- 9 - 



The manner of competition between the growers to supply the changed market 

 for their product will determine the level of prices for the different uses and 

 the differentials that will be paid for the tobacco for the different uses. 

 Should the smaller quantity of natural binders lead to increased competition 

 among the growers for the market for tobacco to be sorted, the prices would go 

 down. On the other hand, if the manufacturers find that they need to pay from 

 50 cents to 60 cents to secure the high quality of natural binder needed for 

 the cigars selling at the higher price, the average price for sorted tobacco 

 would increase. Should the manufacturers of processed binders find that cer- 

 tain areas or certain growers produce a leaf that is more desirable for their 

 purpose, they may pay a premium to secure that tobacco in competition with the 

 scrap chewing manufacturers. It also may be found that certain processed 

 binder manufacturers will pay a premium for some type of tobacco to secure the 

 kind of binders they want for their brands, as is now true of Broadleaf, type 

 51. Other data based on other assumptions can be substituted in the tables, 

 depending upon the expected cost situation. 



Importance of Production Costs 



Adjustment of the supply to "this new development in cigar manufacturing 

 will depend not only upon the amount and kind of tobacco that manufacturers of 

 cigars and scrap chewing will require, but on the costs to the growers in meet- 

 ing this demand. Changes in demand necessarily raise questions of how to lower 

 costs in production and marketing. It should be possible to lower the cost of 

 producing and marketing tobacco for processing. Experience shows that the 

 extreme care required in growing, harvesting, handling, sorting, and marketing 

 tobacco for natural binders is not required for tobacco intended for processed 

 sheet binders. The competitive situation among the areas growing binder types, 

 and also with respect to other tobacco growers, will depend on costs in the 

 various areas and among different growers. Increased mechanization and other 

 changes in production methods, including the introduction of new varieties, 

 will affect these costs. 



Adjustments Since World War II, Indicated for the Future 



The growers of binder- type tobacco have adjusted to a number of rather 

 drastic changes in demand in the past. The most recent was the adjustment in 

 acreage and production from the high prices of the immediate postwar period, 

 1945-1949, to the lower prices of the period 1950-1954. The data in table 4 

 show how the growers made that adjustment, and show also the first reaction to 

 the processed binder in 1956. The prices in table 4, in each instance, are 

 for periods 1 year earlier than the periods covered by the acreage and produc- 

 tion data, to show the effect of earlier prices on production. For example, 

 the drop in acreage for Connecticut Broadleaf from an average of 9*6 thousand 

 for the period 1946-50 to 8.4 thous. acres for the period 1951-55 was an ad- 

 justment resulting from the decline in prices from an average of 59*6 cents 

 for the years 1945-49, to 53*6 cents for the period 1950-54. There were sig- 

 nificant differences in the adjustment by types within the binder tobaccos. 



