University of Kentucky Department of Agricultural Economics
Economic & Policy Update Featured Articles: KY Burley Production Opportunities for 2014 –Will Snell Profitability Up for 2013 Grain Farms -Jerry Pierce Community Health Needs Assessment -Sarah Bowker Beginning Farmers: Where to go for Resources –Lee Meyer Balance Sheets –Tarrah Dunaway
Volume 14, Issue 4
Edited by: Kevin Heidemann, Steve Isaacs, & Will Snell
April 30, 2014
KY Burley Production Opportunities for 2014 Burley, like most of our agricultural enterprises, is produced in a global marketplace. Higher global grain prices in recent years have not only encouraged Kentucky and U.S. farmers to raise more grain, but also corn and soybean producers around the globe. As a result of increasing global supplies, grain prices have predictably declined from the record levels we experienced in 2012.
in 2014. This may not be the case for all companies or all growers, as there is room to eliminate some “fictitious” contract volume that was never going to materialize in recent years. Preliminary signals that 2014 burley production opportunities may be reduced for some growers is certainly disappointing and somewhat surprising; given how aggressive the buying interest has been in recent years in attempting to find more U.S. burley production.
The global burley market has a similar story. World burley production fell to a very low level in 2012, generating higher burley prices around the globe in 2012 and 2013; and, not surprisingly, generated increases in global burley supplies. According to the Universal Leaf Tobacco Company, world burley production has expanded by almost one-third since 2012. But most of this growth has occurred in Africa, where burley output has almost doubled since 2012.
Evidently, lower cost/lower quality burley is finding its way back into cigarette blends in increasing amounts in the midst of overall declining global and domestic burley consumption. Prior to the buyout, U.S. burley exports had swelled to more than 200 million pounds. Despite a period of favorable exchange rates and overall competitive prices during most of the post-buyout period, U.S. burley exports have been cut in half. Ample supplies of lower Africa is primarily a filler (low quality) leaf market, quality/less expensive burley from competing there was a short 2013 U.S. burley crop, and there nations, coupled with lower world burley needs, have was fairly constant South American burley more than offset competitive U.S. burley prices in production. Due to this, expectations were that U.S. global markets since 2004. On a positive note, U.S. burley growers might continue to observe expansion burley exports have remained relatively stable over opportunities in 2014. However, it appears that in the past four years, ranging from 108 to 114 million the midst of overall growing world burley supplies, pounds. However, burley imports into the United coupled with very sluggish domestic demand, some States have been increasing in recent years despite companies have reduced U.S. burley contract volume slumping domestic cigarette production. Since 2010, University of Kentucky Department of Agricultural Economics: Economic & Policy Update View all issues online at http://www2.ca.uky.edu/agecon/index.php?p=209