Tobacco exports surge, imports increase slightly Markets opening in Far East add to greater demand

May 26, 1992|By Journal of Commerce

U.S. tobacco exports have surged this year -- led by increasing world demand for U.S. cigarettes -- while imports have risen slightly.

Total U.S. tobacco imports have risen during 1992 as shipments of tobacco from Latin America, the Caribbean and Turkey have increased, reflecting the dramatic rise in production of discount cigarettes by U.S. companies.

U.S. tobacco exports rose to $193.1 million in March from $127.8 million in March 1991, according to Commerce Department figures released last week. Total tobacco exports for the first three months of this year rose to $439.9 million from $341.6 million in the same period last year.

Meanwhile, U.S. tobacco imports increased to $93 million in March from $70.3 million a year earlier, the department said. Imports for the first three months of this year totaled $277.3 million, up from $272.3 million in the comparable 1991 period.

"U.S. cigarette exports are now permitted to compete in growing markets formerly dominated by a single state monopoly," said Farrell Delman, president of the Tobacco Merchants Association the U.S. Inc. in Princeton, N.J.

"In order to compete against U.S. cigarettes, known for their high quality the world over, our competitors are now required to use higher quality ingredients, including U.S. tobacco leaf," he said.

World demand for U.S. cigarettes received a large boost from the opening of markets in Japan, Taiwan, South Korea and Thailand, a growing market share in the Middle East, and recent access to markets in Turkey and Eastern Europe, especially the former Soviet republics.

"Part and parcel of the opening of these markets has been that the monopolies still prevent local manufacturing of foreign brands," said Matthew Winockur, director of corporate affairs for Philip Morris International.

Competition in domestic and global markets also lies at the heart of the increase in U.S. tobacco imports, industry executives said.

"We buy offshore tobacco to remain competitive in world markets and to obtain certain grades not grown here or in short supply," said a spokesman for R.J. Reynolds Tobacco Co. of Winston-Salem, N.C.

"We have to have an appropriate mix of tobacco grades and prices to respond to market demand," he said.

Tobacco companies don't provide detailed breakdowns of content, arguing that to do so would reveal proprietary secrets. However, Sheila Banks McKenzie, a spokeswoman for Philip Morris Cos. of New York, said her company imports tobacco from Turkey and Greece, although most of its imports come from Brazil.

About 85 percent of the content of the company's U.S. brand cigarettes is U.S.-grown, she said.

Philip Morris also imports tobacco from the Caribbean that is processed and shipped to plants in Central America.

Although most of the tobacco in its U.S. cigarettes is domestically grown, a Reynolds spokesman said, "imported tobacco can be found in every brand we make."

Imports of one key tobacco category, burley, were 50 percent higher in 1991 than in 1990, according to the Commerce Department. In the same period, the number of cigarettes exported rose 10 percent, but exports decreased 11 percent in value, the U.S. Department of Agriculture reported.

Much of the growth in imports is the result of increased demand and production of discount cigarettes sold here by U.S. companies under such brand names as Bucks, Bristol, Commander, Doral and Montclair. Made of lower-cost tobacco, they sell for as little as half the price of premium brands.

The increase in tobacco imports has been across the board.

Verner N. Grise, leader of the Tobacco Analysis Section in the Agriculture Department's Economic Research Service, said total duty-paid imports of tobacco for consumption rose 21 percent in to a record 502 million pounds. The two largest sources were Brazil and Turkey, which accounted for 215 million pounds, or 40 percent of all imports.

According to the service's U.S. Tobacco Situation and Outlook Report, issued after the first quarter of 1992, the U.S. imported more cigarette leaf, cigar leaf and stems, but less cigarette and cigar scrap.

Most of the imports were unstemmed leaf (219 million pounds last year), primarily from Turkey (128 million pounds), Greece (31 million pounds) and Yugoslavia (21 million pounds).

Stemmed-leaf imports totaled 167 million pounds last year and came primarily from Brazil, Chile, Argentina and Mexico.

U.S. companies also imported significant amounts of tobacco from the Dominican Republic, Indonesia, the Philippines and Italy.

U.S. domestic tobacco production totaled slightly more than 1.6 billion pounds.

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