'Tobacco Road' Turnpike Could Have Some Bumps Ahead

Economist says the path looks positive ahead for trade but there could be some bumps.

Published on: Mar 5, 2013

With an excellent 2012 crop year behind them, many tobacco growers say they feel a renewed optimism about the crop as they move into a new growing season. But while there are positive world market factors suggesting potential growth for U.S. tobacco on the horizon, some market analysts say there are potential negative demand factors on the domestic and world market that should be recognized, too.

After pronouncing a string of good news items for growers in his annual Situation and Outlook Report before the Tobacco Growers Association of North Carolina, Feb. 1, NCSU agricultural economist Blake Brown paused in his presentation and said, 'Just to keep this in perspective  -- after all I am an economist and I can't just talk about all the optimistic things – lets look at some other things out there.

 Tobacco Road Turnpike Could Have Some Bumps Ahead
'Tobacco Road' Turnpike Could Have Some Bumps Ahead

'The World Health Organization may have put some regulations in place that have the unintended consequences of increasing the demand for our product,' Brown said, 'but overall their goal is to decrease smoking consumption in the world. The same is true with the Food and Drug Administration. FDA has been moving along at what seems like a snail's pace but there are just lots of unknowns about what may be done at FDA. So, we still have to watch that.

'The same is true with WHO and their Framework Convention On Tobacco Control.'

Brown, along with Mark Kehaya, chairman of the Board of Alliance One Intl. in Morrisville, N.C., had noted earlier in the meeting that in recent years tobacco control efforts by WHO, FDA and other tobacco control advocate organizations and agencies have regulated many flavorings out of tobacco in many countries in the world. That, ironically, has created a higher demand for naturally flavored, high quality U.S. tobacco, which could increase the market for U.S. product.

Brown also noted the industry has seen a lull in the past couple of years on excise tax increases at both the federal level, 'since we had the big increase in 2009,' and at the state level, since votes for some very large state excise taxes 'were carried forward in the latter part of the last decade.'

'Some analysts who look at tobacco feel we may be ripe to see some additional increases in state excise taxes,' he said. 'And it has been said that the Children's Healthcare Insurance Program may need some additional revenues.

'…So we'll have to keep in mind that these excise taxes are still an issue that we have to watch and they may still crop up again, perhaps even in 2013.'