U.S. Flue-Cured Tobacco Situation & Outlook
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Source Brazil & U.S.: Universal Corporation.
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World Leaf Production as of November 8, 2016.
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Source Zimbabwe: Zimbabwe Tobacco Association “Weekly FCV Report 26.07.2016”
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*October 2016 Forecast. USDA-NASS
*October 2016 Forecast. USDA-NASS
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Cigarette consumption continues steady decline
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Industry revenue declines at annual rate of 2.3% 2012-
2016 to $37.6 billion
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Strong profit growth over last 5 years; $12.1 billion in
profit estimated to account for 32.7% of revenue in 2016
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Industry revenue expected to decline at an annual rate of
2.4% to $33.3 billion in 2021
Source: IBISWorld
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Annual growth 2011-2015 of 3.6% in VALUE of sales to
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From 2016-2020 Value of sales expected to increase at
an annual rate of 1.8% to $703.8 billion
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Continued volume declines in mature markets with
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Number of smoking age adults increases
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Some future vapour scenarios rated by likelihood
THE FUTURE
85%
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From: “GLOBAL TOBACCO KEY FINDINGS PART 2: VAPOUR
PRODUCTS” Euromonitor International, PASSPORT.
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Global surpluses, especially of flavor-style flue-cured,
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Despite continued reductions in cigarette consumption and
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Watch the “heat-not-burn” category
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Strategic Planning
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Human Resource Management
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Financial Management
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Leading Change
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Risk Management
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Family Business Issues
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Assessing Markets
•
Assessing and building key
partnerships
•
Strengthening your value
proposition
February 5-10, 2017
December 10-15, 2017
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Analyzing the current and projected status of U.S. flue-cured tobacco production, global supply trends, exchange rates, harvested acres, production output, exports, domestic use, and imports. Comprehensive data and insights provided by Dr. Blake Brown and Hugh C. Kiger from the College of Agriculture & Life Sciences.
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U.S. Flue-Cured Tobacco Situation & Outlook Dr. Blake Brown Hugh C. Kiger Professor Agriculture & Resource Economics College of Agriculture & Life Sciences
Global Supply: U.S., Brazil and Zimbabwe Flue-Cured Tobacco Production 2500 2000 1500 1000 500 Zimbabwe US 0 2016E 2017P 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Brazil Source Brazil & U.S.: Universal Corporation. World Leaf Production as of November 8, 2016. Source Zimbabwe: Zimbabwe Tobacco Association Weekly FCV Report 26.07.2016
Exchange Rates: EURO/US$ & EURO/Brazilian Real 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2014-01 2014-02 2014-03 2014-04 2014-05 2014-06 2014-07 2014-08 2014-09 2014-10 2014-11 2014-12 2015-01 2015-02 2015-03 2015-04 2015-05 2015-06 2015-07 2015-08 2015-09 2015-10 2015-11 2015-12 2016-01 2016-02 2016-03 2016-04 2016-05 2016-06 2016-07 2016-08 2016-09 2016-10 EU/US$ EU/REAIS
Flue-Cured Acres Harvested: 2012 2013 2014 2015 2016* US 206,000 228,800 232,000 218,300 214,000 NC 164,000 170,000 181,000 170,000 165,000 *October 2016 Forecast. USDA-NASS
Flue-Cured Production: (million pounds) 2012 2013 2014 2015 2016* US 473 454 557 468 460 377 360 434 365 346 NC *USDA-NASS October 2016 Estimate
US Flue-Cured Exports and Domestic Disappearance 700 600 500 400 159.19 74.58 300 200 290.97 268 100 - 2005-20062006-20072007-20082008-20092009-20102010-20112011-20122012-20132013-20142014-20152015-2016 Exports Domestic Use
US Flue-Cured Domestic Disappearance and Imports for Consumption 300 250 200 150 100 50 0 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 Domestic Use Flue-Cured Imports Other Imports
U.S. Unmanufactured Exports of Flue-Cured Tobacco (stemmed) (lbs farm weight) 350000000 300000000 250000000 World 200000000 EU28 150000000 PRC Switzerland 100000000 50000000 0 2007200820092010201120122013201420152016 Source: USDA-FAS
Chinas Cigarette Market: Euromonitor International Forecast 2016 2017 2018 2019 2020 Sales of Cigarettes (bn sticks) 2,428.0 2,398.0 2,383.2 2,375.8 2,372.1 Sales Value of Cigarettes (CNY bn) 1,472.0 1,515.7 1,554.0 1,587.4 1,616.3 Source: Euromonitor International
China National Tobacco Corporation -financial performance Revenue $ billion Operating Profit $ billion 2012 167.5 20.2 2013 175.3 21.5 2014 197.2 24.2 2015 211.2 26.0 Source: IBISWorld
US Tobacco Products Market Cigarette consumption continues steady decline Industry revenue declines at annual rate of 2.3% 2012- 2016 to $37.6 billion Strong profit growth over last 5 years; $12.1 billion in profit estimated to account for 32.7% of revenue in 2016 Industry revenue expected to decline at an annual rate of 2.4% to $33.3 billion in 2021 Source: IBISWorld
Global Tobacco Manufacturing Annual growth 2011-2015 of 3.6% in VALUE of sales to $643.8 billion in 2015 From 2016-2020 Value of sales expected to increase at an annual rate of 1.8% to $703.8 billion Continued volume declines in mature markets with growth in emerging markets Number of smoking age adults increases Increases in disposable income cause some smokers to trade up to premium tobacco products Source: IBISWorld
Share of Global Market by Manufacturer % of Global Tobacco Products Market China National Tobacco Corp 32.8% Philip Morris International Inc. 12.2% British American Tobacco PLC 10.6% Japan Tobacco Inc. 9.6% Imperial Tobacco Group PLC 5.0% Altria Group Inc. 3.9% Other 25.9% Source: IBISWorld
THE FUTURE Some future vapour scenarios rated by likelihood 85% FDA regulation lays waste to US market and allows tobacco companies to dominate market 75% Widespread taxation impairs growth of e-cigarettes globally 60% Significant liberalisation of cannabis legislation creates new front for vapour technology 50% Reduced-risk becomes a premium positioning slowing cannibalisation Technological leap which replicates the combustible experience and drives significant adoption 33% 10% Consumption of vapour products exceeds 30% of total tobacco consumption by 2030 From: GLOBAL TOBACCO KEY FINDINGS PART 2: VAPOUR PRODUCTS Euromonitor International, PASSPORT.
2014: heat-not-burn products CONTAIN TOBACCO LEAF PMI introduces Marlboro HeatSticks in Japan and Italy $680 million invested in reduced-risk factory in Italy Reynolds American to introduce heat-not-burn product in Wisconsin in February 2015
Philip Morris could stop making conventional cigarettes BBC News November 30, 2016 iQOS did well in test markets PM plans to introduce into additional markets
Some Take-Aways Global surpluses, especially of flavor-style flue- cured, were reduced in 2016
Some Take-Aways Global surpluses, especially of flavor-style flue-cured, were reduced in 2016 Exchange rates favored increased Brazilian production; 2017 Brazilian flue-cured production is up at around 1.4 billion pounds
Some Take-Aways Global surpluses, especially of flavor-style flue-cured, were reduced in 2016 Exchange rates favored increased Brazilian production; Brazilian flue-cured production is up at around 1.4 billion pounds Despite continued reductions in cigarette consumption and increases in taxation and regulation, industry profits remain strong
Some Take-Aways Global surpluses, especially of flavor-style flue-cured, were reduced in 2016 Exchange rates favored increased Brazilian production; Brazilian flue-cured production is up at around 1.4 billion pounds Despite continued reductions in cigarette consumption and increases in taxation and regulation, industry profits remain strong Watch the heat-not-burn category Opportunities for flavor style producers are in countries where smokers are expected to trade up to premium brand cigarettes www.tobaccogrowerportal.org
Executive Farm Management Program for NC Sweet Potato and Tobacco Farmers February 5-10, 2017 December 10-15, 2017 www.tobaccogrowerportal.org Go to the Economics page Key Topics Strategic Planning Human Resource Management Financial Management Leading Change Risk Management Family Business Issues Assessing Markets Assessing and building key partnerships Strengthening your value proposition
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