President Lazarus Chakwera is set to preside over the official opening of Malawi’s tobacco marketing season at Lilongwe Auction Floors today. He will announce the minimum prices for the leaf as well, reports Nyasa Times.
The opening of the tobacco market brings hope for foreign currency availability. Malawi has been struggling with a shortage of foreign currency this year, in part due to comparatively low tobacco export volumes in 2022.
The Tobacco Commission stated that about 20,000 bales have been presented to market, and 2,600 are expected to be sold on opening day.
Production is expected to increase from 85 million kg last year to 126 million kg this year.
Auction floors at Chinkhoma, Limbe and Mzuzu are set to open on April 13, April 17 and May 2, respectively.
Following last year’s record earnings, Brazil’s leaf tobacco sector expects a larger crop in 2023.
By Marissa Dean
As global markets ebb and flow with impacts of the Covid-19 pandemic, inflation and the Russia-Ukraine conflict, the tobacco sector has not been spared. Labor shortages, shipping issues and price inflation have all impacted tobacco growing and sales over the past few years. Through this, though, Brazil has come out in the positive in the last year and expects to see another good crop season in 2023.
Increased Earnings
Brazil’s 2022 tobacco leaf exports brought in the most earnings since 2014, when the country sold $2.3 billion worth of tobacco leaf internationally (see “The Way Forward,” Tobacco Reporter, February 2014). The $2.5 billion earned from leaf exports in 2022 reflected a 67.44 percent increase in value and a 25.93 percent increase in volume from 2021, with the negative impacts from the pandemic beginning to subside and logistical bottlenecks easing.
In 2021, Brazil exported 464,429 tons of tobacco leaf, amounting to $1.46 billion, according to the Interstate Tobacco Industry Union (SindiTabaco). In 2022, the country exported 584,861 tons of tobacco leaf, amounting to $2.45 billion.
The 2021/2022 crop fetched a price of brl17.02 ($3.28) per kilogram in southern Brazil versus brl10.54 per kilogram for the 2020/2021 crop, according to Afubra, the Tobacco Growers’ Association of Brazil.
The majority of exports last year were headed to Europe, with Belgium accounting for 26 percent of shipments. China bought 19 percent of Brazil’s tobacco while the United States purchased 6.3 percent.
While there were many factors that contributed to the substantial earnings last year, “The decisive factors that contributed to the higher-than-expected exports in 2022 were the 2021 unsold stocks, which were shipped abroad in early 2022, and the improvement to the shipping and container logistics in the second half of 2022,” said Iro Schunke, president of SindiTabaco.
What’s to Come in 2023?
Following the strong 2022 season, Brazil is expected to harvest a slightly larger crop this year. According to Afubra, the planted area in southern Brazil should yield an estimated 604,732 tons, 7.95 percent more than in 2022.
To reach these estimates, the growers’ organization uses the number of plants registered in the entity’s Mutual System, by type of tobacco, according to Benicio Albano Werner, Afubra’s president. “To these numbers, we add the number of plants on properties that are not registered in the system,” he said. “It is considered also the percentage that producers planted above or below the quantities registered. These three factors give us the planted area.”
“The Brazilian tobacco crop is expected to reach approximately 600,000 metric tons,” said Schunke. “The quality of the crop will be good enough to meet the requirements of the different clients.”
In the Rio Grande do Sul region, tobacco growers increased their planted area by 3.17 percent and production is estimated to be 3.8 percent higher. In Santa Catarina, planted area was increased by 10.22 percent and production is estimated to be 11.49 percent higher. In Parana, planted area was increased by 6.99 percent and production is estimated to be 10.93 percent higher.
When asked about how the expected increase in crop size would affect 2023 sales and earnings, Schunke said, “The Brazilian tobacco crop has remained around 600,000 metric tons over the past five years, and the average shipments abroad over the same period have remained little above 500,000 metric tons. Therefore, the current crop fits into this context.”
The increase in production area was expected, according to Werner. “The past crop was, for a large part of tobacco growers, very profitable, with high lucrativeness,” he said. “This encouraged some producers to increase their planted area.”
Hurdles
Globally, the past few years have been hard; beginning with the Covid-19 pandemic in 2020 and followed by supply chain issues, global labor shortages, global inflation and the conflict in Ukraine, many sectors have been impacted in some way. Tobacco farming is not exempt.
Brazil’s tobacco industry is dominated by small-scale farming, with a total of 142,190 producers, the majority of whom are in southern Brazil (128,448) followed by the northeast (13,390) and a marginal amount located elsewhere in the country (352). The overall number of producers has decreased from the 2020/2021 season, which counted 151,388 producers.
The Covid-19 pandemic exacerbated the problem of child labor around the world due to increases in poverty, school closures and labor shortages. The International Labor Organization and the United Nations Children’s Fund released a report showing that 160 million children and adolescents ages 5 to 17 were subjected to child labor in early 2020.
The tobacco industry in Brazil has made considerable headway in addressing the problem. The Growing Up Right Institute, which focuses on eliminating child labor, is an initiative of SindiTabaco and its associated companies, supported by Afubra, helping to keep teenagers and children of tobacco farmers out of the tobacco fields. Companies associated with the institute hire young apprentices and pay them a salary equal to 20 hours a week to attend a rural management and entrepreneurship course after regular school hours.
In July 2022, the Growing Up Right Institute held a seminar in Santa Cruz do Sul with associates and partners, discussing progress made in combatting child labor and the work that needs to be done going forward. “The institute was founded with the mission to fight child labor and generate opportunities for adolescents from the rural setting, especially in tobacco growing regions,” said Schunke, who is also president of the Growing Up Right Institute. “It is a complex task, but with good partnerships, we have achieved great results. We have already become known nationally and internationally for the innovative method of offering opportunities to adolescents from the countryside through the learning law.”
Additionally, “The increase in [cost of] farm inputs, along with higher international freight costs, were responsible for pushing up the production costs of all agricultural crops, including tobacco,” said Schunke. While, based on last year’s earnings and expectations for this year, Brazil’s tobacco income seems well positioned, the industry will still have to fight against global inflation and the remaining supply chain issues.
“It is worth emphasizing that Brazil has been the largest tobacco exporter for 30 years due to the quality and integrity of the crop whilst complying with ESG [environmental, social and governance] questions,” said Schunke. “It is important for the tobacco growers to continue in line with these principles, always acting in compliance with good agricultural practices.”
A Rural Tradition
Image courtesy of Palheiros Paulistinha
Brazil is a prominent player in the global tobacco industry, known not only for its leaf tobacco but also for its cigarette manufacturers, including market leader BAT Brasil, which is perhaps better known as Souza Cruz. Within the larger commercial industry, however, lies a smaller, more rural niche of straw cigarette makers.
Palheiros Paulistinha is located in Bebedouro, Sao Paulo, Brazil, and specializes in the production of straw cigarettes, an artisanal product of Brazilian tobacco filler with a corn husk wrapper. The company was started in December 2004 with the aim of preserving the tradition of Brazilian straw cigarettes as well as adding value to the corn production process, making straw a high-scale raw material.
Palheiros Paulistinha produces about 168 million cigarettes per year, with the possibility of expanding local production to 300 million cigarettes annually. The company offers seven product lines, including flavored and nonflavored products.
Straw cigarettes are popular in the rural communities and among young adults, according to the company, partly because they lack chemical additives, with the exception of flavorings such as menthol. “We are experiencing a change of habits when it comes to tobacco customers in Brazil,” said Eduardo Pierini, export director of Palheiros Paulistinha. “While in the rest of the world, they are migrating to e-cigarettes and vapes, in Brazil, despite those products, they are more attracted to straw cigarettes because they are more natural and ‘stronger.’” This change has led to an increased market share for the company.
Each cigarette is handmade by trained individuals who prep the tobacco and corn leaves, cut the leaves, sterilize them and roll the cigarettes. Because of the handmade aspect, these products are more expensive than traditional cigarettes; however, the lack of chemical additives and “lack of smell,” according to the company, make them very popular as a “natural” cigarette alternative.
The company works with many small farms to procure corn husks “because the biggest suppliers sell the corn leaves to industries to produce animal feed,” according to Renata Grasseschi Dunck, export consultant for the company. They have eight suppliers, who buy corn leaves from different farms and from different states. The tobacco used in the cigarettes comes from Bahia in the northeast region of Brazil. Dunck went on to explain that Palheiros Paulistinha helps tobacco farmers buy “corn leaves for a higher value than the market. We also offer training, growth prospects, etc. [for the farmers].”
There’s a big focus on community within the company—“We also work in the rehab of prisoners, offering to them the opportunity to have a job,” said Dunck. “The prisoners have a lot of benefits working,” added Pierini. Prisoners are paid, and the work they do shaves down their sentences; “So if you are condemned for nine years in prison, you would serve six years of [the] sentence,” said Pierini. “So it’s good for all the society.” The company has manufacturing set up in prison workshops and works with signed contracts, following all rules and requirements of regulating organizations. More than 3,000 inmates work for the company.
While the company is looking to expand internationally, having recently registered with the U.S. Food and Drug Administration, Palheiros Paulistinha puts a lot of stock in sourcing locally and keeping the tradition in Brazilian straw cigarettes. –M.D.
Marissa Dean joined Tobacco Reporter in the summer of 2018 as a copy editor.Since that time, she has taken on additional responsibilities, including feature writing.Her skills span the publishing industry from layout and design to copy editing to content creation.
The Tobacco Industry and Marketing Board (TIMB) in Zimbabwe has introduced a natural air curing system (NACS), reports New Zimbabwe.
The new NACS will help prevent farmers from losing leaf due to lack of space in curing facilities. NACS is a drying technique that forces ambient air through the leaf to attain acceptable moisture content.
“This significantly reduces farmers’ post-harvest yield losses and ultimately improves farmer viability, profitability and sustainability,” said the TIMB.
“The introduction of this natural Virginia tobacco product to the Zimbabwe tobacco industry is in line with the Tobacco Value Chain Transformation Plan, which has the farmer at the core of the transformation and seeks to improve productivity and sustainability.”
“The introduction of new systems and practices will also aid in addressing side marketing. Farmers’ cost of production will be reduced, increasing profitability, thereby reducing farmer incentive to side market.”
“Atlas Agri (Private) Limited will be joining TIMB to spearhead this new initiative,” added the TIMB.
Shade grown tobacco growing at the historic Robaina farm in Pinar del Rio (Credit: Hirochi Robaina)
Cuba´s Pinar del Rio province, renowned for its high-quality tobacco, is heading towards the worst harvest in its history, state-run media reported late on Wednesday.
The struggle with leaf production was expected this year. The province was heavily impacted by Hurricane Ian last fall. Most of the region´s tobacco-drying houses were flattened and homes and infrastructure were destroyed.
The 2022-2023 planting season will go down as the “smallest in Pinar del Rio´s history,” according to a report in Granma, Cuba´s state-run newspaper, as reported by Yahoo.
Prior to the hurricane, the province aspired to plant 11,200 hectares, the report said, but the region will struggle to reach half that goal.
State-run tobacco company Tabacuba said in the report it would instead prioritize the highest quality crop to assure sufficient output for the all-important export sector.
The planned area for tobacco planting this year is down to 9,500 ha from an initial plan of 15,000 ha, Enrique Blanco, agricultural director of Tabacuba said last month. Under fabric cover, 2,100 ha of premium leaf will be grown, which Cuba hopes to use to cover export demand.
The rate of rejection at Zimbabwe’s tobacco auction floors is 60.78 percent higher this year than it was during the same time last year, according to Tobacco Industry and Marketing Board (TIMB) statistics, reports The Herald.
“Generally, this season has been very difficult to cure good quality leaf, hence the tendency by some small-scale farmers to mix hands and at times moldy leaf, which accounts for about 97 percent of the rejected tobacco,” said Edward Dune, Tobacco Farmers Union Trust vice president. “The remaining small percentage emanates from pricing issues while at contract floors, even defective tobacco bales are accepted.”
The high rejection rate is a cause for concern, according to Zimbabwe Tobacco Growers Association chairman George Seremwe. “We do not rule out the inside job of middlemen (makoronyera) who collude with buyers to reject certain bales for them to be able to rehandle,” he said. “Rehandling charges can be the driving force behind this menace, and this needs to be investigated thoroughly.”
According to Victor Mariranyika, Tobacco Farmers Union Trust president, bale rejection is subjective and can be abused. “At auction floor, there seems to be a syndicate that is using false allegations, a scam that is meant to siphon money from vulnerable farmers.” He said farmers need a clear breakdown of rejection categories to be sure rejections are valid.
TIMB data shows that rejection rates are generally low at contract sales due to contractors’ ability to buy defective bales.
“Tobacco presentation issues (wet or too dry, mixed hands, moldy tobacco, or they are underweight or overweight or contain nontobacco-related material like stones and wood) account for 97 percent of the rejected tobacco, and the balance is for pricing issues,” said Chelesani Tsarwe, TIMB public affairs officer. “To prevent bales from getting rejected, farmers should focus more on grading and presentation from TIMB, contracting companies’ or Agricultural and Rural Development Advisory Services’ agricultural extension officers who are in all tobacco-growing regions.”
Bulgaria will provide BGN70.5 million ($38.4 million) to help its tobacco growers diversity into alternative livelihoods, reports SeeNews, citing the State Fund Agriculture.
The financing will be awarded to producers who have grown tobacco during for least one year in the reference period 2007-2009, the fund said in a press release published on March 10.
Tobacco producers who continue to practice agriculture are entitled to receive subsidies under the program. Owners of animal farms or beekeepers are also eligible.
Bulgaria has provided aid to a number of farmers since 2015. The amount of the grants are based on the volume of the purchased tobacco and its plant variety.
Earlier last week, Bulgaria’s government said it approved the disbursement of some BGN213 million in aid for farmers to help offset the rising costs of inputs.
Cuban tobacco farmers are working to recover after Hurricane Ian hit the region six months ago, destroying 80 percent of the country’s tobacco infrastructure, reports AP.
When Hurricane Ian his last September, it destroyed almost everything: “Not a single tobacco house was left standing,” said Hirochi Robaina, one of the most recognized tobacco producers in Cuba. “There were no warehouses; there was no tree left. Everything broke, and at that moment, I did not believe it was possible to plant.”
After the tragedy, Robaina was resigned to planting beans and vegetables instead of tobacco, but he changed his mind “to maintain the family tradition of a century,” and he was able to plant and grow about 2 hectares, which accounts for about 30 percent of what he had in 2022.
Private tobacco producers have been meeting with Cuban authorities since the hurricane to secure commitments for the state to help settle debts and pay for materials to rebuild tobacco drying houses, according to AP. Nicaragua and the Dominican Republic as well as other producers have also stepped in to help Cuba recuperate.
The planned area for tobacco planting this year is down to 9,500 ha from an initial plan of 15,000 ha, according to Enrique Blanco, agricultural director of Tabacuba. Under fabric cover, 2,100 ha of premium leaf will be grown, which Cuba hopes to use to cover export demand.
Tobacco prices in Zimbabwe fetched $4.35 per kg at the start of the new marketing season today, up from $4.20 last year, reports Reuters.
“It looks like we are going to have a good crop,” said Tobacco Industry and Marketing Board (TIMB) Chairman Patrick Devenish, who credited favorable rainfalls.
The TIMB expects the country to produce 230 million kg of tobacco this year, 8.5 percent more than in 2022.
Tobacco land use grew to 117,000 hectares this year from 110,000 hectares in 2022, according to the TIMB. The industry also saw an increase in the number of tobacco farmers to 148,527 this year from 123,000 in 2022.
The tobacco industry contributes nearly $1 billion to export earnings every year, Zimbabwean Vice President Constantino Chiwenga said on March 8. Government statistics showed it accounted for more than 12 percent of exports in January.
Zimbabwe is currently implementing a “Tobacco Value Chain Transformation Plan,” which seeks to extract more profit from the sector by processing raw leaf into higher-value products.
“We seek to localize the financing of tobacco. We wish to transform the tobacco sector so we don’t export value,” Agriculture Minister Anxious Masuka said on March 8.
Zimbabwe’s tobacco auctions will open tomorrow, March 8, with an official ceremony at the Tobacco Sales Floor (TSF), reports Chronicle. Although the auctions sell only around 5 percent of Zimbabwe’s crop, they are the major price setter and must thus occur first. Deliveries for the contract crop are scheduled to start March 9.
This year’s marketing season kicks off earlier than last year because favorable rainfall has resulted in sufficient volumes of cured and graded tobacco to start selling. In addition to the TSF, the Tobacco Industry and Marketing Board has licensed the Premier Tobacco Auction Floor and the Boka Tobacco Floors to auction tobacco this season.
Farmers interviewed by The Herald said they were optimistic about the upcoming sales season, citing favorable growing conditions and good quality leaf.
“This year’s yield will be better than the previous season due to the implementation of best agronomic practices,” Victor Mariranyika, president of the Tobacco Farmers’ Union Trust, was quoted as saying. “In terms of agronomic practices, the farmers have been looking after the crop very well, from seedbed to the auction, and we don’t expect any damage to the tobacco as a result of the rains.”
Tobacco growers will receive 85 percent of their earnings in U.S. dollars this year, up from 75 percent last. The remainder will be distributed in local currency. About 160,000 farmers grow tobacco in Zimbabwe, which is then exported to 60 countries.
Tobacco growers’ representatives from Argentina, Brazil, Colombia, the Dominican Republic and the United States gathered in Salta, Argentina, to discuss the challenges and opportunities facing their sector during the International Tobacco Growers’ Association (ITGA) 2023 Americas Meeting.
In addition to dealing with the Covid-19 pandemic, tobacco growers have struggled with skyrocketing production cost, stagnating leaf prices and increasing regulatory pressures. To cope with the challenges, ITGA member associations have been urging their respective governments to support the sector. The ITGA urges international institutions to respect tobacco growers and include them in the debates where their future is being decided.
Key discussion points during the regional meeting included the World Health Organization’s Framework Convention on Tobacco Control (FCTC) and the Conference of the FCTC Parties (COP), which is scheduled to take place in Panama this year. ITGA representatives deplored the COP’s lack of transparency and resistance to include industry representatives in its deliberations. Since COP4 in 2010, meetings have not been held in public.
ITGA President Jose J. Aranda highlighted the steps Argentinian growers have taken to ensure the livelihoods of local farmers. Aranda underlined the multitude of threats facing tobacco, including cost of production and climate issues, and the stigmatization of the sector, which he stressed operates in a legal market and complies with all the regulations imposed on it.
ITGA CEO Mercedes Vazquez recognized the pioneering spirit of Argentinian tobacco growers and their substantial contribution to local economies. She commended Argentina’s Special Tobacco Fund, a unique provision that has enabled tobacco growers to make a dignified profit margin from their work.
Michiel Reerink, director of corporate affairs at Alliance One International, examined the global regulatory environment while Benjamin Dessart, vice president of external affairs at Universal Leaf, reviewed the latest legislative initiatives in the Americas region.
ITGA Manager of Tobacco Industry Analysis Ivan Genov evaluated the threats and opportunities for tobacco growers. These include the rising costs of production, political and economic uncertainty, along with a disequilibrium of supply and demand for tobacco leaf.
ITGA member associations shared the latest crop estimates and discussed the issues in their respective markets. Special attention was paid to the situation in the host country, Argentina, where out-of-control inflation is causing serious obstacles for growers. Argentinian associations also highlighted several sustainability initiatives to tackle social and environmental issues.
The participants in the meeting agreed that they will have to work closely together to tackle the increasing challenges facing the sector.
