1. Will Snell Agricultural Economist University of Kentucky The Ever-Changing and Uncertain Tobacco Situation and Outlook

2. Tobacco Issues Lawsuits/Settlements Declining Export Markets Import Substitution World Burley Surplus/Competitiveness Movement of Cigarette Production Offshore Volume and Quality of Pool Stocks Marketing Inefficiencies Lease Prices Contracting Grading Designation Continued Political Uncertainty

3. U.S. Burley Basic and Effective Quota 2000 Quotas: Basic -- 247 mil lbs Effective -- 367 Mil lbs

4. Burley Production: U.S vs. Rest of the World In recent years 100% of the adjustment in world burley production has occurred in the U.S. market.

5. Kentucky Tobacco Cash Receipts

6. Kentucky Tobacco Cash Receipts/Mailbox $

7. Can Demand/Quotas Recover?

8. U.S. Cigarette Consumption U.S. Cigarette Consumption Is Down Around 10% Since The Tobacco Settlement …. But Is Expected To Fall By Only 2% To 3% In 2000

9. While the Tobacco Settlement Is Adversely Affecting the Domestic Demand for U.S Burley, the Major Reason for the Decline in U.S. Burley Demand is Due to: Losses in the Export Market Substitution of Imported Burley

10. Domestic vs Imported Burley Use Domestic Imports

11. U.S. Cigarette Exports U.S. Cigarette Exports Fell 39% From 1996 To 1999 And Continue To Slide In 2000

12. U.S. Cigarette Production U.S. Cigarette Production Has Declined Constantly Since the 1996 Record Level of 755 Billion Pieces

13. Based on Recent Import Patterns, U.S. Cigarette Production Levels in the 500 to 550 Billion Piece Range Would Require Around 200 to 225 Million Pounds of U.S. Burley

14. U.S. Burley Exports Can U.S. Burley Export Demand Rebound Above 150 Million Lbs?

15. U.S. Burley Demand Current Demand For U.S. Burley May Be More in the Neighborhood of 350-400 Million Pounds

16. What About China? Represents 1/3 of World Cigarette Consumption Growth in American-Blended Cigarettes Opportunities Will Exist To Move Some U.S. Burley/Cigarettes Into China Market Will Develop Slowly and Will Not Be the Immediate Answer to Industry’s Short-Term Problems

17. What Does This Imply About 2001 Quota Levels?

18. U.S. Burley Pool Stocks

19. Manufacturer Purchase Intentions

20. “Potential” Quota Scenarios For 2001 Does the Industry Have Enough Inventory to Allow the Effective Quota to Fall to Less Than 250 Million Lbs?

21. “Potential” Quota Scenarios For 2001

22. Price Adjustment Issues Given Quota Transfer Restrictions, Will Lower Prices Constrain Available Supplies to Meet Potential Increases in Demand? How Will World Burley Prices Adjust to Potential Reductions in the U.S. Burley Price? Will Lower U.S. Burley Prices Result in a Percentage Greater Increase in U.S. Burley Demand? What Are the Structural/Adjustment Costs For Farmers/Rural Communities That Cannot Compete At Lower Prices?

23. Issues To Address Industry (Both Buyers and Sellers) Evaluation of the Distribution of Price Supports According to the Value of These Grades in the World Market A Grading System That Is Perceived to be Objective By Both the Buyers and the Sellers Mechanism to Adequately Compensate Quota Owners to Transfer Quota Into the Hands of Active Growers Unity/Leadership …. Survivorship