- 36 - 



SOME PROBABLE EFFECTS OF A CUTOFF OF CUBAN TOBACCO 



Introduction 



Cuba has been the source of about one-fourth of the tobacco used by the 

 United States cigar industry, and it is estimated that around two-thirds of all 

 cigars now produced in the United States contain Cuban tobacco to a varying ex- 

 tent. Accordingly, inability to obtain Cuban tobacco for a lengthy and indef- 

 inite period would force substantial changes in the composition of cigars and 

 in the cigar industry. This in turn would have repercussions on domestic pro- 

 duction and on imports. However, since taste, preferences, and habit appear 

 to be important factors affecting the consumption of cigars, it is not feasible 

 to trace the ramifications of a stoppage in great detail, though it is possible 

 to indicate some of the broad dimensions of the ensuing adjustments. 



As pointed. out on page 7> the cigars containing Cuban leaf can be placed 

 in two categories: (l) clear Havana cigars and predominantly Havana filler 

 cigars (nearly 10 percent of the total), and (2) blended filler cigars using 

 Cuban tobacco in varying proportions (about 57 percent of the total). 



A prolonged stoppage would" affect all segments of the industry using 

 Cuban tobacco, but there would be wide variations in the severity of the 

 impact and on the ability of the different segments to effect a transition 

 to the radically altered supply situation. 



The Transition 



The most drastically affected segments of the industry would be those 

 whose products are the clear Havana cigars and the predominantly Havana filler 

 cigars. Producers of a substantial part of the clear Havana cigars held 

 stocks of Cuban tobacco on October 1, 1961, amounting to 5.4 million pounds-- 

 unstemmed weight. While these holdings were substantially above October 1 stocks 

 of recent years, they are estimated to be sufficient, on the average, for sustain' 

 ing only around 10 months' cigar production, assuming the current rate of use. 

 As there is wide variation in the level of stocks, some firms, of course, have 

 less than a 10 months' supply, whereas other firms would be able to maintain 

 production considerably longer. Manufacturers also have the problem of keeping 

 stocks balanced among wrapper, binder, and filler tobaccos. 



Following a cutoff of Cuban tobacco, and after exhaustion of existing 

 stocks, production of both the clear Havana cigars and the predominantly 

 Havana filler cigars would be discontinued. This would take place over a 

 period of time that cannot be estimated with any high degree of accuracy 

 because of variations in the size of stocks held by individual firms and the 

 fact that there is no way, from available data, of isolating the Cuban tobacco 

 stocks held for production of the predominantly Havana filler cigars from the 

 stocks of Cuban tobacco held for producing blended filler cigars. However, it 



