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UNITED STATES

Burley demand may exceed supply as African output falters

04 Aug 2017. Demand for burley tobacco may “slightly” exceed supply this year as larger than expected shortfalls in Africa underpin an expected 13 per cent drop in global production, Universal said in its latest earnings statement.

“We are currently forecasting worldwide burley tobacco production levels for fiscal year 2018 of about 510 million kilos, a reduction of approximately 13 per cent from fiscal year 2017 levels. As a result, we believe that demand for burley tobacco may slightly exceed supply,” said Universal Chief Executive Officer George Freeman.

"Crop purchases are essentially completed in Brazil and are progressing well in Africa,” he said. “Overall crop qualities are good. We expect increased volumes in Brazil to continue to positively affect earnings throughout this fiscal year. At the same time, greater reductions than expected in burley crop sizes in Africa, and continued challenging market conditions in Tanzania will reduce our volumes sold from that region.”

Tobacco segment operating income at USD 6.1 million (EUR 5.1 million) in the business quarter to 30 June contrasted with a loss of USD 8.1 million last year. Sales of flue-cured and burley were lower at USD 237.7 million compared with USD 250.7 million due to a slump in North America. Volume shipped was lower in North America mostly due to larger crop carryover sales, Universal said.

"Although it's still early in the season, customer orders are progressing as anticipated, and our uncommitted stock levels are well within our target range at 17 per cent,” Freeman said.