By Brad Haire
University of
Georgia
U.S. tobacco companies recently announced they will buy less
tobacco in 2003 than they did in 2002. But Georgia farmers will
probably plant more of the crop, says a University of Georgia
expert.
The companies said they intend to buy 283.3 million pounds of
tobacco in 2003, around 26.6 million pounds, or 9.4 percent,
less than their 2002 intention.
Cigarette makers are required to report each year to the U.S.
Dept. of Agriculture how much flue-cured tobacco they intend to
buy from U.S. auction markets and producers.
Less Quota?
The intentions could reduce the U.S. tobacco quota, the amount
of tobacco that farmers can grow and get government support
prices for, by as much as 6 percent to 9 percent, said J.
Michael Moore, a tobacco agronomist with the UGA College of
Agricultural and Environmental Sciences.
The USDA includes the companies’ buying intentions in a formula
that calculates the U.S. tobacco quota each year. The formula
also considers the U.S. export average over three years and the
reserve supply of the Flue-Cured Tobacco Cooperative, the farmer-
owned co-op that runs the federal tobacco program.
The formulas and business of tobacco can get complicated, Moore
said. But the announcement doesn’t necessarily mean less tobacco
in Georgia next year. In fact, due to poor growing conditions in
2002, tobacco acreage could increase in Georgia in 2003.
Missed Quota
Drought, insects and disease devastated the 2002 Georgia tobacco
crop. So Georgia farmers didn’t grow all the quota pounds they
were allowed to grow in 2002.
Georgia growers could have sold 60.7 million pounds in 2002. But
they were only able to grow and sell 52.4 million pounds, or 86
percent of their quota, Moore said. Under the current tobacco
program, Georgia farmers could make up the 14 percent difference
with the 2003 crop.
“Without the underproduction in 2002, growers would be looking
at a smaller crop next year,” he said.
Georgia farmers planted about 28,000 acres of tobacco in 2002.
Their gross tobacco farm-gate income was $96.5 million, about
$15 million less than in 2001. Growers got about $1.84 per
pound, or about 2 cents below the 2001 average.
Catch up Quota
“Because growers in Georgia will be trying to play catch-up
again this year, they will be producing a slightly larger
effective quota in 2003 than in 2002,” he said. But how much
larger isn’t certain.
As part of the tobacco quota formula, U.S. Secretary of
Agriculture Ann Veneman has the statutory discretion to raise or
lower the quota by as much as 3 percent.
The future of the federal tobacco program is in question, Moore
said. Industry officials are debating a quota buyout, which
would end the program. But Moore said he doesn’t see this
happening before the 2003 crop is planted.
Over the past two years, growers have increasingly contracted
and sold directly to tobacco companies and bypassed the
traditional tobacco auctions. This calls for adjustments in how
tobacco is handled in the U.S. market.
“It’s pretty negative out there now,” Moore said. “Nobody knows
for sure where the industry is going.”
