World Developments

Brazil: Brazilian tobacco production for 1999 is expected to rebound to historical levels after decreasing 22 percent in 1998 to 447,000 tons. The decline in production in 1998 was attributed to the "El Nino" phenomenon which resulted in poor weather conditions and subsequently lower yields in 1998. For 1999, leaf production is estimated at 525,000 tons, up 17 percent due to favorable weather conditions. Flue-cured leaf, which accounts for 66 percent of production, is expected to increase by nearly 23 percent to 387,000 tons. Likewise, flue-cured exports are expected to total 249,850 tons, up 9 percent in 1999. Increased supplies and increased global demand are fueling flue-cured tobacco exports. Average flue-cured export prices are down by 9 percent as compared to last season because of increased competition among producing countries, and the economic crisis in Russia and Asia.

European Union Tobacco Consumption: The European Union (EU) is the world’s largest importer of tobacco leaf. During 1997, the EU accounted for about 35 percent of the world’s tobacco leaf imports or 536,110 metric tons. Flue-cured tobacco represented about 46 percent of the EU’s leaf imports. EU imports of U.S. flue-cured tobacco totaled almost 62,000 metric tons, more than any other supplier in 1997.

Cigarette manufacturers in the EU rely heavily on imported tobacco to compensate for the low quality of domestically produced tobacco and to cater to consumers of American-style cigarettes. Consumers preference for light cigarettes has generally been met without altering blends. Instead, cigarette manufacturers have adjusted filters and the degree of ventilation of cigarette papers.

Cigarette consumption in the EU has been declining since 1992 mainly due to consumers’ increasing awareness of health issues, consumers’ reluctance to purchase cigarettes following tax increases on the sale of tobacco products, and advertising bans on cigarettes. However, consumers in Northern Europe appear to be largely responsible for these decreases. Cigarette consumption in Mediterranean countries is reportedly not dropping as significantly and for some countries, such as Spain, cigarette consumption has increased in recent years.

Canadian Flue-Cured Auction Update: Through the 39^th sale day of the 1998/99 Canadian flue-cured tobacco marketing season, the Ontario Flue-Cured Tobacco Growers Marketing Board reports that 24,724 metric tons of flue-cured tobacco have been sold. This represents a decrease in sales when compared to the same period of last year's marketing season. Prices in Canadian currency are averaging $3.50 (US$2.27) per kilogram, slightly lower than last year. So far this year, sales of "A" graded leaves account for 68 percent of purchases, down from 74 percent last year.

Canadian Flue-Cured Auction Update Sales Day 39 December 5, 1998
Quantity in Metric Tons		Average Value per Kilogram (US $ equivalent)*
1997/98	1998/99	1997/98	1998/99
24,888	24,724	US$2.56	US$2.27
Source: Ontario Flue-Cured Tobacco Growers Marketing Board.