the range of plus or minus 3 percent.

The formula components (as of Dec. 1) and three options for the Secretary's discretionary adjustment, are presented in Table 1. Most of the data are based on estimates by Dr. Verner Grise; USDA/FSA/TPD. Several of the final data such as the December 1 stabilization stocks may vary slightly from the figures below.

The basic and effective quotas are two different quotas included in formula calculations. Basic quota is the statutory quota 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 (estimated below) from last year. The alternatives shown in the next table are for the total flue-cured belt. For individual farmers, the important figure is the quota for their own farm or quotas they rent.

The quota is announced December 15. Until that time, the critical issue is the action of the Secretary. Over the past few years, the Secretary has used the -3.0 percent discretion. From Table 1, the projected 1998 basic quota is expected to range from -17 percent to -22 percent. When quota projections are extended to 1999, the Secretarial discretion becomes even more important. By making some conservative estimates for 1999 (Buying Intentions = 455; Exports = 380; Loan Stocks = 289 (an additional 100 mil. lbs.), and, Sec. Discretion = -3%), a projection of an additional 20 percent decline from 1998 is estimated. There are no more 10 percent restrictions on quota reduction. If the purpose of the Secretary is to lessen the impact of quota changes, then a +3 percent adjustment may be warranted.

Table 1. 1998 Flue-Cured Tobacco Formula Estimates With Three Alternatives for the Secretary, as of December 1.

Item	1995	1996	1997	1998a	1998b	1998c
-------------------------------million pounds --------------------------------
Buying Intentions	569.9	475.5	535.5	454.6	454.6	454.6
3 Yr Avg Exports	371.5	344.8	343.3	371.9	371.9	371.9
Total	941.4	820.3	878.8	826.5	826.5	826.5
Reserve Supply	120.4	140.2	131	146.1	146.1	146.1
Dec. Loan Stocks	98.3	59.9	5.9	188.5	188.5	188.5
Mktg. Adjustment	22.1	80.3	125.1	-42.4	-42.4	-42.4
3 Part Total	963.5	900.6	1003.9	784.1	784.1	784.1
Sec. Discretion Quantity Percentage	-28.9	-27.0	-30.1	23.5	0.0	-23.5
	-3.0%	-3.0%	-3.0%	+3.0%	0.0%	-3.0%
Basic Quota Percentage	934.6	802.6	973.8	807.6	784.1	760.6
	+16.4%	-10.0%	+16.4%	-17.1%	-19.5%	-21.9%
Over/Under Marketings	-9.7	70.0	46.0	6.0	6.0	6.0
Effective Quota Percentage	924.9	872.6	1019.8	813.6	790.1	766.6
	-1.0%	-10.2%	+15.8%	-20.2%	-22.5%	-24.8%

Notes: Three alternatives are based on Secretary Discretion of: (a) -3%; (b) no change; and, (c) +3%. Some figures are preliminary and will likely change.

The 1998 flue-cured basic quota will likely be reduced by 17-22 percent. This will have a major impact on our farmers and industry. The effective quota should not be significantly different from basic because of the small carry-over. Immediate focus must be given to the Secretary's Discretionary adjustment. Producers renting in quota for 1998 need to be aware that as quantity declines, rental rates tend to increase; if so, they must utilize their records prior to making rental decisions. A major longer-term effort must be undertaken in dealing with the program. Will the Tobacco Agreement offer this opportunity and, if so, will farmers be prepared to take advantage?

THE CLEMSON UNIVERSITY COOPERATIVE EXTENSION SERVICE OFFERS ITS PROGRAMS TO PEOPLE OF ALL AGES, REGARDLESS OF RACE, COLOR, SEX, RELIGION, NATIONAL ORIGIN, OR HANDICAP AND IS AN EQUAL OPPORTUNITY EMPLOYER.
COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME ECONOMICS--STATE OF SOUTH CAROLINA, CLEMSON UNIVERSITY, U.S. DEPARTMENT OF AGRICULTURE, AND SOUTH CAROLINA COUNTIES COOPERATING.

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updated 12/04/97