Category: Leaf

  • Growing Pressure

    Growing Pressure

    Photo: Prestige Leaf

    Inflation and competition from alternative crops are compounding the traditional challenges facing oriental tobacco.

    By Stefanie Rossel

    For more than 100 years, oriental tobacco has been used as a key ingredient in American blend cigarettes, but the history of this aromatic, small-leafed variety goes back much further. In the early 17th century, the Spanish introduced the tobacco plant to the Ottoman Empire. The Turks developed their own cultivation processes. It is assumed that oriental tobacco emerged as a mutation spawned by the growing countries’ climatic conditions, poor soil and the “starvation” method of cultivation in which the plants are placed very close to one another. Today, classical oriental tobacco is mainly grown in the countries of the eastern Mediterranean, with Turkiye and Greece being the biggest producers followed by North Macedonia and Bulgaria. Thailand, India, Albania, the CIS countries and China also cultivate oriental varieties.

    Compared to other tobaccos, oriental is a niche product. Due to the hot and arid conditions in which it is grown, the leaf contains significantly lower levels of nicotine than flue-cured Virginia or burley, and harvesting and curing methods are more pristine: The leaves are picked by hand and sun-dried for about a week, a process that enables the leaves to retain some of the natural sugars, which provide a hint of sweetness and a unique taste.

    While the authenticity of the cultivation practices may appeal to some, they also present a major challenge. The oriental tobacco sector is struggling to replace aging farmers and working hard to become more efficient and sustainable.

    Today, classical oriental tobacco is mainly grown in the countries of the eastern Mediterranean
    (Photo: Missirian)

    Smaller Crop Size

    The summer of 2022 was hot and dry, especially in southern Europe. In Turkiye, it was the second year that the growing season suffered from drought, according to Zafer Atici, owner and managing director of Prestige Leaf, a global leaf supplier based in Hong Kong. “Planting was delayed beyond the usual window,” he says. “Extreme hot weather in July and August also adversely affected the growth and consequently yield of plants in the field. In some areas, production dropped to half. As Turkish tobaccos are mostly sun-cured, the curing period was better without any rainfall.”

    Turkiye’s 2022 oriental crop was almost identical to the 2021 crop, which was one of the smallest in history, notes Atici. “While an increase was expected, the prevailing weather conditions that were similar all over Europe last summer took their toll on the yields,” he says. “The Izmir variety, which is the flag carrier, may result in a total of 42 million kg, with 35 million kg in the western part in the Aegean Region and 7 million kg in the eastern part of Turkiye, respectively.”

    In other regions, the crops were also smaller than in previous seasons while the quality was rated normal to good. “Quality has not been negatively affected by the dry summer,” says Dora Gleoudis, managing director of Greek leaf tobacco exporter Nikos Gleoudis Kavex. “In general, such weather conditions are affecting oriental tobaccos mainly in regard of reduced yields.”

    According to Nikos Tzoumas, managing director of Greek leaf merchant Missirian, the country’s oriental leaf production decreased from 11,500 tons in 2021 to 8,500 tons in 2022. Production of Basma amounted to 5,400 tons, and production of Katerini was 3,100 tons in 2022.

    In Bulgaria, 2022’s crop shrank by 18 percent to 4,500 tons compared to 2021. North Macedonia by contrast increased its crop from a record low of 18,700 tons in 2021 to 21,000 tons this season. “The weather conditions that prevailed in the Balkan areas were not extremely dry,” explains Tzoumas. “The temperatures were quite mild—close to the historical average—throughout the cultivation season and very favorable during the last part of the curing period with a lot of sunshine. The rainfalls were short in the first half of the season and at normal levels later. The farmer yields were kept at regular levels and were not affected by climate change.”

    Prior to this summer’s weather conditions, the sector confronted the challenges brought by the outbreak of Covid-19. Gleoudis says the pandemic had a minor impact on tobacco production in Greece and the Balkans. “However, there have been serious delays in the shipping schedules due to the lack of available containers, but this has been drastically improved lately,” she says.

    In 2021, Greek production was affected by a lack of external workers, mainly from Bulgaria and Albania, due to travel restrictions, according to Tzoumas. “The production of 2022 was scheduled to be at lower levels, with the Greek farmers being informed about the workers’ absence well in advance,” he says.

    Unsurprisingly, the war in Ukraine, which has created an energy crisis and driven inflation to new heights, has made life more difficult for oriental farmers. “Now, the challenge is to be able to produce agricultural products, including tobacco plants and leaf, under current economic conditions,” says Atici. “Increases in the oil prices have affected all crop inputs for the growers. In Turkiye, the gasoline price increased four times. With the war, wheat prices soared, and we also saw some areas switching production from tobacco to wheat. Less energy-dependent crops like oregano were also increasingly planted. The leaf price will increase due to increased costs.”

    In Greece, farmers’ production cost increased at an average of 25 percent in 2022, says Tzoumas. “The factory costs of supplies, such as transportation, energy and packing materials, have increased by 25 to 200 percent, depending on the category.”

    Gleoudis says that the combination of higher cost, higher inflation and reduced yields are forcing the dealers to pay growers better prices. In addition to covering the cost of production and offering farmers a modest standard of living, this helps secure the future production of oriental tobacco, which is increasingly facing competition from alternative crops, such as wheat, corn and sunflower, which demand less labor and currently attract high prices due to the Ukraine crisis.

    Oriental tobacco is a notoriously labor intensive and producers have struggled to mechanize the process. (Photo: Prestige Leaf)

    Changes Required

    So does it still pay for growers to cultivate oriental tobacco under the given circumstances? Speaking for Turkiye, Atici says one of the main concerns is the decrease in the rural population as many people migrate to the cities in search of better economic opportunities.

    “Oriental tobaccos could be viable to grow,” he notes. “However, some things need to change. For example, there should be less reliance on conventional energy and more use of renewables, along with smart mechanical tools instead of intensive labor usage, in particular in harvesting, as well as a better fertilizer regimen and financial improvement for crop input via cooperatives, private companies or government bodies. A good example is what Prestige Leaf does in India by providing fertilizers to growers as a financial help. The advantage of oriental growing is that it is an environmentally friendly crop. It requires very little irrigation and fertilizer and cures under the sun.”

    In recent years, stakeholders have attempted to improve the efficiency of harvesting in the oriental tobacco sector. In 2020, an oriental tobacco harvesting machine entered the market. For the time being, however, picking the crop remains a manual job for most growers. The harvesting machine did not create the desired impact, according to Atici, citing high startup costs and insufficient efficiency gains.

    For farmers with more than 10 ha of land, however, the harvesting machine ended up being a successful tool, says Tzoumas. “In 2020, it did not have the support it needed from the market, though, as the appearance of the final product could not match the one of a handpicked crop,” he says. “In other products, such as cotton, for example, this case was solved many years ago. Today, it is clear that even in oriental tobaccos, there is no future if it will not be fully mechanized, considering the lack of field workers and increase of wages.”

    Oriental crops currently struggle to meet the demand levels, he says. “Farmers receive the messages and react fast to the new facts. The viability of the crop, however, depends not only on the demand but also on the alternative crops’ income, which is mainly food, farmers receive.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Adding Value

    Adding Value

    Photo: Taco Tuinstra

    Moving up the tobacco value chain requires a content and stable grower base.

    By George Gay

    Why is tobacco produced anywhere, given what is known about the risks of consuming it? I ask because it seems to me that if there is one thing that governments around the world agree on, it is that the consumption of tobacco comprises a serious negative, socially and economically, which suggests they ought, in unison, to ban production universally.

    Of course, all sorts of arguments can be put forward as to why this strategy couldn’t be made to work, but, thinking about it, I could not come up with one such argument that was irrefutable. So why isn’t production banned worldwide? Where’s the catch? I think it lies in the fact that many governments are happy to enjoy tobacco’s positive aspects but uncomfortable about admitting to them. It lies in the degree of negative consequences suffered by a country because of tobacco consumption and the degree to which these consequences are offset by the positive outcomes that can accrue to those countries that produce tobacco. Obviously, the desire to ban tobacco production would be much stronger in a country that doesn’t grow tobacco but has a large smoking population than it would be in a country that grows and exports tobacco but has a small smoking population. And this dial might shift further in the future in favor of some producer countries as they try to add to the value of their exports by empowering local merchants and manufacturers.

    I started thinking about such issues after reading a Dec. 1 story in The Star newspaper that described how the Kenya Tobacco Control Alliance had asked President William Ruto to reconsider his decision to sign a trade pact with South Korea aimed at increasing exports of, among other things, tobacco. The alliance was fearful that such increased trade would cause the expansion of tobacco production at a time when efforts were being made to encourage growers to switch to other crops and activities.

    Spiraling production cost, price stagnation, the impact of climate change… members of the International Tobacco Growers Association had plenty to discuss when they met in Portugal late last year. (Photo: ITGA)

    Perennial Issues

    A press release issued following the International Tobacco Growers’ Association (ITGA) 2022 annual general meeting held in Castelo Branco, Portugal, Oct. 26–29, stated that its members were calling for inclusion in the global-level, regional-level and country-level consultations shaping the present and future of the tobacco production sector.

    Particularly, the ITGA wants to be able to take part in the Conference of the Parties (COP) to the World Health Organization Framework Convention on Tobacco Control (FCTC), COP10, which is due to be held next year in Panama. “By preventing growers’ access to the ongoing discussions, the Framework Convention on Tobacco Control acts against the international institutions’ rules of procedures and therefore against its own,” the press note said. “Growers urge for closer and stronger engagement with partners to overcome the common challenges facing tobacco growing. Costs of production and price stagnation, in the face of rapid inflation, mean […] that growers need support from all industry stakeholders to fight pressing issues, including the effects of climate change, deforestation and child labor.”

    At least 400 ha of irrigated tobacco have been damaged in Zimbabwe after farmers applied counterfeit chemicals to their crop. (Photo: Taco Tuinstra)

    In fact, these are just a taste of the challenges confronting tobacco production. Running one’s eye over reports from around the world, it is also possible to pick up on perennial issues, such as the aging of the tobacco grower bases in some countries and labor shortages more generally. Then there are the not constant but all-too-frequent concerns surrounding unhelpful currency movements and severe weather events, such as hurricanes. As usual, government regulations come into the picture, either indirectly, through efforts to reduce product consumption, or directly, though it needs to be noted that not all such regulations are negative. Interestingly, there seems to be little immediate concern about moves in the U.S. to require very low levels of nicotine in tobacco, perhaps because many people see this as either a nonstarter or something that is way off in the future.

    Other issues are particular to these times: The Covid-19 pandemic is still posing risks and causing logistical problems while Russia’s invasion of Ukraine has pushed up the prices of energy and some agricultural chemicals and, according to one report at least, led to the use of counterfeit chemicals that have damaged crops. Perhaps Graham Boyd, executive vice president of the Tobacco Growers Association of North Carolina, summed the situation up best when, addressing the ITGA meeting, he said that the reward to risk ratio of producing tobacco in the U.S. was currently too low.

    Adding Value

    Pyxus International has been recognized for its efforts to promote responsible fuel production in Malawi. (Photo: Pyxus International)

    Few of these challenges are new, of course, but some of the responses to them are. At the Global Tobacco and Nicotine Forum in October, Pyxus International’s subsidiary, Pyxus Agriculture Malawi (PAM), received the Golden Leaf Award in the Best ESG (environmental, social and governance) Program category for its efforts to promote responsible fuel production in Malawi. These efforts have involved the company producing charcoal in what it describes as a responsible manner using residual wood from its preexisting forest plantation. PAM is able, using its parent company’s proprietary track-and-trace platform, to ensure that any lumber used in its charcoal manufacturing is sustainably sourced and can be replenished.

    PAM is clearly well regarded in Malawi, where it was last year given a platform to describe the strides it was making in diversification and value addition. The occasion was the opening on June 23 of the 34th Congress of the Tobacco Association of Malawi Farmers’ Trust by Malawi’s then minister of agriculture, Lobin Clarke Lowe.

    According to a story in The Nyasa Times, Lowe said tobacco growers needed to diversify and add value to their produce as they had in the past by lifting yields from 1,000 kg per hectare to 1,800 kg per hectare. This had been one step in the right direction because improving productivity allowed growers to maintain their tobacco production while freeing up land for growing other crops.

    “Recent global events are teaching us that we need to intensify on value addition and stop exporting crop commodities in raw form,” he said. “My ministry is working on an ‘agricultural and general crops act,’ which will see improvements in the conduct of markets for all crops and encourage investments in production and value addition.”

    The idea of value addition in the country of production has been around for a long time, which is an indication, I think, of how easy it is to imagine but how difficult it is to bring about. The Herald newspaper reported in the middle of last year that the Zimbabwe government was spearheading the Tobacco Value Chain Transformation Plan that aimed to transform the country’s tobacco value chain into a $5 billion industry by 2025. “The plan, which was … [announced] last year [2021], focuses on increasing primary production to 300 million kg by 2025, localizing financing for small-scale producers and increasing value addition from 2 percent of total tobacco produced to more than 30 percent,” the story said.

    Overcoming Challenges

    Value addition cannot come soon enough, according to an October story in The Sunday Mail newspaper, which said that while the country’s land reform program had led to the empowerment of the tobacco sector at the primary level, it had not translated into gains further down the value chain, where higher returns were being made by leaf merchants and cigarette manufacturers.

    With one or two exceptions, indigenous merchants had failed to penetrate the market due to formidable entry barriers, including limited access to low-cost funding and a lack of factory processing capacity, the story said. And, as a result, indigenous merchants had been condemned to trading as speculators at the sales floors. They engaged in surrogate buying on behalf of the big merchants, and they were involved in the management of contract growing schemes on behalf of the large merchants.

    Returns from all these activities comprised a pittance relative to the returns indigenous players could realize in export markets as leaf merchants or cigarette manufacturers, the story said. The indigenous tobacco merchant did not have a seat at the main table and was surviving on crumbs dropped by larger merchants.

    The industry in Zimbabwe clearly has some issues that need to be addressed, though whether the empowerment of indigenous merchants, clearly a good idea in itself, would address those issues is a moot point. In a report in The Independent newspaper, the president of the Tobacco Association of Zimbabwe, George Seremwe, said tobacco growers were expecting the Tobacco Industry and Marketing Board (TIMB) to iron out problems that had affected growers last season. Some contractors had failed to pay growers last year and still had not paid them, so those contractors should not be buying tobacco this season, he said.

    And Seremwe had more serious accusations to make. “We all know that this sector is regarded as one of … [those] heavily infected with cartels,” he said. “This should end. We want sanity in the tobacco industry, and I urge TIMB to make sure that all these things negating the industry are eliminated,” he said.

    Reading some of these Zimbabwe stories is like being transported back decades to India’s export leaf production industry when stories were rife of growers not being paid during the season in which they handed over their tobacco and perhaps not being paid at all in some cases. At the same time, rumors of cartels were similarly rife. But India got its act together in large part by switching from a contract system of buying tobacco to an auction system. I have not been to India for many years, and I’m sure that the industry has its challenges, but from what I can gather, the situation there is fairer and therefore more stable than it was.

    Of course, the arrival of the auction system did not account completely for the turnaround of the industry in India, and it is obvious that other countries manage to operate production industries using contract buying. Nevertheless, it is interesting to note comments reportedly made recently to The Herald by the CEO of the Zimbabwe Tobacco Association, Rodney Ambrose, who said there was a need to restore the viability of the auction system to insulate growers from “all kinds of abuse by the merchants.”

    “We need to return to a system where farmers self-finance themselves so that the auction system remains viable,” he was reported to have said. “We cannot have a situation where contractors determine the price of inputs, the price of extension services, the prices of the final product. This leaves farmers in debt. Besides, the contract system is not healthy in terms of foreign currency generation.”

    What it comes down to, I guess, is that a strategy of value addition is all well and good, but to make it work, you need tobacco and, therefore, a content and stable grower base.

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
  • Power Shortages Hamper Zim Curing

    Power Shortages Hamper Zim Curing

    Photo: Taco Tuinstra

    Power shortages in Zimbabwe are creating headaches for farmers who rely on electricity to cure their leaf tobacco, according to an article in The Herald.

    Due to low water levels, the Zambezi River Authority has ordered the Zimbabwe Power Co. to stop production at its Kariba South hydroelectric plant, which is the largest electricity generator in the country.

    The shortfall in power supply from the national grid means that tobacco growers must generate up to 70 percent of their electricity through diesel-driven generators, according to Rodney Ambrose, chief executive of the Zimbabwe Tobacco Association, which represents mostly large-scale farmers.

    In a letter to the Ministry of Land, Agriculture, Water, Fisheries and Rural Development, Ambrose asked the government to give farmers access to discounted fuel to help prevent losses to the 2022–2023 tobacco crop and an associated decline in foreign currency earnings.

    Tobacco is Zimbabwe’s most lucrative export after gold. In the 2022 marketing season, the country earned $650 million, up from $589 million in 2021.

    According to Ambrose, the cost of production per hectare is at a record high in Zimbabwe. The power shortage, he warned, has the potential to increase cost to the point where farmers’ tobacco is no longer competitive.

    Zimbabwean farmers have bought at least 925 kg of tobacco seed with the capacity to cover 184,999 ha this year, according to the Tobacco Research Board. This would be the largest hectarage ever planted if all the seed sold is sown.

  • Zim Farmers Pleased with Early Tobacco

    Zim Farmers Pleased with Early Tobacco

    Photo: Taco Tuinstra

    Farmers in Zimbabwe’s Karoi and Headlands area have been pleased with the quality of early planted tobacco, reports The Herald.

    The crop is generally reported to be in good condition and many small-scale farmers, who rely on rainfall, are still in the process of planting.

    This year to date, Zimbabwean tobacco farmers have planted 53,571 ha of tobacco compared with 38,312 ha during the previous growing season, according to the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development.

    Statistics also revealed that about 18,614 ha were put under irrigated tobacco and 34,957 under dryland tobacco.

    The Tobacco Industry and Marketing Board recently increased the number of licensed tobacco contractors to 42 from 39 as more merchants qualified.

    Tobacco continues to rank as one of Zimbabwe’s most important non-food crops.

    Zimbabwe earned $650 million during the 2022 tobacco marketing season, which closed Oct. 21. The figure was up from $589 million last year.

  • Kenya Urged to Reverse Tobacco Export Deal

    Kenya Urged to Reverse Tobacco Export Deal

    Photo: prehistorik

    Anti-smoking activists are urging the government of Kenya to reverse a deal to export more tobacco to South Korea, reports The Star.

    During a recent visit to South Korea, Kenyan President William Ruto signed a bilateral trade agreement that will see Kenya increase its exports of tea, coffee and tobacco.

    The Kenya Tobacco Control Alliance (KETCA) has asked the president to reconsider his decision, citing fears that the agreement will persuade farmers to grow tobacco even as health advocates are encouraging them to replace the golden leaf with other cash crops.

    Concerned about the environmental and health effects of tobacco production and consumption, the World Health Organization, the World Food Program and the Food and Agriculture Organization in collaboration with the Kenyan government launched a project to discourage tobacco production in western Kenya in March.

    The project enables the farmers to stop tobacco growing contractual agreements and switch to food crops that will help feed communities.

    According to KETCA national coordinator Thomas Lindi, Kenya’s Tobacco Control Act also commits the government to continually phase out tobacco farming in Kenya.

    “Any treaty or agreement that binds Kenya to promote tobacco farming is against the Tobacco Control Act and is therefore illegal,” he said. “We ask the government to immediately cancel aspects of the Kenya-South Korea agreement that touch on tobacco.”

    Tobacco is a key cash crop for at least 55,000 farmers in Kenya, mostly from the western and southeastern parts of the country. Though the overall contribution to the national economy is relatively small (about 0.03 percent of GDP), tobacco is an important economic activity in the regions where it is farmed.

  • Brazil Anticipates Larger Crop in 2023

    Brazil Anticipates Larger Crop in 2023

    Photo: Ronaldo Almeida

    Farmers in southern Brazil have planted enough tobacco to harvest 604.73 million kg in 2023—7.95 percent more than in 2022, reports Kohltrade, citing the country’s tobacco growers’ association, Afubra.

    In Rio Grande do Sul, the production estimate points to 256.73 million kg of tobacco, cultivated in an area of 117,675 hectares with a productivity of 2,182 kg per ha. Compared with the past crop, tobacco growers in the Rio Grande do Sul increased their area by 3.17 percent and production should be 3.8 percent higher, Afubra estimates. Average productivity during the 2021–2022 harvest was 2,168 kg per ha.

    In Santa Catarina, the projection is 191.55 million kg, produced in an area of 77,489 hectares with a productivity of 2,472 kg per ha. The planted area increased 10.22 percent from last year, and production is estimated to be 11.49 percent higher. Santa Catarina’s farmers average productivity was 2,444 kg per ha in the past season.

    In Parana, production should reach 156.46 million kg in an area of 66,576 hectares with an estimated productivity of 2,350 kg per ha. The producers of Parana increased their area under tobacco by 6.99 percent. Afubra estimated increased production will be up by 10.93 percent. Productivity in the past season was 2,267 kg per ha.

    Afubra President Benicio Albano Werner said the increase in the production area was expected. “The past crop was for a large part of tobacco growers very profitable,” he said. “This encouraged some producers to increase their planted area.”

  • Contemplating the Future

    Contemplating the Future

    Tobacco growers gather in Portugal to debate the many challenges facing their sector.

    By Ivan Genov

    The year 2022 marked a return to in-person meetings for the International Tobacco Growers’ Association (ITGA). After successfully conducting regional conferences in the Dominican Republic for the Americas region and in Zambia for the Africa region in August, the ITGA held its annual general meeting (AGM) in Castelo Branco, Portugal—the organization’s secretariat headquarters.

    The event was attended by tobacco growers’ associations from five continents—Africa, Asia, Europe, South America and North America—together with key industry stakeholders and local hosts. Participants included delegations from Argentina, Brazil, Bulgaria, India, Italy, Malawi, the Philippines, Poland, Portugal, Spain, Switzerland, the United Kingdom, the United States, Zambia and Zimbabwe. The three-day event featured an open session, during which a variety of topics were discussed—the latest leaf production dynamics, a global market overview, regulatory updates and three blocks dedicated to sustainable tobacco growing in Africa, the Americas and Europe. ITGA members shared the latest market information regarding their respective regions and highlighted the most pressing concerns going into the 2023 season. Among the frequently mentioned ones were the growing costs of production, unsatisfactory pricing and the importance of being included in major tobacco forums.

    The Consumption Side

    Euromonitor International provided an in-depth briefing dedicated to the global nicotine market. The market intelligence provider’s head of nicotine and cannabis research, Shane MacGuill, identified broadening of the nicotine universe, regulatory innovation (including sustainability) and the opportunities and threats created by Covid-19 as the key future consumption drivers. In 2021, the pandemic effects sent cigarettes to their best performance in years while the category accounted for 83 percent of the total tobacco value sales. With most regions likely to see both volume and value declines in their cigarette sales, the Middle East, Africa and China are where growth is most likely to come from in the future.

    In the illicit sphere, sales are expected to rebound significantly in the short term as costs of living are growing rapidly in many markets. Currently, the countries with the biggest illicit penetration are Ecuador, Peru and Uganda. In emerging products, heated tobacco is seen as the leading reduced-risk format while nicotine pouches show significant potential, mainly driven by sales in the U.S., but starting from a lower base. The importance of sustainability is another key driver in the tobacco and nicotine universe. The growing focus on cultivation and its environmental impact; supply chain emissions, widely accepted as environmentally damaging; and product waste, which is now in part tackled by the EU Directive on Single-Use Plastics, are among the key issues that will shape the regulatory framework. Finally, Euromonitor flagged the potential of legal cannabis, which is forecasted to reach nearly $100 billion in sales by 2026, according to company estimates, with focus on the U.S. and Germany as key examples of how the newly emerging industry could take shape.

    The Production Side

    After a sharp drop in 2020, 2021 marked a slight rebound in production for the biggest tobacco variety, flue-cured Virginia (FCV). This was largely driven by production increases in the U.S., Brazil and Zimbabwe, coupled with good weather conditions and revival of trade after the initial waves of Covid-19. In 2022, further production growth was registered, but this was primarily triggered by a 110 million kg increase in China. The biggest producer of FCV, excluding China, is Brazil, where the season concluded with 60 million kg of FCV less than the year before, with production costs up nearly 30 percent. Projections for 2023 suggest that China will keep the 2022 production levels while Brazil will also increase its FCV outputs, which could lead to additional growth on a global level. Pricing is showing an upward trend in some of the biggest markets for FCV, but the rapid growth in production costs is the biggest concern flagged by most ITGA member associations. As inflation and unstable supply chains are likely to continue shaping trade in 2023, this issue is likely to persist in the medium-term to long-term.

    The trajectory for burley tobacco is downward. Production levels have been consistently declining in the past three years to four years. In contrast, for 2023, leading merchants expect notable production growth for burley in Africa, bringing the global quantities closer to the 500 million kg mark. Whether this forecast will materialize remains an open question. A market of particular importance for burley, Malawi experienced a difficult season. Sales were just under 70 million kg, down from 104 million kg the year before, representing a more than 30 percent drop on a yearly basis. The average price of $2.03 meant that total proceeds for the sector were only 7.7 percent down in comparison. The Tobacco Association of Malawi has indicated that 2021 and then 2022 have recorded a high increase in input prices because of Covid-19-related logistical developments and the impact of the Ukraine crisis, with fertilizer prices almost doubling. Fertilizers will be a big factor going into 2023 as well. In the U.S., another important producer of burley, growers indicated that interest in the variety is rapidly decreasing. Although some have diversified into other tobacco varieties, such as dark air-cured for the growing popularity of smokeless products, next season’s production is likely to register a double-digit year-on-year decline.

    Focus on Other Markets

    The AGM also shed light on some of the smaller markets that do not often enter the spotlight. For example, in the Philippines, production currently stands at 46 million kg, with an expected rise of 3 million kg going into the 2023 season. During the current crop, at least 4 million kg were lost due to rains. In Italy, the season was particularly difficult, with the rising cost of gas, fertilizer and power impacting production. A significant number of farmers took a sabbatical year while climate was hot and dry with several thunderstorms impacting production. The situation in the wider European region is also difficult. In the span of a decade, production went down drastically, with little help for growers on a regional level. Recently, the war in Ukraine has seriously been affecting pricing and availability of fertilizers. Shisha has arisen as a new opportunity for EU growers, especially in Poland.

    Special attention was also paid to Ukraine, where the war has a significant impact on the larger agricultural environment. According to U.N. data, a significant number of markets depend heavily on agricultural commodities from Russia and Ukraine while the wheat dependence of many African and other least developed markets is also noteworthy. In addition to the fertilizer shortage and availability issues, big tobacco manufacturers have large exposures of their cigarettes and heated-tobacco portfolios to Russia and Ukraine, making supply chain complications even more pressing.

    Election of New ITGA President and Future Objectives

    Jose Javier Aranda (Photo: ITGA)

    Among the important outcomes of the ITGA’s 2022 AGM was the election of Jose Javier Aranda as the new association president. Aranda belongs to a family of farmers with roots and traditions in Argentina’s Lerma Valley. His ancestors were among the first Virginia tobacco producers in Salta Province. Currently, he serves as the first member of the Camara del Tabaco de Salta, a founding organization of the ITGA and secretary of the Cooperativa de Productores Tabacaleros de Salta. His leadership experiences are built on 16 years of action in the representative entities of the Salta producers.

    Going into next year, ITGA members highlighted the importance of maintaining and strengthening communications with already scheduled regional meetings in Africa, America, Asia and Europe. The ability to sit in all meetings where the future of the sector is being decided, including meetings hosted by the World Health Organization, is among the goals of the new president. The multiple challenges facing the most vulnerable part of the supply chain necessitates the close cooperation between associations and major industry stakeholders to continue, so the sustainable future of millions of people taking part in tobacco growing can be ensured. Finally, growers agreed that tobacco should be grown in a sustainable way, respecting the environment and making sure all processes involved in production are fully compliant.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.
  • Stabilization Settlement Funds Available

    Stabilization Settlement Funds Available

    Photo: Taco Tuinstra

    Current and former tobacco growers who wish to claim funds from the U.S. Tobacco Stabilization lawsuit settlement should complete a proof of claim form by Dec. 12, 2022.

    The settlement stems from a lawsuit against the Flue-Cured Tobacco Cooperative over withheld funds, which are now being returned to qualifying grower members.

    Tobacco growers who were a member of the cooperative at some point between 1946 and 2004 are eligible for payment considerations.

    Growers claiming funds must supply their FC Number. Alternatively, they must provide sufficient identifying information, including all names and addresses used during the period that they marketed flue-cured tobacco.

    A copy of the qualified settlement fund procedures, the proof of claim form and additional relevant information is available at https://omniagentsolutions.com/lewissettlementclasstrust.

  • Iranian Tobacco Mulls Investment in Zimbabwe

    Iranian Tobacco Mulls Investment in Zimbabwe

    Photo: Taco Tuinstra

    The Iranian Tobacco Co. wants to invest in Zimbabwe to reduce the cost associated with buying tobacco through middlemen, reports The Sunday Mail. Among the areas the Iranians are targeting are irrigation, curing and mechanization. They also want to contract with farmers and set up factories in Zimbabwe. 

    The investments were discussed during a visit to Tehran by a delegation led by Zimbabwe First Lady Auxillia Mnangagwa.

    “We get our needs through agents, and prices go higher for us and also causing Zimbabwean farmers to have little profit,” said Iran’s vice president of commerce and economy, Hamid Gharesheikh, during the meeting.

    “We want to get companies to work with directly in Zimbabwe and do away with middlemen. We are under sanctions, and it’s difficult for us to import from other Western countries, but with Zimbabwe, we have a better understanding and for that, our cooperation will be helpful to both of us. We can also supply you with equipment such as tractors and implements for production. We can also supply dryers for curing and processing,” he said. 

    The proposed cooperation dovetails with Mnangagwa’s passion to economically empower Zimbabwe’s citizenry, especially women and youths, in the effort to attain upper middle-income status for the country by 2030. 

    During the meeting, Gharesheikh said Iran would prioritize women in its investments.

  • Pyxus Sales up by Third

    Pyxus Sales up by Third

    Photo: Taco Tuinstra

    Pyxus International reported sales and other operating revenues of $508.3 million for the three months ended Sept. 30, 2022, up 28.9 percent in the comparable 2021 period. Operating margin increased $21.6 million to $27.1 million. Net loss improved by $8.2 million to $1.5 million. Adjusted EBITDA increased 63 percent to $42.2 million.

    “We are pleased with the results achieved during the first half of fiscal 2023, particularly our efforts to reduce supply chain complexities and increase operational efficiencies,” said Pyxus President and CEO Pieter Sikkel in statement.

    “These efforts resulted in more normalized shipments in certain markets compared to the prior year. During the quarter, we increased sales and other operating revenues by $114.1 million, and operating margin improved by $21.6 million primarily due to increased demand and more normalized timing of shipments from Africa, Asia and South America.

    “This enabled the company to utilize cash generated from increased sales in the quarter to refinance the Delayed Draw Term Loan Facility, repay a portion of the revolving loan facilities and fully fund the U.S. defined benefit pension plan.

    “As of Sept. 30, 2022, our inventory increased $87.7 million compared to the prior year primarily due to higher green tobacco prices and processing costs in Africa and South America and delayed shipments from North America. Our processed tobacco inventory continues to be more than 90 percent committed to specific customers. The overall increase in inventory and our committed inventory levels for processed tobacco position us to meet near-term demand.

    “The prevailing La Nina weather patterns continue to adversely affect the global supply of tobacco. Through our efforts to accelerate buying activities in certain key markets, investments we have made across the business, and engaging with customers in transparent dialogue regarding the impacts of La Nina and inflation on our business, we purchased sufficient volume to meet near-term customer demand and maintained our gross profit as a percentage of sales despite historic inflation.

    “As we approach the second half of fiscal 2023, we are closely monitoring the market for crop inputs like fertilizer and taking steps to mitigate the near-term risk of supply shortages where possible. We continue to expect fiscal 2023 sales to be between $1.75 billion and $1.95 billion and adjusted EBITDA to be between $130 million and $160 million.

    “We remain focused on driving stakeholder value as we accelerate our contributions toward a net-zero future and were recently awarded a Golden Leaf Award in the Best ESG Program category for our efforts to promote sustainable fuel production helping to mitigate deforestation. We received positive feedback from customers on our environmental, social and governance framework, specifically our strategic alignment with our customers’ targets, and look forward to increasing collaboration so that together we can grow a better world.”