1. Burley and Dark Tobacco Trends, Issues, & Outlook: Will Snell, University of Kentucky Changes Concerns Challenges … but yet still opportunities Agricultural Economics

2. Number of Farms Growing Tobacco in KY Source: USDA AG Census Agricultural Economics

3. Distribution of KY Agricultural Cash Receipts: 1990s vs. 2008 Source: Ky Ag Stats/NASS

4. Number of Farms Growing Tobacco in KY Source: USDA AG Census Except for cattle/hay, more farms grow tobacco than produce any other Kentucky ag enterprise Agricultural Economics

5. U.S. Tobacco Farms (2007 Ag Census) U.S. Tobacco Farms (2007 Ag Census) Agricultural Economics StateTobacco Farms (2007) % of U.S. Tobacco Farms Change Since 2002 Kentucky8,11350%-72% North Carolina2,66216%-66% Tennessee1,61010%-80% Pennsylvania1,1527%+28% Virginia8956%-79% Georgia2241%-73% Others (11 states)1,57810%-73% Total U.S. (17 states)16,234100%-72%

6. Adair Allen Anderson Ballard Barren Bath Bell Boone Bourbon Boyd Boyle Bracken Breathitt Breckinridge Bullitt Butler Caldwell Calloway Campbell Carlisle Carroll Carter Casey Christian Clark Clay Clinton Crittenden Cumberland Daviess Edmonson Elliott Estill Fayette Fleming Floyd Franklin Fulton Gallatin Garrard Grant Graves Grayson Green Greenup Hancock Hardin Harrison Hart Henderson Henry Hickman Hopkins Jackson Jefferson Jessamine Johnson Kenton Knott Knox Larue Laurel Lawrence Lee LeslieLetcher Lewis Lincoln Livingston Logan Lyon Mccracken Mccreary Mclean Madison Magoffin Marion Marshall Martin Mason Meade Menifee Mercer Metcalfe Monroe Montgomery Morgan Muhlenberg Nelson Nicholas Ohio Oldham Owen Owsley Pendleton Perry Pike Powell Pulaski Robertson Rockcastle Rowan Russell Scott Shelby Simpson Spencer Taylor Todd Trigg Trimbl e Union Warren Washington Wayne Webster Whitley Wolfe Woodford Harlan Increased Acres -25 to -40% 0 to -25% > 40% Decline Total (Both Burley and Dark) Tobacco Acres (2005-08 Average vs 2004) Agricultural Economics

7. Value of Kentucky Tobacco Production Agricultural Economics Source: Ky Ag Stats/NASS Million Dollars

8. Dark Tobacco Trends, Issues and Outlook Agricultural Economics

9. U.S. Snuff Tobacco Consumption Source: USDA/ERS and TMA +4% to +7% Annual Growth Successful product marketing Increasing number of public smoking restrictions Reduced risk perception/reality Entry of Cigarette Mfgs in 2007, 2008 …

10. Source: NASS/USDA Agricultural Economics US Dark Tobacco Acres US Dark Tobacco Acres +21% +38%

11. Agricultural Economics U.S. Dark Tobacco Production vs. Use Source: ERS/NASS/USDA, Was Expansion Too Much?

12. Source: NASS/USDA Agricultural Economics US Dark Tobacco Acres US Dark Tobacco Acres +21% +38% -16%

13. Domestic –State and Federal Tx Increases –Increasing Smoking Restrictions –FDA and other Regulations –General Economy Downturn Agricultural Economics What about Burley? Export –Higher Valued Dollar –Increasing Foreign Supplies –Global Economic Downturn

14. Agricultural Economics How Did U.S. Burley Growers Respond in 2009 in Response to Reduced Demand Expectations? 2009 Burley Farmers Faced with … Lower ag commodity prices Declines in dark tobacco contract needs Off-farm job layoffs Diminished buyout dollars Available infrastructure Alternative markets/decent prices for pre 2009 crops

15. Source: NASS/USDA Agricultural Economics US Burley Acres US Burley Acres + 1%

16. Agricultural Economics Source: NASS/ERS/AMS/USDA U.S. Burley Production

17. Agricultural Economics Source: NASS/ERS/AMS/USDA U.S. Burley Production vs Disappearance (Use) Potential Needs for 2008-09? 200 Mil lbs ??? What aboout 2009-2010 ???

18. Agricultural Economics Source: ERS/USDA 2006-2007 Estimates by UK U.S. Burley Leaf Exports as a Percentage of Total U.S. Burley Disappearance (Exports + Domestic Use)

19. U.S. Burley Leaf Exports Source: ERS/USDA/TMA Agricultural Economics U.S. Burley Leaf Exports Are Down 25% in 2008-2009 Marketing Year

20. Agricultural Economics Source: Federal Reserve Bank Brazilian Reals to One U.S. Dollar

21. Agricultural Economics Total World Burley Production Source: Universal Leaf +19% +15%

22. U.S. Cigarette Production U.S. Cigarette Production Agricultural Economics U.S. Cigarette Production Down 12% in 2008 U.S. Cigarette Consumption May Drop Another 6 to 9% in 2009

23. Agricultural Economics Source: NASS/ERS/AMS/USDA U.S. Burley Production vs Disappearance (Use) Potential Needs for 2009-10 at “profitable” prices … Less than 200 mil lbs ???

24. Average U.S. Burley Prices Average U.S. Burley Prices What about 2009/2010? Better quality crop in 09 should induce higher “average” prices. Poor quality tobacco, especially outside of contract will suffer greatly Excess production in 2009 could enhance short-term disappearance, but have adverse impacts on 2010 contract volume given anticipated domestic and export demand outlook

25. What does the immediate future hold for U.S. Burley? Companies Need Less Total Acres/Less Growers More Volatile Prices and Tight Profit Margins Especially for Low Yielding/Low Quality Leaf Consolidation Could Lead to Opportunities for Good Low Cost Producers of Quality Leaf to Maintain Profits and Crop Size