Friends of Tobacco

Tobacco Industry Profile 1995

403 B East New Bern Road, Kinston, North Carolina 28501
Phone & Fax (919) 522-4769 *

Prepared by:
The Tobacco Institute
1875 I Street NW
Washington, DC 20006
(202) 457-4800
(All data for calendar year 1994, unless otherwise stated.)


Total U.S. consumption, including overseas armed forces was: *Consumption figures for little cigars are no longer broken out by U.S. Department of Agriculture.
The output of cigarettes from U.S. factories was 725.6 billion. Of the total, 11.5 billion cigarettes were shipped to overseas forces, including Puerto Rico and other U.S. possessions and 220 billion to other countries.

Per-capita U.S. consumption, based on population 18 and over, declined to 2,514. The record high was 4,345 in 1963.


US expenditures for tobacco products were estimated at $47.1 billion, a decrease of $2.9 billion from a record high in 1993. More than $44.5 billion, 94 percent of the money spent for tobacco products, was for cigarettes.

World Production

World production of tobacco in 1994 was estimated at 7.24 million metric tons.

The leading leaf-producing nations in 1994 were:

U.S. Tobacco Production

Tobacco Growers

Tobacco was grown on 124,270 farms in 23 American states and in Puerto Rico. The federal government issued 347,765 allotments to grow tobacco in 1994. The allotment total is larger than the number of farms because some farms are given allotments for more than one type of tobacco.

The acreage harvested was 672,880, down 10 percent from 1993, with a yield of 2,046 pounds per acre. The total U.S. harvest was 1.59 billion pounds, down nearly 2 percent from 1993. The types of tobacco grown in 1994 include:

Tobacco growing requires about 250 man-hours of labor per acre harvested. By comparison, it takes about three man-hours to grow and harvest a acre of wheat. The more than one-half million farm families involved directly and indirectly in producing tobacco in the U.S. were aided by additional seasonal workers.

Tobacco Sales

Nearly all of the nation's tobacco was sold at auction in 136 designated markets. The remainder was sold directly from farms or by farmers' cooperatives.

The average price of the 1994 flue-cured crop was $1.70 per pound, while burley brought $1.84 per pound. This increase represents an increase of about 3 cents for burley and an increase of 2 cents for flue-cured from 1993 prices.

Crop Income

Tobacco was the seventh largest cash crop in 1994, behind corn, wheat, hay, soybeans, cotton and rice. The tobacco crop was worth almost $2.7 billion, representing more than 2.9 percent of the total for all cash crops and farm commodities.

Estimates of cash receipts from the 1994 tobacco crop were:
millions of dollars

North Carolina         $943             Florida             $27
Kentucky                786             Connecticut          24
Tennessee               248             Pennsylvania         21
South Carolina          172             Maryland             19
Virginia                168             Missouri             13
Georgia                 136             Wisconsin            10
Ohio                     33             Massachusetts         7
Indiana                  29             West Virginia         7

Tobacco is also grown in Alabama, Arkansas, Illinois, Kansas, Louisiana, Minnesota, New Mexico and the Commonwealth of Puerto Rico.



In FY 1992, 114 factories in 21 states had federal permits to manufacturer tobacco products. Facilities were concentrated in the southeast and mid-Atlantic states.

In FY 1992, 272 warehouses in 33 states were authorized to export tobacco. Federal permits to manufacture cigarette papers and tubes were issued to four establishments in four states.


An estimated 42,900 persons were employed in tobacco manufacturing during 1993 on a monthly average basis, representing hundreds of millions of payroll dollars. The 36,700 employees on the production lines in the average month earns $627.95 a week for a 37.4-hour week.

Of all the manufacturing employees, about 80 percent, or approximately 29,500, were employed by cigarette manufacturers, and earned $769.33 for a 37.4-hour week. Over 88 percent of the production workers, or 26,200 employees, were involved in cigarette-making. The rest worked in other aspects of tobacco manufacturing, including stemming and redrying the leaf.



The Bureau of Census, Business Division, estimated in 1992 that 625,000 retail outlets distributed tobacco products.* The following figures have been compiled from surveys and reports by tobacco industry associations and trade magazines to provide an overview of retail outlets and sales.

Retail tobacco shops numbered 3,164 with an average revenue of $333,000. Of the retail tobacco shops, 1,477 are retail outlets specializing solely in tobacco products. Tobacco sales at these stores averaged $191,000 for 1993. Cigarettes accounted for $54,000 of this figure.

In 1994, combined outlets of traditional convenience stores and petroleum marketers with convenience stores, number 84,000. Totaled tobacco sales equaled $10.6 billion. Traditional operators had total tobacco sales of $5.7 billion. Petroleum marketers had total tobacco sales of $4.8 billion.

Cigarette sales from 480,000 vending machines totaled approximately $2.1 billion in 1994.

Supply Network

Related Industries

Dependence on a complex industrial and service network greatly extended the contributions of tobacco to the nation's economy. The need for farm and manufacturing materials, supplies and equipment, as well as services ranging from transportation to advertising, provided employment for additional millions and added billions of dollars to personal and business income in all the states.

Exports and Imports

The U.S. remains the leading exporter and importer of tobacco. In 1994, the value of U.S. exports of leaf and manufactured tobacco products was $6.7 billion, $1 billion more than 1993. Imports were valued at approximately $853 million, a decline of nearly 45 percent. U.S. tobacco trade contributed more than $5.8 billion to the U.S. trade balance last year. $1.6 billion more than the industry's $4.2 billion trade surplus of 1993. This is a new record.


Approximately 196,794 metric tons of unmanufactured leaf tobacco, valued at $1.3 billion, were exported. Leading markets for U.S. leaf were Japan, Federal Republic of Germany, Taiwan, Thailand and Turkey.

Imports of unmanufactured leaf totaled 291,000 metric tons and were valued at $692.7 million, almost a 54 percent decrease in value from 1993.

Nearly 25 percent of the leaf imported, or 72,000 metric tons, was oriental leaf for use in domestic cigarettes. Turkey continues to be the major supplier of oriental leaf, followed by Greece and Bulgaria.


The value of exported manufactured products in 1994 was $5.3 billion, cigarettes accounted for 92.5 percent of this figure. Imported manufactured products were valued at $162 million.


Approximately 220 billion cigarettes were exported in 1994 to 113 countries, up 11 percent in quantity from 1993. They were valued at $4.9 billion. The leading destinations were Belgium-Luxembourg, Japan, Saudi Arabia, Lebanon and Singapore.

About 8.7 billion foreign cigarettes, valued at $71 million, were imported.

Other Products

Cigar and cheroot exports included 116 million units, valued at $8 million.

About 85 million units of foreign cigars and cheroots were imported with a value of $62.8 million. Exports of pipe and roll-your-own tobacco in bulk increased 2 percent to 2.6 million pounds. Their value of $275 million was a 9 percent increase from 1993. Exports also included 1.48 million pounds of snuff and chewing tobacco worth $8.7 million, up 95 percent in volume and 58 percent in value. from 1993.


Approximately 81 percent of all tobacco leaf exported was shipped from the eastern U.S. Major ports shipping tobacco leaf were:
Port                   Metric Tons         Value (thousands)

Norfolk, VA            82,517              $537,657
Wilmington, NC         52,487               339,959
Los Angeles, CA        27,984               160,955
Charleston, NC         17,069               117,427
San Francisco, CA      4,855                 38,030
San Juan, PR           1,358                 34,512
Savannah, GA           2,435                 12,669
Seattle, WA            1,532                 11,158
New York, NY           1,543                  7,023
Tampa, FL                831                  5,939

Cigarettes accounted for approximately 97 percent of the value of manufactured tobacco products exported. Major ports shipping cigarettes overseas were:
Port                   Units (billions)    Value (millions)
Norfolk, VA            85.1                $2,078
Seattle, WA            30.4                   767
Los Angeles, CA        30.8                   653
San Francisco, CA      14.1                   358
Wilmington, NC         12.9                   221
Savannah, GA           11.3                   195
Charleston, NC         10.3                   161
New York, NY            7.7                   155
Baltimore, MD           6.3                   150
Miami, FL               3.3                    79

Government Receipts from Taxes

Tobacco Taxes

About 31 percent of the receipts from domestic civilian retail sales of tobacco products went to federal, state and local treasuries in the form of consumer excise and sales tax. These totaled close to $15 billion in FY 1994 (ending June 30).

Federal, state and local governments collected over $12.7 billion alone in consumer excises on all tobacco products in FY 1994. Cigarette taxes represent 97 percent, or nearly $12.4 billion.

Federal, state and local excises on other tobacco products totaled $350 million.

Since 1863, when cigarettes were added to the tobacco products taxed by the federal government, governments at all levels have collected over $285.2 billion in tobacco excise tax. Cigarettes have accounted for 96.3 percent of that, or $274.8 billion.


In FY 1994, the federal government's share was $5.7 billion. Cigarette taxes accounted for almost 98.7 percent. A total of $73.6 million in taxes on other tobacco products was collected. The federal cigarette excise tax rose from 16 cents per pack to 20 cents on January 1, 1991. The federal cigarette excise tax increased - to 24 cents - on January 1, 1993.


All states, and the District of Columbia, impose consumer excises on cigarettes, 44 also tax cigars and smoking or chewing tobacco, snuff or a combination of products.

Total state tobacco consumer excise tax revenue in FY 1994 was $6.9 billion, over 96 percent of which came from cigarette excises. About $263.5 million was collected on other tobacco products. As of July 1, 1995, the states' cigarette excises range from 2.5 to 81.5 cents per pack, averaging 32.5 per pack.


Tobacco taxes in 440 cities and counties yielded approximately $185 million in FY 1994. Of that amount, $184.8 million, or 99 percent, resulted from taxes on cigarettes. Eighty-two local governments also collected $480,000 from taxes on other tobacco products.

Government Tobacco Programs

Farm Quotas

In 1994, the USDA continued to administer laws to stabilize tobacco production and assure the grower fair prices. Most tobacco farmers, through periodic referenda, favored marketing quotas. Because of the production controls, less tobacco was produced and prices were higher than would be likely without them.


With grower approval of marketing quotas for a tobacco type, price supports for it were mandatory. Under the program, the Commodity Credit Corporation (CCC) made loans to farmers through their cooperative associations, with the tobacco as collateral. The associations handled and sold the tobacco, repaying loans as the tobacco was sold. The realized cost of the tobacco program since it's start in 1933 was about 0.1 percent of the cost for all 13 farm commodity price support programs. In FY 1994, loan repayments totaled $131 million, while new loans totaled $351.4 million. The loans are to be repaid with interest to CCC as the collateral tobacco is sold by the associations.

In 1982, Congress revised the price support program, requiring tobacco farmers to pay into a fund to offset any losses, assuring that its continued operation will be at no cost to the American taxpayer.


USDA's Agricultural Marketing Service (AMS) inspected and graded all tobacco before auction. Government grade standards were the basis for CCC loans. Beginning in FY 1982, tobacco farmers paid user fees for grading. In FY 1994, AMS collected $14.9 million from tobacco farmers, including investments. Daily market news reports informed growers of prices and market conditions. This service cost approximately $1 million in FY 1994.

Tobacco's Contribution to
America's National Economy

Price Waterhouse performed an analysis of the U.S. tobacco industry to determine its impact on America's economy during 1990.

Based on that analysis, it is estimated that the tobacco core sectors in the U.S. economy generated $51.5 billion of the Gross National Product (GPN) in 1990 and employed 681,353 persons to producer and deliver tobacco products and associated goods and services.

The tobacco industry's estimated spending-induced impact on America's GNP was $77.8 billion - far more than expenditures on tobacco products alone. This impact was generated by tobacco workers' expenditures on goods and services of other, non-tobacco, business sectors throughout the United States.

The Price Waterhouse study estimates tobacco industry activities in all 50 states produced these contributions.
US Dept. of Agriculture: Agricultural Marketing Service and Financial Management Division; Consolidated Farm Agency Service, Economic Research Service, World Tobacco Situation and Outlook; Foreign Agriculture Service, World Tobacco Situation; Statistical Reporting Service, Crop Production 1994 Summary, Crop Values 1994 Summary.

US Dept. of Commerce: Bureau of Census, U.S. Exports EA-622, Census of Agriculture, 1992; Census of Manufacturing, 1992; Census of Retail Trade, 1992; Census of Wholesale Trade, 1992.

US Dept. of Labor: Bureau of Labor Statistics, Supplement to Employment and Earnings.

US Dept. of Treasury: Bureau of Alcohol, Tobacco and Firearms.

Convenience Store News, May, 1995.

American Wholesale Marketers Association, 1128 16th St. NW Washington, DC 20036

Automatic Merchandiser, Vol. 37, No. 8, August 1993

Price Waterhouse, Washington, DC

Retail Tobacco Dealers of America, Inc. 107 East Baltimore St. Baltimore, MD 21202

Smoke Shop Magazine, Vol. 21, No. 5. Sept./Oct. 1994

The Tobacco Institute: The Tax Burden on Tobacco, Vol. 29, 1994, 1875 I Street, NW Washington, DC 20006

Tobacco Merchants Association, PO Box 8019 231 Clarksville Road, Princeton, NJ 08543-8019

Vending Times: Census of the Industry, 1994

*The estimated number of retail outlets reported in previous years was higher, owing to differing interpretations of census data.
Let's set the record straight...

There is NO tobacco subsidy!

One of the most misunderstood facets of tobacco is the government price support program, sometimes incorrectly called 'the tobacco subsidy'. Critics denounce a bureaucracy which - they say - gives money to farmers to grow the leaf while it discourages tobacco smoking. In fact, there is no tobacco subsidy. There never was. So how could the government's farm and anti-smoking programs conflict?

There is a government price support and production control that guarantees farmers a minimum price for their tobacco in return for strict limits on production, much as similar programs do for corn, rice, peanuts and cotton - 13 different commodities altogether.

How price support works.

The money isn't a gift. It's a government-backed loan, to be paid back just like government loans for small business-men, students and home buyers.

All tobacco types are eligible for price support. The program is voluntary, with growers of each type being given the choice, via referendums every three years, to participate. Most elect to be bound by price support guidelines.

To participate, tobacco growers agree to strict acreage and poundage allotments set annually by the U.S. Department of Agriculture. Total allotments, the 'national marketing quota', equal the amount the USDA estimates is necessary to meet the needs of the domestic tobacco industry, foreign buyers and inventory set by law.

Price supports do more than control quantity. They establish a minimum price for tobacco to be sold at auction. This minimum price is especially important to the tens of thousands of farm families who grow tobacco on acreage so small that no other crop grown there could support a family.

Most U.S. tobacco is sold at warehouse auction after grading by U.S. standards according to type and quality. The grade determines the per-pound support price.

If a grower fails to bring an auction bid of at least one cent per pound above the support price, and if the grower meets USDA requirements, he is eligible foe a government-backed loan based on the support price. The tobacco is taken as loan collateral by a cooperative owned and operated by growers. It's then processed and stored for future sale.

What it costs.

Among the most imperishable of crops, tobacco can be stored for several years before being sold in a more favorable market. It may take several years to dispose of the loan collateral leaf from a single marketing year. But when the cooperative sells the tobacco, each loan is repaid with interest.

Until recently, on the rare occasions that sale proceeds did not cover a loan, the unpaid balance was written off as a federal program cost. Since 1982, however, each participating tobacco grower has contributed to a fund held by his cooperative to ensure repayment of loans and interest. Beginning in 1986, buyers made half the contributions.

In past years, when proceeds from loan tobacco exceeded the cost of the loan, interest and storage charges, profits were distributed to growers. Now they, too, go into the repayment fund.

Permanent government efforts to stabilize sectors of the national economy, including agriculture, began in the depression of the 1930's. The 1932 tobacco crop sold for only 9 cents per pound. Many farmers, unable to sell their leaf at all, were using it as fuel.

Price stabilization and production control were - and are - designed to ensure the farmer a reasonable return for his considerable investment.

A no net cost program.

The Commodity Credit Corporation administers commodity stabilization programs for the USDA and, as with all the other commodities, in the past incurred some expenses in the tobacco program. For example, changes in prevailing interest rates occasionally caused gaps set by CCC at the start of the year and the rate at which CCC borrowed from the Treasury for producer association loans later in the year. Variable interest loans, begun in 1981, now minimize this gap.

USDA also has administrative costs of about $15 million annually - for the agents who track allotments, marketing and other tobacco program operations. They would be incurred anyway because the agents work for other crops, too, and bookkeeping separation is not feasible.

As of 1992, CCC books showed a $81.5 million loss on tobacco loans over half a century - the result of only two or three 'bad' years. This is less than one-tenth of one percent of all losses for all commodity price support programs. by comparison, the corn and wheat price support programs each show a $3 billion-plus loss and cotton more than $2 million.

For various reasons, however, collateral stocks of tobacco rose in the 1980s, threatening a larger government loss. Congressional action in 1986 provided for manufacturer buyouts from the surplus, and lower support price levels - measures which will sharply reduce government liability and make U.S. leaf more competitive in foreign markets.

There is no tobacco subsidy.

In the 50-year span during which the tobacco program ran it's relatively modest loss, purchasers of tobacco products paid federal, state and local treasuries more than $254.8 billion in excise taxes (as of 1992).

So there is no tobacco subsidy.

Still, critics argue the program makes tobacco products readily available. Untrue.

The program is intended to, and does, keep tobacco leaf prices higher than they would be without it.

The program is intended to, and does, keep domestic tobacco supplies lower than they would be without it.

Without the program, many more acres would be devoted to tobacco. Overplanting would bring a larger tobacco supply and lower prices for the farmers, who would then lose their land and other capital. Such widespread financial and commercial disruptions would create regional recessions with national repercussions.

Encourage smoking?

Does the price program encourage smoking or continuing to smoke? Just what are government health and regulatory officials saying about this question?

Everett Koop, the former Surgeon General, said federal health authorities consider price supports to be an agricultural and economic matter, 'not an issue concerning public health. It's hard to see how a subsidy by the government encourages young people to start smoking or keeps people who are smoking continuing.'

Dr. Koop gave the program the wrong name calling it a subsidy. But he gave an accurate assessment of its effects.

A then Federal Trade Commission member and long-time foe of smoking, Michael Pertchuk, told it like it is at a session of the 1983 World Conference on Smoking and Health. The support system, he said, 'restricts the production of tobacco as part of a program for keeping the price of tobacco and hence the income of tobacco farmers up.'

Without the program, Pertchuk said, there would be 'a return to the conditions which spawned the program in the great depression.'

He's right.

For further information on this and other tobacco related issues, write or call The Tobacco Institute.
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