OU 362

July 27, 2001

TOBACCO SITUATION AND MARKETING SCHEDULE UPDATE FOR 2001
R.W. Sutton, Extension Ag. Economist

MARKET UPDATE: South Carolina tobacco auction markets opened July 24th with 13 warehouses and about 1.5 sets of buyers (three sets for type 13). According to USDA, there are 80 flue-cured warehouses that opened this season as compared to nearly 150 last year.

About 82 percent of S.C. tobacco is being contracted this year and will not be marketed through the auction system. Nearly 12.4 million pounds were designated as of July 18, out of a total 67.8 million pounds of effective state quota. This means that some warehouses/markets did not have a large quantity designated and thus, sales will be not be as often as in the past. This could cause some problems with the system as producers could find themselves selling lower-stalk tobacco while the market has already moved into leaf or even upper-stalk grades.

The down-side of this short-term assistance is the tax liability of these payments. Coupled with the reduction in production expenses (lower quotas), the immediate and long-term tax consequences are highly important. Although the specific situation is different for each, everyone must be involved now in their own calculations and using all types of unbiased financial help to plan the future. The result of actions today and especially during this current tax year will be important for years to come.

South Carolina entered this year with some 12 percent of quota already produced or reported as carry-over to FSA. Much of this is due to an increase in yield last year and the inability of many production systems to be efficient at nearly one-half capacity. Given the excellent season this year, carry-over will likely be an even larger problem next year.

A recent preliminary report of the President's Commission (charged by President Clinton) called for, among many other things, a tobacco production control program being in the best interest of the public health and tobacco producer communities, the voluntary buying out of existing quota owners/growers, and tobacco growing states and communities receiving funds to enhance economic infrastructures. One may or may not agree with this document but it is the one recent comprehensive policy analysis and could be relied on heavily for possible changes.

S.C. TOBACCO CROP: Starting harvest, the 2001 crop may be as good or even the best in overall quality crops in modern times. Although there are a few exceptions with weather and especially disease, most of the growing area received timely rains and excellent growing conditions. This crop should offer a relatively large amount of high quality grades for buyers.

Generally, growing conditions have been exceptional with the present situation looking as if a superior quality crop will be marketed. However, the production of specific high quality grades will now depend directly on the producer and harvesting/curing practices. In the past, buyers sent a very costly message to South Carolina that they wanted tobacco harvested in three or more stalk positions and to follow other recommended practices. This was communicated in the form of the large amount of previous crops (prior to 2000) that went to stabilization. This past year, the voluntary quality assurance program and several educational activities emphasized improving quality.

Whether contracting or selling through the auction system, growers must utilize detailed management practices to ensure they market the highest quality product. Although most S.C. producers generally take extra care and follow excellent management steps to ensure the highest possible quality, it is especially important to review some of these factors. These include: harvest three or more stalk positions; market only clean/uniform packaged tobacco; and, use only labeled rates of recommended pesticides. All producers must also continue to improve in lowering MH residues and give close attention to recommended practices. It is recommended that Prime⁺ be combined with MH to enhance late-season sucker control in lieu of additional MH. Growers should make extra effort to harvest and cure mature, ripe leaves, being careful with the curing process. They should take special care to remove all foreign matter, oxidized leaf, and green tobacco. Buyers have spoken -- harvest tobacco in three or more stalk positions and use proper practices in harvesting and curing.

MARKETING SCHEDULE: The 2001 South Carolina/North Carolina type 13 marketing schedule follows. This schedule is based on the "X Schedule" by Tony Fowler and Mickey Smith, USDA Tobacco Division in Raleigh, NC. This schedule is based on three sets of buyers in Area B. The "sandtraps" or markets that share sets of buyers are: one set rotating between Conway, Darl-Timm, King-Hemmi, and Lake City; one set sharing Loris, Mullins and Fairmont-F. Bluff (NC); and the third set sharing Tabor-Whiteville (NC) and Clark-Chad (NC). No warehouses are operating this year in the towns of Darlington or Hemmingway plus Lumberton (NC) market.

Contracting has been a major change in our marketing system. It is unknown how long or what form the auction/non-contract selling process will take in the future. Given the problems with operating a minor or almost residual auction marketing system, it is uncertain how present policies such as designation will or can operate in the years to come. A dual marketing system can survive but could potentially cause more complexity to the system if changes are not made.

2001 SOUTH CAROLINA/NORTH CAROLINA TYPE 13 TOBACCO MARKET SCHEDULE

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Clemson University Cooperating with U.S. Department of Agriculture, South Carolina Counties, Extension Service, Clemson, South Carolina. Issued in Furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of May 8 and June 30, 1914.

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