Friday, February 13, 2015

HOW BIG WILL THE 2015 CROP REALLY BE?

These greenhouses in east Tennessee will be seeded soon. 
But how many more will be needed?
The U.S. flue-cured crop in 2014 was in excess of 500 million pounds,
said Tim Yarbrough, president of the Tobacco Growers Association of 
N.C., at the association's annual meeting on February 6. How much in 
excess? Yarbrough calculated that if, as has been reported, North Carolina
marketed 440 million pounds in 2014, then beltwide production would have 
been 515 to 520 million pounds. That definitely exceeded demand. "It 
is estimated that the amount of contract issued last year was in the range 
of 460 to 480 million pounds," he said. "Obviously, we over-produced, by 
perhaps as much as 13+ percent."

To make the situation even worse, "A mega volume of inventory 
from China has [apparently] been offered to the global marketplace 
at a super-discounted price," said Yarbrough. It is in all likelihood 
filler style leaf that does not normally compete head to head with anything 
produced in America. "But at a bargain price, it most certainly can be 
described as 'usable' and therefore likely having influence on our current
set of circumstances," he said.

Bad news from South of the Border: Brazil overproduced in 2014 and 
has an accumulated inventory of more than 300 million pounds.
"That [inventory] is...work[ing] its way into the global marketplace," said 
Yarbrough. "We also hear that the current crop [2015] in South America 
[including Brazil] is too large, which further contributes to the 
oversupply situation."

The predicament for American burley: Tobacco companies only 
need around 170 to 180 million pounds of burley leaf from this past 
season, but growers produced around 200 million pounds or higher.
Will Snell, Kentucky Extension economist, said last week that production 
will still likely be greater than anticipated use, explaining the lower prices. 
In 2015, excess world burley supplies and slumping demand will likely 
induce tobacco companies to reduce contract volumes in the U.S. and 
South America in 2015, Snell said. Cheaper international leaf, combined
with an appreciating U.S. dollar, may reduce the competitiveness of U.S. 
burley in international markets and overall export volume may decline. 
There has been a lot of volatility in prices this last growing season, Snell 
said, as the market has gone from "somewhat of a seller's market" to 
"more of a buyer's market."

Dark outlook a little brighter: The 2014 U.S. dark fire-cured crop is 
expected to total around 50 million pounds, with the 2014 U.S. dark air-
cured crop totaling around 15 million pounds (just slightly above last 
year's levels), said Snell. Expansion in smokeless tobacco consumption 
appeared to slow in 2014, but the current supply/demand balance for dark 
tobaccos indicates relatively strong leaf prices for the current crop--$2.65 
to $2.70 per pound for top quality dark-fire and $2.35 to $2.40 per pound 
for dark-air.

There are some other demand factors that could still favorably affect 
2015 production of flue-cured and burley. Regular sources tell me China 
apparently intends to buy a little more U.S. flue-cured this season. 
As reported in the last issue, there is apparently a little more demand for 
U.S. organic tobacco, partly from the traditional buyer, Santa Fe 
Natural Tobacco, and partly from a new company, Swiss Organic 
Tobacco Co., which has reportedly bought U.S. flue-cured and burley 
leaf to make an organic cigarette for sale in the European market.

Weather could affect our competition: In Africa, Zimbabwe and Malawi 
have clearly suffered losses as a result of intense rains, which may improve
our competitive position. But there is still much confusion as to how much. 
One flue-cured grower--Portia Gurira of Beatrice, Zimbabwe--told 
the Zimbabwe Herald that she planted her crop late due to the late rains. 
"We planted late and a mid-season dry spell affected the crop, and 
this reduced yields significantly. [Now] we have a late crop. We started 
reaping yesterday [February 11]. Last year, during the same period, we 
were already curing." 

Malawi's yield will be less than half of last year's, according to Afriem
an online website specializing in news on Malawi. "Erratic winds and 
cyclones destroyed many of the fields of this country," Afriem reported. 
"Additionally, poor distribution of subsidized fertilizer also resulted in stunted 
growth of tobacco in some of the country's districts." Malawi's production is
 primarily burley."

In Zambia, which neighbors both Zimbabwe and Malawi, the experience 
for the coming crop has run parallel to what American farmers are facing. 
Albert van Wyk, general manager of the Tobacco Association of Zambia, 
told Tobacco Farmer Newsletter on February 11, "Merchants have given very 
strong indications here that only contracted tobaccos will be bought," said 
Van Wyk. "Lower plant positions are unwanted." The rains that have 
so damaged the Malawi and Zimbabwe crop have not affected Zambian 
tobacco, Van Wyk says. "We haven't had any floods! We had a very dry 
start to the season, but in the last five weeks rain has not been in short 
supply." Zambia produces burley, flue-cured and fire-cured.

So how much will Americans produce? On February 2, just before the 
annual meeting, Universal Leaf issued its final estimate for 2014 and its 
initial projection for 2015. For flue-cured, it estimated that 525 million 
pounds were produced last year and 485 million pounds would be 
produced in 2015. That would be a decrease of only eight percent, 
low compared to almost all other projections. It estimates 2014 
American burley production at just under 200 million pounds and 
projects 2015 production at 176 million pounds, an 11 percent 
decrease, which again is a more optimistic figure than has been 
going around.

In other news from the TGANC Annual Meeting:

A group of 38 young tobacco growers and agriculture professionals 
participated in the 2015 N.C. State Tobacco Short Course, which 
concluded at the TGANC meeting. "Since the tobacco industry faces 
continuous change, we need to make sure our younger farmers, their 
advisors and other allied industry representatives are able to focus on how 
to attain efficient quality tobacco production," says W.K. "Bill" Collins, the
retired director of N.C. State Tobacco Extension program. Co-directing
 the program with Collins was Loren Fisher. The Short Course was conducted 
by the N.C. Tobacco Foundation in partnership with the College of Agriculture 
and Life Sciences at N.C. State University. It was funded with a grant by the 
N.C. Tobacco Research Commission from the 10-cent per hundred pounds 
of tobacco sold via a self-assessment paid at the point-of-sale. Out-of-
state participants pay their own expenses. This year's group was the most 
diverse yet, including participants from Louisiana, South 
Carolina and China, though the majority were North Carolinians. 
Following are the participants:



--FARMERS: N.C.--Zach Morris of Bertie Co.; Hunter Walters of Bladen Co.;
 Channing and Grayson Foley, of Columbus Co.; Will Brinkley of 
Davidson Co.; Taylor Fitzpatrick and Taylor Ray of Franklin Co.; Daniel 
Watkins of Harnett Co.; Jason Barbour, Blake Thomas, and Chance Thornton 
of Johnston Co.; Bryan Salmons of Nash Co.; David Thomas of Person Co.; 
Kevin Dixon and Derick Lasley of Rockingham Co.; Zack Boles of Stokes 
Co.; and Rob Fulghum, Patrick Owens and Thomas Webb of Wilson Co. Out-
of-state tobacco farmers: Brothers Alan Gravois, Jr., and Brandon 
Gravois, both of St. James Parish, Louisiana; Tim Griggs of Hartsville, 
S.C., and Ben Teal of Patrick, S.C.



--GOVERNMENT: N.C. Department of Agriculture--Mike Wilder, 
regional agronomist; Jonathan Barbour, field crop supervisor of the 
Central Crops Research Station at Clayton; and Tobacco Technicians 
R.T. Elliott, Robert Overton and John Shotwell, all of the Oxford 
Tobacco Research Station at Oxford. Cooperative Extension 
Service--Jarrett Hurry of Bertie Co.; Gary Cross of Granville Co.; and 
John Ivey of Guilford Co.



--INDUSTRYCrop Consultants--Carson Barnhill and John Hoffner of 
Carolina Precision Consulting of Wake Co; Scott Uzzell of Fowler Crop 
Consulting, Inc. of Halifax Co; and Sarah Arthur of Jones Co. Tobacco 
Services--Cory Wade of Coastal AgroBusiness of Greenville. N.C. State 
University Student: Hailey Askew of Nash Co. Note: Zanhoug Gan of 
China Tobacco International, Raleigh, N.C., also participated in 
the event.










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