U.S. tobacco companies recently announced they will buy less tobacco in 2003 than they did in 2002. But Georgia farmers probably will 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, about 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.
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 University of Georgia 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.
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 this past year. Georgia growers could have sold 60.7 million pounds in 2002. But they were able to grow and sell only 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 under-production 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 received about $1.84 per pound, or about two cents below the 2001 average.
“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.”