UGA Tobacco -- Tobacco Hotline May 26, 1999

Georgia-Florida flue-cured tobacco auctions resumed on a positive note, as 95 percent of the grade bid averages increased. Sales had been suspended since September 15 to allow tobacco processing facilities in eastern North Carolina to recover from flood damages. No major change was noted in desirability of offerings, and volume was heavy. The percentage of tobacco placed under loan was down slightly.

Through this week, around 64 percent of the effective quota has been sold at auction.

Gross Sales by States and Type follow:

State / Type	Weekly Pounds	Weekly Average	Season Pounds	Season Average
Florida	2,561,327	$184.58	12,733,887	$170.52
Georgia	9,204,464	$179.85	51,546,818	$167.26
Total	11,765,791	$180.88	64,280,705	$167.90

This week's general average of $180.88 was up $6.30 from week number eight. After 32 sales days last year, 70.3 million pounds had averaged $164.09 per hundred.

Bid averages for ripe leaf and smoking leaf grades were up generally $1 to $5, and sold within a narrow range of $184 to $188 per hundred. Unripe leaf marketings advanced $2 to $10 in most cases, and brought between $175 and $185 per hundred. Some nondescript offerings, which were light in volume, recorded increases in the $20 to $50 range. Nearly all heavy volume marketings were selling above levels set at the same point last year.

Only minor changes were noted in composition of marketings. Good quality tobacco increased to 10 percent of sales, fair also rose to 62 percent, while low slipped to 22 percent, and poor quality held at 3 percent. By group, leaf grades comprised 86 percent of the volume, followed by smoking leaf at 5, with cutters and lugs at 3 percent each, and nondescript at 2 percent. Maturity of offerings remained less than desirable, as half of all auctions was either unripe or immature.

The Flue-Cured Stabilization Corporation acquired 9.7 percent of sales this week, and 11.0 percent for the season. At the same period last year, 9.7 percent had been placed under loan.

Auction bid averages per hundred pounds on several U. S. grades and comparisons follow:

U.S. Grade	Auction Bid	Change From Previous Week	Change From Previous Year
B4F	$188	Up $1	Up $3
B3K	$188	Up $1	Up $4
B4K	$187	Up $2	Up $4
B5K	$184	Up $5	Up $4
B4KR	$187	Up $4	Up $5
B4KF	$181	Up $6	Up $3
B5KF	$175	Up $10	Up $1
B3KM	$185	Up $2	Up $3
B4KM	$184	Up $5	Up $4
B5KM	$178	Up $9	Down $1
H4K	$188	Up $1	Up $3

Receipts by the Flue-Cured Stabilization Corporation were down from levels prior to the storm, but remained disappointingly high. Growers placed 14.7 million pounds under loan for the week (17.5 percent of gross sales, raising the season's total to 70.3 million pounds (16.3 percent). At the comparable point last year, 70.3 million pounds (14.6 percent) had been delivered to the Cooperative.

Weekly percentages of loan receipts, by type, follows: Type 11 - 18.8; Type 12 - 12.1; Type 13 - 30.2; and Type 14 - 9.7 percent.

The Daily Market Average as well as the percent going under loan can be found at the following web site which is updated by The Flue-Cured Tobacco Cooperative Stabilization Corporation.

Flue-Cured Tobacco Cooperative Stabilization Corporation has also developed a tobacco loss estimate based on a county by county analysis of pounds remaining to sell as of September 15, 1999. Stabilization expects the loss of farm tobacco from Dennis and Floyd to be between 60 and 75 million pounds.

During the eighth week of sales ending September 16, 1999, the highest average price for the week was found at H & R Tobacco Warehouse on the Moultrie Market with an average price of $184.05 per hundredweight. Second highest was Perkins Warehouse on the Nashville Market with an average of $183.09 per hundredweight. Third highest for the week was Big Z and Planters Warehouses on the Blackshear Market with an average of $181.44 per hundredweight. The Nashville Market had the highest average price for the eighth week with an average of $181.72 per hundredweight. Through the eighth marketing week the Blackshear Market had the highest average price at $173.00 per hundredweight.

As of the September 24, 1999 MH residue report, with 258 samples analyzed for the Tobacco Industry Leadership Group MH residue levels average 77 ppm across all belts. Georgia-Florida type 14 is averaging 92 ppm. South Carolina type 13 stands at 89 ppm. North Carolina border belt type 13 is averaging 101 ppm. North Carolina Eastern belt type 12 is averaging 85 ppm. North Carolina Old Belt type 11 is averaging 25 ppm. Virginia Old Belt type 11 is averaging 28 ppm.

The State Community Development Board is charged with managing the distribution of the Phase II monies to Georgia tobacco quota owners and producers who were involved in either way as of September of 1998.

The board is developing a verification form to be mailed to all quota owners and producers in the next week or so. Much confusion exists as this process is put into place rapidly in order to provide the needed information to Chase Manhattan by December 1, 1999 so that checks can be written in December.

An informational meeting to explain this process and to gain input from quota owners and producers will be conducted in the:

It is important that quota owners and producers begin to be informed of this process and have a chance to have their questions answered.

The Board hopes to have the final version of the form ready and available by this meeting. This may be an excellent opportunity to get an early look at the information needed before any money will change hands.

A series of meetings similar to this one is expected to be developed and conducted throughout the Georgia tobacco production area over the next few weeks.

Extension Economist, Bill Givan reports that the State Community Development Board (for Tobacco) will mail forms this week to OWNERS of farms with basic tobacco quota in 1998.

The OWNER will be responsible to contact others who may own part of the quota - or who may have produced the tobacco - and certify the validity of the 1998 basic tobacco quota - ownership and producer. Others who are associated with the farm will receive letters informing them of the need to contact the farm owner for verification and signature.

Payment maximum will be approximately 26 cents per pound for 1998 basic quota - less some administrative costs and associated expenses. This amount will be paid to quota owners who produce the tobacco. Or it will be divided 50/50 if the quota is leased and produced by another party. In the case of leased quota - growers will receive payment for spring-leased quota only. Quota leased late (during the marketing season) will not be considered.

The farm owner should make a copy of the form before sending it back to the Development Board. The Board has intentions of getting this information to Chase Manhattan Bank - who is handling the fund - so payments can be made in December 1999.

An IRS form W9 will be mailed with the form. This is a form which requests the individual's taxpayer identification number, which is usually the social security number. It is important this form be completed and sent back to keep 31% of the payment being withheld.

No information is available at this time on how this payment will be interpreted by the IRS. At this point we suggest it may be considered ordinary income - or "supplemental income for the production of a commodity". If this be the case, it would be taxed at the individual's marginal tax rate. Further, the grower may be liable for self-employment tax. Consult your tax practitioner for information on this.

On Friday October 1, 1999, the House of Representatives passed the fiscal year 2000 agriculture appropriations conference report by a vote of 240-175. The conference report includes $8.7 billion in FY 2000 emergency funding to assist farmers who have endured economic losses and natural disasters. The bill includes $328 million in payments to burley and flue cured tobacco growers as partial compensation for quota losses from the 1998 basic quota cut. The bill goes before the Senate early this week and is expected to pass.

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