The end of the U.S. government's tobacco program has resulted in a 27-percent drop in this year's production, according to USDA. If forecasts prove true, 2005 U.S. tobacco production would be the smallest since 1889 and the smallest acreage on record.

All U.S. tobacco production is forecast at 640 million pounds, down 27 percent from 2004. Area for harvest is forecast at 307,010 acres, which is down 25 percent from last year. If realized, this would be the smallest production since 1889 and the smallest acreage on record.

An example of declining production could be seen in Georgia this year, where growers produced 27.2 million pounds for 2005 or 42 percent less than last year. Although Georgia's crop was hurt by weather and disease problems, acreage dropped this year from 23,000 acres in 2004 to 17,000 acres this year.

The Fair and Equitable Tobacco Transition Act of 2004 eliminated price supports and marketing quotas for all tobacco beginning with the 2005 crop year (July 2005 for flue-cured and October 2005 for other types). Mandatory inspection and grading of domestic leaf also is eliminated, and the USDA market news reporting is terminated.

Since Congress passed the buyout legislation, many growers have quit producing tobacco altogether or reduced their acreage until it becomes clearer how markets will react.

Tobacco yields for 2005 are expected to average 2,083 pounds per acre or 16 pounds below last month's forecast and down 72 pounds from 2004. Yields in North Carolina, the leading tobacco producing state, are expected to average 2,173 pounds per acre or 73 pounds below a year ago. In Kentucky, the second leading state, growers expect to have yields averaging 1,962 pounds per acre, down 82 pounds from 2004.

Cigarette leaf production is expected to account for 91 percent of U.S. output in this year or 584.4 million pounds, compared with 816.8 million pounds during the 2004 season. Cigar types accounted for 1 percent, while dark-fired and air-cured leaf accounted for 8 percent.

Despite wide areas of lower quality leaf caused by dry weather, the quality of U.S. flue-cured and burley is expected to be generally good.

Supplies of U.S.-grown tobacco in 2005 are expected to slip 12 percent from last season. The 25 percent drop in production is the primary factor affecting supplies, with beginning stocks at 4 percent lower than last year or an estimated 1.5 billion pounds. U.S. leaf supplies at the beginning of the 2005 crop year are estimated at 2.1 billion pounds.

The use of U.S.-grown leaf is expected to advance by about 10 percent by the end of the 2004/05 marketing year to reach about 944 million pounds.

The 84-million-pound gain is mostly due to increased domestic use. Imported tobacco use declined slightly. During late 2004, manufacturers began using greater volumes of domestic leaf relative to imports. Domestic use is expected to end at 542 million pounds, and export use is expected to be about 400 million pounds.

Domestic consumption for 2005 is not yet available but expected to continue declining at a similar rate as in previous years. Cigarette exports during the first six months of 2005 reached 53.8 billion pieces compared to 65.4 billion during the same six-month period in 2004. Imports for January-June 2005 totaled 8.7 billion cigarettes or 20 percent below the same six-month period in 2004.

During 2005, 11 States raised cigarette excise taxes, and per capita consumption (18 years old and over) slid to 1,770 cigarettes in 2004 compared to 1,837 cigarettes the previous year.

At the beginning of the flue-cured season, growers carried more than 23.9 million pounds available for marketing from previous crops. Last year's carryover was only 4.4 million pounds. With no quotas in effect, most tobacco is expected to be sold, with the majority of leaf being sold under contract to leaf dealers and manufacturers. In addition, Flue-cured Stabilization operated 11 marketing centers where producers could market tobacco.

Beginning flue-cured stocks on July 1, 2005, were 796.0 million pounds compared to 822.8 million pounds on July 1, 2004. The total reported supply of U.S.-grown flue-cured in 2005 is about 1.2 billion pounds or 9 percent below the supply available at the beginning of the 2004 marketing year.

As of Sept. 1, burley production in 2005 was estimated at 192.3 million pounds compared to 292.2 million pounds last season. Acreage is 105,300 acres or 47,850 acres fewer than last season. Lower production and lower beginning stocks in October 2005 are expected to result in supplies of 699.1 million pounds, or 15 percent below the previous season's 820.1 million pounds. Burley disappearance during the 2003/04 year (October 2004-September 2005) is expected to advance 6 percent based on October-June trade data and Sept. 1 production estimates.

For January-June 2005, leaf exports totaled 180.5 million pounds (267.4 million pounds farm-sales weight) about 2 percent below the same period last year. Again, most categories slipped with the exception of burley, which gained 39 percent to top 100 million pounds.

Flue-cured shipments slipped 31 percent to 43.4 million pounds during the six-month period, a larger decline than last year's. Germany eclipsed Japan as the largest leaf buyer, even though its purchases were slightly lower at 22.6 million pounds.

Imports for consumption declined 45 percent during January-June 2005 compared with January-June 2004, following a small decline the previous year. The period ended at 154.2 million pounds, compared with 279.5 million pounds last year. Value was $253.6 million, compared with $380.8 million the previous year.

e-mail: phollis@primediabusiness.com