Flue Cured Tobacco Quota Projections--Outlook Update 348

OU 348

October 12, 1999

FLUE CURED TOBACCO QUOTA PROJECTIONS FOR 2000
R.W. Sutton, Extension Ag Economist
D.T. Gooden, Extension Agronomist

The 2000 flue-cured basic quota will not be known until announced by USDA/FSA on December 15th. This quota level will serve as the basis of U.S. (and much of the world) flue-cured production for this next year. Given the present industry uncertainty and recent massive reductions, quota projections are especially important for South Carolina growers and industry.

An attempt was made to utilize the best current data and project the quota for this next year. Three different scenarios are presented in table 1.

Table 1. U.S. Flue-Cured Tobacco Formula Projections for 2000

Item	1994	1995	1996	1997	1998	1999	2000a	2000b	2000c
million pounds
Buying Intentions	288.0	569.9	475.5	535.5	454.6	327.0	340.0	315.0	288.0
3 Yr Avg Exports	391.3	371.5	344.8	343.3	371.9	355.2	330.0	325.0	320.0
Total	679.3	941.4	820.3	878.8	826.5	682.2	670.0	640.0	608.0
Res. Supply Level vel	133.8	120.4	140.2	131.0	146.1	121.1	100.0	100.0	100.0
Dec. Loan Stocks	316.8	98.3	59.9	5.9	188.5	157.6	225.0	230.0	235.0
Mkt'g Adjustment	-183.0	22.1	80.3	125.1	-42.4	-36.5	-125.0	-130.0	-135.0
3 Part Total	496.3	963.5	900.6	1,003.9	784.1	645.7	545.0	510.0	473.0
Sec. Discretion
Quantity	-14.9	-28.9	-27.0	-30.1	23.5	19.4	16.4	15.3	14.2
Pct. Change	-3.0%	-3.0%	-3.0%	-3.0%	3.0%	3.0%	3.0%	3.0%	3.0%
Basic Quota
Quantity	802.6	934.6	873.6	973.8	807.6	666.2	561.4	525.3	487.2
Pct. Change	-10.0%	16.4%	-6.5%	11.5%	-17.1%	-17.5%	-15.7%	-21.2%	-26.9%
Notes: This assumes that there will be no major sales from stabilization prior to December 1^st. If Projection A, B, or C (or comparable levels) were realized, this would be the smallest basic quota in modern times.

The three different estimates are shown under the columns labeled as "2000a", "2000b", and "2000c." The first, or "a" situation is intended to be the most optimistic while "c" is the most pessimistic. Table 2 helps explain the definition of the quota estimates.

Table 2. Explanation of U.S. Flue-Cured Tobacco Formula Components

Item	Explanation
BUYING INTENTIONS	Dec. 1 buying intentions submitted by the major buyers of leaf
3 YR AVG EXPORTS	Sum of past 3 years unmanufactured exports divided by three
RES. SUPPLY LEVEL (Reserve Supply Level)	Higher of: (1) 15% of last year's basic quota, or (2) 100 million pounds.
DEC. LOAN STOCKS	Quantity of surplus stocks owned by stabilization on Dec. 1st
MKT'G ADJUSTMENT	Reserve Supply Level minus Dec. 1 Loan Stocks
SUM RES. SUPPLY ADJUST. (Sum Reserve Supply Adjustment)	Sum of: Buyer Intentions, Exports, and Mkt'g Adjustment
SECRETARY'S DISCRETION	Secretary of Agriculture discretionary adjustment value between plus or minus 3 percent
BASIC QUOTA	Sum of Reserve Supply Adjustment and Secretary's Discretion

The projected buyer intentions were not optimistic since it is thought the manufacturing/exporting sector will be facing rather difficult/uncertain times in the future. The optimistic estimate was slightly above last year while the pessimistic value was equal to 1994. The "3 Yr. Ag. Exports" will also likely be lower since a very large single year value of over 390 m.p. (million pounds) drops from the formula. The "Dec. Loan Stocks" has been lowered since Hurricane Floyd and assumes pre-1999 stabilization stocks around 145 m.p. and another 80-90 m.p. for the 1999 receipts. This could be high if there are sales prior to December 1^st. The "Secretary's Discretion" is predicted to be +3% in all cases.

The result of the above assumptions is another devastating major quota reduction. The projected range is between 15 to 27 percent less. If this were to hold, South Carolina growers and quota holders would be facing a reduction of some 42 to 50 percent over a three year period. Phase II and other supplement programs will help, but probably not enough to salvage several operations, especially those with major living requirements and/or any amount of loan obligations. This is further complicated by a multitude of factors such as the possibility of major program changes (or even no program), contracting, lawsuits, etc.

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 10/12/99