WORLD DEVELOPMENTS

Highlights:

Australia: Flue-cured production (FSW) is forecast to drop by 2 percent to 9,000 metric tons in 1998. Much of this decline is due to the recent deregulation of the tobacco industry. Inefficient producers continue to exit the industry while more efficient producers are becoming larger and are producing a higher quality leaf. Imports of flue-cured this year are expected to reach 13,050 tons, up nearly 2 percent due to decreased domestic production and an increase in the demand domestically for leaf.

Brazil: Brazilian leaf production is expected to total 442,500 metric tons in 1998, down 23 percent from 1997 due to adverse weather. Flue-cured production, which accounts for most of the decrease, is expected to reach 315,000 tons this year, down 26 percent from 1997. Brazil’s leaf exports in 1998 are forecast to total 279,500 tons. This represents a drop of 12 percent from 1997 due to lower domestic stocks, a decline in leaf demand in Eastern Asia, an increase in world stocks in 1997, and reduced leaf prices from Argentina and Zimbabwe. Brazil’s leaf imports are expected to reach 25,600 tons this year, up 35 percent due to lower availability of specific types of leaf tobacco for cigarette production.

Chile: Total leaf output in 1998 is expected to reach 13,436, up 25 percent from last year. Much of this growth is due to higher yields after last year’s drought reduced harvest. Chilean leaf exports in 1998 are expected to reach 3,549 tons, up 28 percent, while imports are forecast to more than double to nearly 3,144 tons. Because of the growth in imports and production, stock levels in 1998 are expected to end the year more than double 1997 stock levels.

Greece: Total leaf production is projected to decline in 1998 as Greece attempts to comply with EU quotas. Leaf output is forecast to reach 132,000 metric tons in 1998, down slightly from last year. Oriental tobacco, which accounts for 78 percent of production, is expected to reach 82,500 tons, down slightly from 1997. Greek imports of oriental leaf are expected to total 8,200 tons this year, up 9 percent from 1997 due to increased cigarette production coupled with a small domestic oriental crop.

India: Indian leaf tobacco production in 1998 is expected to increase 2 percent to 635,500 metric tons due to an increase in the demand domestically for economical cigarettes. Total unmanufactured tobacco exports in 1998 are likely to reach a record 635,000 tons but are expected to decline significantly in 1999 due to lower production of flue-cured tobacco, poor quality leaf, and higher domestic prices. India’s flue-cured output is forecast to decline nearly 9 percent to 156,000 tons in 1998 due to adverse weather conditions. Burley production in 1998 is estimated to total 15,000 tons, up nearly two-fold due to industry efforts to rebuild stocks, a strong export demand, and favorable weather conditions. Burley exports are forecast up 50 percent to 6,000 tons in 1998. Light air-cured output this year is expected to reach 26,000 tons, up nearly two fold from 1997.

Pakistan: Leaf production in 1998 is projected to reach 90,450 metric tons, up 5 percent from last year due to improved farm management practices. Tobacco companies are supporting programs which educate farmers about techniques to improve the quality of leaf tobacco. Leaf quality this year is expected to be good and overall prices are expected to be up 10 percent. Increased cigarette production is expected to push domestic leaf use to 79,500 metric tons this year, up 3 percent over last year. Pakistan’s leaf exports in 1998 are projected to reach 3,000 tons, up 20 percent due to increased sales in South East Asia.

Poland: Growers continue to replace traditionally grown dark tobacco with flue-cured and burley tobacco due to a shift in consumer preference towards western style cigarettes. Sources indicate that burley and flue-cured tobacco will comprise 76 percent of leaf tobacco in 1998 as compared to 72 percent a year ago. Flue-cured production is expected to reach 28,000 metric tons in 1998, up 12 percent from last year, while burley output is forecast to total 14,000 tons, up nearly 8 percent. Imports of both flue-cured tobacco and burley are expected to decrease this year due to increased domestic production and an overall decline in cigarette consumption. Polish imports of flue-cured tobacco are expected to total 11,000 tons this year, down 16 percent from 1997. Imports of burley are expected to reach 2,550 tons, down 12 percent.

Spain: Spain is expected to fill its EU tobacco quota allocation this year. Flue-cured production (FSW) is expected to reach 23,780 metric tons, up slightly from last year. The quality of this year’s flue-cured crop is expected to be good. Spain’s flue-cured exports are forecast to be up 5 percent in 1998. Cigars and smoking tobacco production are projected to increase 3 percent and 4 percent, respectively, in 1998 due to increased domestic consumption. Cigarette sales are projected to decline 4 percent in 1998.

Zimbabwe: Prices on the flue-cured tobacco auction floors in 1998 are averaging about $1.26 per kilogram, down nearly 44 percent from a year ago. Volume traded in 1998 is down over 27 percent at 30.6 million kilograms. Buyers are blaming the depressed prices on oversupply on the world market and weak demand. In the mist of the depressed prices, flue-cured tobacco production is expected to increase almost 10 percent this year to 205,000 metric tons. Quality is expected to be good due to favorable weather conditions. Flue-cured exports are forecast to increase nearly 12 percent to 173,865 in 1998.

Auction Reports:

Canadian Flue-Cured Auction Update: Final sales of the 1997/98 Canadian flue-cured tobacco marketing season were completed on April 2, 1998. The Ontario Flue-Cured Tobacco Marketing Board indicated that 70,268 metric tons of flue-cured tobacco were sold this marketing season which lasted 112 sale days. This represents an increase in sales of 9 percent when compared to last year's marketing season when 64,520 tons were marketed (last year’s marketing season lasted 100 sale days). Prices in Canadian currency this year averaged $3.82 (US$2.69) per kilogram, down from $4.06 (US$2.96) per kilogram last year. Sales of "A" graded leaves this year accounted for over 80 percent of purchases, unchanged from last year.

Exchange Rates:
1996/97 U.S.$ = CA$ 1.37
1997/98 U.S.$ = CA$ 1.42

Last modified: Wednesday, November 26, 2003