Tobacco Situation & Outlook

2009 Production

According to USDA's crop report, U.S. Flue-Cured tobacco acreage was estimated at 223,500 in 2009, up 500 acres from 2008.  Estimated average yield per acre was 2,307 pounds, up 3.0% from 2008.  The 2009 flue-cured tobacco crop production estimate was 515.5 million pounds, up 3.3% from 499.2 million pounds in 2008.  Within North Carolina, the largest flue-cured producing state, acreage was 174,000 acres, up 3,000 acres from 2008.  Production in North Carolina was estimated at 417.4 million pounds, up 8% from 2008.  Production in South Carolina is estimated to be 37 million pounds in 2009, down 7% from 2008.  Acreage in South Carolina was 18,500 acres in 2009. 

Global flue-cured tobacco production is expected to be 9.46 billion pounds in 2009, up about 3% from 2008 according to Universal Tobacco Company's August 2009 issue of "World Leaf Production Summary".  Production was up in China and estimated to be about 5.18 billion pounds.  Brazilian flue-cured production (the chief competition to U.S. Flue-Cured) declined from 1.340 billion pounds in 2008 to 1.316 billion pounds in 2009.  

Prices and Costs

Tobacco market prices are difficult to estimate since official market reporting was eliminated with the buyout.  Flue-cured tobacco prices likely averaged $1.80 to $1.85 per pound for the 2008 crop, up about 30 cents from 2007.  While the 2007 to 2008 price increase was up about 20% for some producers, production costs have increased by a similar level due to increased fuel and fertilizer costs. Increased production costs dampened anticipated increases in production despite higher prices.

Fertilizer and LP gas prices, the major input costs besides labor, reached record levels in 2008.  Nitrogen prices in spring 2008 were up about 75% from spring 2005, the first season after the tobacco buyout.  Phosphate and potash prices were up over 143% in spring 2008 from their levels in spring 2005.  Fertilizer prices continued to rise in summer 2008 before declining this fall.  The Food and Agriculture Organization of the United Nations forecasts world fertilizer production (N, P, and K) to outstrip demand over the next five years, allowing prices to decline.  With declining corn and soybean prices, declining petroleum prices, and increasing supplies of fertilizer, analysts expect fertilizer prices to be lower in 2009.

The record high 2008 fertilizer prices were blamed on soaring demand for fertilizer due to high corn, soybean and wheat prices, plus high petroleum prices.  LP gas prices rose to over $2 per gallon in 2008, but have declined this fall with declining petroleum prices.  Futures prices for LP gas for summer 2009 had declined to near $1 per gallon, but remain volatile and are up slightly for 2010.  While much uncertainty exists for both fertilizer and LP gas prices in 2010, flue-cured tobacco producers hope for some relief in input prices for the 2010 crop.   Additional information on the situation and outlook for flue-cured tobacco may be found at: http://cherokee.agecon.clemson.edu/tobacco.htm.

For more information, contact Dewitt T. Gooden, 843-662-3526, ext. 203, dgooden@clemson.edu.