Category: Leaf

  • Row over ILO tobacco funds

    Row over ILO tobacco funds

    Japan Tobacco International has said it commends the governing body of the International Labour Organization (ILO) for postponing its decision on the continuation of the ILO’s partnerships with the tobacco sector in the fight against child labor.

    ‘ARISE (Achieving Reduction in Child Labor in Support of Education), JTI’s current public private partnership with the ILO, has proven that the most efficient approach is a co-ordinated one involving all areas of expertise,’ JTI said in a note posted on its website and issued through PRNewswire.

    “Together, we have already withdrawn thousands of children from child labor since its launch in 2011,” said Elaine McKay, global leaf social programs director at JTI.

    “The issues involved are much more complex than the over-simplified view portrayed by the FCTC [World Health Organization’s Framework Convention on Tobacco Control] secretariat and anti-tobacco activists, who are more concerned about the source of funding than fighting child labor.

    “It is now crucial that the governing body assesses this misdirected pressure on the social mandate of the ILO, and understands fully what is at stake – the future of tobacco growing communities – before reaching a consensus.”

    According to an ABC report, relayed by the TMA, ILO spokesman, Hans von Rohland, corrected an earlier report that the agency would end their PPPs and stop accepting funding from the tobacco industry to combat child labor.

    The agency apparently issued a revised, one-point decision saying its governing body had instructed its director-general to present an ‘integrated ILO strategy to address decent work deficits in the tobacco sector’ at its next meeting in March.

    In an email to reporters yesterday, von Rohland said, ‘We sent you the wrong version of the decision taken by the ILO governing body on ILO co-operation with the tobacco industry’.

    The ABC said the ILO had received more than $15 million through partnerships that aimed to fight child labor, and, in doing so, had attracted criticism from anti-tobacco groups that it was the only UN agency that still collaborated with the tobacco industry.

    The row over tobacco funding seems to have arisen not so much because of the source of the ILO funding, however, but because some people see one of the root cause of child labor in tobacco production as being endemic poverty among tobacco producers – poverty brought about by the generally-low prices paid to these producers by the tobacco industry.

    Meanwhile, the ECLT (Eliminating Child Labour in Tobacco Growing) foundation, in a press note headed, ILO to develop strategy to address decent work in tobacco, said the ILO’s governing body had concluded the discussion regarding the collaboration between the organisation and the tobacco industry by calling on the director-general to develop ‘an integrated ILO strategy to address decent work deficits in the tobacco sector’ while ‘taking into account all views expressed in the current session’ [ECLT quote marks].

    ‘The integrated strategy, to be developed and presented at the governing body session in March 2018, will have significant impact on the realisation of the legal and human rights of the children and families of more than 40 million tobacco farmers in over 120 countries worldwide,’ the ECLT’s press note said.

    ‘The ECLT foundation renews its commitment to these children, their families, and their communities. The foundation will continue to advocate for strong policies in both government and private sector, which evolve into laws and responsible business practices that keep children out of labor and promote decent work, in line with international legal frameworks including ILO Conventions 138, 182 and 184.

    ‘Through our efforts directly in tobacco-growing communities, the ECLT foundation has seen concrete results, which are maximised by working in partnership to find collaborative solutions for the systemic causes of child labour. Therefore, the foundation seeks to engage all relevant stakeholders, even those with differing views, on how to bring about sustainable social change for the children and communities we serve.

    ‘ECLT will continue to prioritize impact and transparency for all of its work, as well as continuing research while sharing best practices and effective models to increase our global efforts to accelerate the transformation of agricultural communities, for the ultimate benefit of children, farmers and their families.’

  • Universal’s volume sales up

    Universal’s volume sales up

    In reporting Universal Corporation’s results for the six months to the end of September, chairman, president, and CEO, George C. Freeman, III, said that during the second half of the company’s current fiscal year, sales of its African tobaccos would be impacted by reduced Burley production volumes in Africa, which mainly shipped in the third and fourth fiscal quarters.

    “Less African Burley leaf was grown this fiscal year due to excess production and low grower prices in fiscal year 2017 and unfavorable weather conditions this fiscal year,” he was quoted as saying.

    “Although we still expect our total shipments to be weighted to the second half of the fiscal year, we currently anticipate modestly lower total lamina sales volumes for fiscal year 2018.

    “We are estimating that this fiscal year’s global Burley production declines will recover in next year’s crop.”

    Meanwhile, Universal reported that net income for the six months ended September 30, was $29.7 million, or $1.16 per diluted share, compared with $19.8 million, or $0.54 per diluted share for the same period of the previous fiscal year.

    Operating income for the six months ended September 30, of $51.5 million, was increased by $16.2 million on that of the first half of the previous fiscal year.

    “Our results for the six months ended September 30, 2017, were in line with our expectations and reflected slightly higher total sales volumes and lower selling, general, and administrative costs,” said Freeman.

    “In our second fiscal quarter, we continued to see the benefits of higher current crop sales and processing volumes and lower factory unit costs from the recovery in leaf production volumes this year in Brazil.”

  • Best Malawi season for JTI

    Best Malawi season for JTI

    Fries Vanneste

    JTI Leaf Malawi (JTILM) says that the 2016-2017 season was the most successful for the company since it entered the Malawi market in 2009, according to a Malawi Voice story.

    MD Fries Vanneste said that during the 2016-2017 season, JTILM had recorded a contract market share of 31 percent against an average of 17-18 percent in previous years.

    He said that while the overall national crop volume had been down by 54 percent, JTILM had managed to deliver “all of its committed volumes”, which he described as “a milestone for the company”.

    He said the season’s outcome had shown how close collaboration between farmers, leaf technicians and grower associations, combined with the company’s ongoing support for growers was bearing fruit.

    JTI’s contract farmers had been “very receptive” to the company’s Grower Incentive program called Mlimi Wozitsata (model farmer), which was launched in June 2017. There had been clear improvements in both the quality and yield of the growers’ tobacco.

    Vanneste said also that the better quality and higher yield had had a direct and positive impact on the growers’ revenues and profitability.

    All of JTILM’s growers had paid off their financing loans this year,” Vanneste said.

    JTI is currently working on having its Integrated Production System (IPS) recognized in Malawi’s legislation.

    Vanneste said that Malawi’s Tobacco Control Act had been last amended in the 1970s, an era when sustainability, traceability or contract growing were not high on the agenda.

    An updated tobacco act, he said, could provide an improved legal framework that supported IPS implementation, protecting the interests of the farmers as well as JTILM’s investments. It could eventually create greater stability for the future of tobacco farming in Malawi overall.

    Meanwhile, Vanneste said that by investing more than US$2 million in its factory during the past two years, JTILM had reduced its energy consumption by 53 percent, by enough to light an additional 1,365 households.

  • Farmers concerned

    Farmers concerned

    The ITGA worries about slumping demand for leaf tobacco and a lack of alternative crops

    Tobacco Growers from Africa, Asia, Europe, North and South America gathered at the International Tobacco Growers’ Association (ITGA) annual meeting in Litohora, Greece, on Oct. 16-17, asking governments and institutions to open a formal dialogue to address the sector’s challenges resulting from a decrease in demand for its products and the absence of viable alternative crops.

    Continued declines in the demand for tobacco will lead to a drastic drop in employment and family income in many countries, according to the ITGA. Without a concerted effort to find alternatives for tobacco growers, the organization fears the situation will get even worse.

    The gathering took place against a backdrop of considerable political turmoil, including the deepening of the Middle East crisis and the growing potential for conflicts around the South China Sea, the Korean peninsula and eastern Europe. The rise of populist parties in many developed-world democracies is also calling into question the continuity of long-established trends.

    This has made the business environment less predictable, especially in the leaf tobacco sector.

    There are, nevertheless, some unshaken realities, according to the ITGA: The present population of more than 900 million smokers will likely remain stable for at least a decade. The population of the world will go from the present 7.5 billion to 9 billion in 2050, which will mean that food production will have to increase steeply in the coming decades, even years.

    Meanwhile, regulation of the tobacco sector and other factors have caused the legal tobacco market to shrink. Only three countries expect an increase in smokers’ prevalence at this time. Because regulation depends on the political environment it has become less predictable in recent years.

    But the anticipated decline in tobacco use is driven not only by external factors. Philip Morris International (PMI) recently announced its intention to phase out combustible cigarettes. As part of that ambition it has promised substantial donations to the recently created Foundation for a Smoke Free World. The company has invested heavily in heat-not-burn (HnB) technology.

    British American Tobacco (BAT) and Japan Tobacco International (JTI) are also developing heat-not-burn products and they are speeding up their distribution as they do not want to fall behind.

    The future of those products is important for tobacco growers as they are the only alternatives to traditional cigarettes that require leaf tobacco.

    Beyond the customers’ preferences, the future will depend on taxation and regulation. Several governments want to tax new “tobacco” products just like cigarettes; other governments want to tax them at lower levels to encourage smokers to switch from traditional cigarettes.

    Regulation will be decisive. If HnB products are treated like traditional cigarettes, with all the associated  bans and limitations, it will be almost impossible for the companies to advertise them and communicate their advantages.

    Another point of concern for growers is the recent announcement of the U.S. Food and Drug Administration (FDA) regarding the implementation of a policy to reduce nicotine in cigarettes. This measure will influence policymakers in other countries and will eventually impact the most vulnerable part of the tobacco value chain, the growers. For them, it will be almost commercially impossible to produce leaf with such low levels of nicotine. Besides, the reduction of nicotine will make the sale of traditional cigarettes almost impossible too, pushing consumers to illicit products that do not respect such limits; and therefore, the demand for legal tobacco will drop sharply without any alternative plan for tobacco growers around the world, according to the ITGA.

    The growers already face a similar from the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC). Many of the subjects discussed in the FCTC meetings concern tobacco growers. Articles 17 and 18 relate directly to tobacco production as they refer to alternatives to tobacco production and the environmental impact of tobacco growing.

    Growers have been offering their help and their expertise to define measures that will directly affect their future. The legitimate growers’ representatives could have helped the government delegations attending FCTC meetings to have a much more realistic view of the present situation of tobacco growing around the world. Growers insist that the WHO FCTC must return to its original mandate under Article 17, as was reiterated at the previous Conference of the Parties (COP6) in Moscow.

    COP6 reaffirmed the importance of carrying out studies and research to identify alternative crops that could provide a level of income and assured export markets equal to those provided by tobacco.  For this reason, it was agreed upon that pilot projects in tobacco-growing regions would be necessary to demonstrate the long-term feasibility of such alternative crops.

    However, the FCTC keeps excluding growers and their representatives from the discussions about matters having a direct impact on tobacco production and therefore, on growers’ livelihoods.

    With COP8 on the horizon, the growers will have to be prepared for a new wave of dangerous proposals. The ITGA is expecting direct attacks on tobacco production this time, given the aggressive FCTC report on the impact of tobacco growing, released last spring. This report referred almost exclusively to tobacco’s negative impacts. According to the ITGA, it contained biased and in many cases totally unscientific views—particularly on possible alternatives to tobacco—and highly exaggerated positions on problems such as child labor, deforestation, soil erosion and water management.

    The ITGA says that tobacco growers are committed to working in a compliant manner, following good agricultural practices to produce a crop supplying a legal market of more than 900 million consumers. Their crop provides a livelihood to millions of farmers, rural workers and their families around the world.

    They also agree about the efforts to be made in order to improve tobacco production and sustainability to address challenges, such as child labor and deforestation, and accept the need of regulating consumption of tobacco products.

    However, they insist that regulatory measures should be balanced and based on science, not opinions, so as to prevent such measures from having a devastating impact on the livelihoods of millions of tobacco farmers and laborers, without achieving the desired aims of tobacco control.

    Even so, the ITGA expects some aggressive proposals against the growers in the coming COP besides the usual ones on plain packaging, high taxation of tobacco products, ingredients and possibly, nicotine reduction in cigarettes.

    Any of the foreseeable scenarios carries an almost certain future reduction in the demand for tobacco products and ITGA members and tobacco growers in general need to begin adapting to this reality.

    Prices have been stable or are falling due to the fact that many countries have not reduced their production and some are still increasing it. A price crash has not happened yet because the weather has reduced production in some of the biggest producers, but the forecast for the next crop is not a pleasant one, according to the ITGA.

    If the weather is “favorable,” the sector may have more than 200,000  tons of oversupply, particularly in flue cured.  The ITGA has been insisting on the need to foster diversification and some of its members have already gone a long way in that path—but a lot more has to be done. As the FCTC is doing little to support research on diversification, the ITGA and its associations will have to find ways of doing it.

    Tobacco growers attending the ITGA annual meeting signed a declaration requesting governments and international bodies:

    • To respect their right to be consulted on the development of policies which have a direct impact on them must be guaranteed,
    • To recognize the significant economic contribution of the tobacco crop to the economies of tobacco-growing countries to be recognized, and
    • To undertake a comprehensive economic study on the market and take into account its results when proposing measures.

     

     

  • AOI sales increased

    AOI sales increased

    The value of Alliance One International’s sales during its second quarter to the end of September, at US$447.3 million, was increased by 14.9 percent on that of the second quarter to the end of September 2016.

    The increase was said to have been due primarily to the production of a larger South American crop and a 12.4 percent increase in average sales price due to favorable product mix.

    At the same time, gross profit increased by 37.9 percent to US$69.3 million and gross profit as a percentage of sales improved to 15.5 percent from 12.9 percent last year.

    Net income was US$1.0 million and adjusted EBITDA improved 40.5 percent to US$49.9 million.

    In announcing the company’s results for the second quarter and first six months, president and CEO Pieter Sikkel said that AOI had achieved solid sales growth during the second quarter, and that volume was increasing as crop sizes had returned to more normal levels in many key markets.

    Sales were planned to improve throughout the fiscal year, with each subsequent quarter building on the prior, based on the timing of crops and processing in the growing regions.

    “Through the first half of this year total kilos sold increased 2.1 percent to 153.2 million kilos and sales increased 11.3 percent to $724.3 million this year versus last year as a result of the larger South American crop, increased customer demand primarily from Asia and Europe, and a 9.5 percent increase in average sales price due to favorable product mix,” said Sikkel.

    “Lamina as a percentage of total sales was 14.2 percent higher when compared to last year. Additionally, the 2017 Brazilian crop now being sold is of higher quality than the El Niño-affected 2016 crop.

    “Gross profit increased by 16.2 percent to $98.0 million for the first six months of this year and gross profit as a percentage of sales improved to 13.5 percent from 13.0 percent last year.

    “These improvements were driven by sales that increased by 11.3 percent while total costs of goods and services sold only increased 10.6 percent.”

    Sikkel said that the company was implementing initiatives that should grow its business platform, while continuing to enhance its sustainability and track-and-trace capabilities.

    In addition, the company had recently made a further investment to expand its e-liquid capability and footprint established initially with its investment in Purilum, a leader in e-liquids and flavoring. Purilum had won the 2017 Golden Leaf Award for the company most committed to quality, affirming AOI’s commitment to high quality next generation products and their future.

    “Future prospects for our business are bright and we are excited about developing and maximizing future opportunities that should drive improved profitability and enhanced shareholder value,” Sikkel said.

    “We are taking measured steps to strengthen our preferred supplier role with customers, further developing our position as a key supplier for both traditional requirements as well as next generation reduced risk products.”

  • Child labor dispute

    Child labor dispute

    A row has broken out between the Eliminating Child Labour in Tobacco Growing Foundation (ELCT) and the Framework Convention Alliance (FCA) over the foundation’s activities.

    In a press note issued on Monday, the ELCT alleged that public assertions made by the FCA concerning the ECLT foundation in its online article ILO amongst last UN Agencies accepting money from ‘Big Tobacco’ were ‘false and devoid of up-to-date evidence’.

    ‘Specifically, the ECLT Foundation notes that the FCA has failed to provide any credible, independently-corroborated evidence to support their assertion that, “Reports have repeatedly claimed that ECLT’s work aims to keep farmers dependent on aid from the tobacco industry to avoid them abandoning the sector(sic),”’ the ELCT said in its press note. ‘ECLT strongly rejects this false accusation, which is lacking evidence and solely supported by references from unnamed third parties.

    ‘In addition, the separate assertion that, as an independent Swiss Foundation, “ECLT allows the tobacco industry to promote a positive public image while continuing the practices that cause labour exploitation in the first place”, is both insulting to the work that the Foundation has carried out since 2000, and again, is untrue.

    ‘Having reached over 650,000 children and families in tobacco-growing communities since 2011 alone, working in partnership to find collaborative solutions for the systemic causes of child labour, the ECLT Foundation stands by the results of its work…

    ‘In this debate, the stakes for millions of children and their families are high, and the subsequent decision has significant potential to directly impact the realisation of their human and legal rights, including to escape poverty and other forms of exploitation and to secure decent conditions in which to work and live with dignity.

    ‘The ECLT Foundation, therefore, shares the FCA’s view that eliminating child labour is “of utmost importance and a goal that must be pursued”.

    ‘For the tens of thousands of children and families who are benefiting from ECLT interventions and public-private partnerships working to help keep children in school and out of fields, it is imperative that the debate regarding collaboration towards eliminating child labour remain fair, fact-based and focused on the needs of the rights holders. Statements made by any actor, including the FCA, must be either truthful, or immediately retracted.

    ‘The ECLT Foundation remains committed to encouraging a public debate that is open, transparent, and accountable to the children and their families, who are ultimately impacted by this and other key international decisions.’

  • Farmers seek protection

    Farmers seek protection

    The Indonesian Tobacco Farmers Association (APTI) has urged the government to control leaf-tobacco imports so as to protect local farmers, according to a story in The Jakarta Post.

    During a meeting between APTI members from nine provinces and President Joko ‘Jokowi’ Widodo yesterday, the farmer representatives called on the president to allow cigarette companies to import tobacco only if they had absorbed the tobacco produced by local farmers.

    “If a company buys a small amount of local tobacco, it has to get only a small import quota,” APTI chairman Agus Parmuji said after the meeting. “If a company buys a large amount of local tobacco, the government can give a larger quota. But it should be no more than 20 percent of its total consumption.”

    According to APTI data, leaf imports stood at about 28,000 tons in 2003, but they rose to 90,000 tons in 2010 and to 150,000 tons in 2012, which was about 72.5 percent of local consumption.

    The increase in imported tobacco had resulted in a lower absorption of local tobacco and a decline in prices, Agus said.

    Local tobacco production had reached 247,000 tons annually with prices varying from Rp45,000 (US$3.31) per kg to Rp350,000 per kg, depending on the quality.

    Agriculture Minister Andi Amran Sulaiman said that he would discuss the matter with the Trade Minister Enggartiasto Lukita.

    “Actually, we talked to cigarette companies last month and they agreed to buy local tobacco at [a] good … price,” he said.

  • Leaf price up – and down

    Leaf price up – and down

    The grower price for leaf tobacco produced during Japan’s 2018 harvest has been set at an average of ¥1,887.14 per kg for all leaf types, an increase of 0.51 percent on the previous year’s price of ¥1,877.57 per kg.

    The 2017 price was the same as that for 2016-season tobacco, but the 2016-season price was down by 2.2 percent on that of the 2015 season, ¥1,920.1 per kg, which was up 0.71 percent on that of the 2014 season, ¥1,906.47 per kg. The 2014 season price was the same as that of 2013 but up by 0.84 percent on that of 2012.

    Japan Tobacco Inc. said yesterday that the Leaf Tobacco Deliberative Council (LTDC), chaired by Yoshio Kobayashi, had released its annual determinations for the domestic leaf tobacco cultivation area and grower prices for 2018, in response to a proposal submitted by JT earlier in the day.

    ‘The Council was in general agreement with JT’s proposal, and determined that in 2018, the domestic tobacco cultivation area will be set at 7,436 ha, a decrease of 4.7 percent compared to the contracted area of the previous year.’

    The council went along too with JT’s price recommendation.

    The LTDC is described as a council that confers on important matters concerning the cultivation and purchase of domestically-grown leaf tobacco in response to inquiries by JT representatives. It comprises no more than 11 members who are appointed by JT with the approval of the Minister of Finance, from among representatives of domestic leaf tobacco growers and academics.

  • Universal to webcast results

    Universal to webcast results

    Universal Corporation is due to webcast a conference call on November 7 following the release of its results for the second quarter of fiscal year 2018 after market close on that date.

    The conference call will begin at 17.00 Eastern Time and will be hosted by Candace C. Formacek, vice president and treasurer.

    The webcast will be available online on a listen-only basis at www.universalcorp.com, and a replay will be available at that site through February 5.

    A taped replay of the call will be available from 20.30 on November 7 through November 20 at (855) 859-2056, using the telephone replay identification number 5697004.

  • Grower registrations up

    Grower registrations up

    Registrations for growing flue-cured tobacco during Zimbabwe’s 2017/18 season, at 91,693, have increased by 39 percent from those of the 2016/17 season, 65,750, according to a story in The Chronicle citing Tobacco Industry and Marketing Board (TIMB) figures.

    Agronomist Stacy Chiware was quoted as saying that the number of registered tobacco growers was expected to surge due to favorable prices at the auction floors.

    “With regards to tobacco growers’ registration, Zimbabwe has since 2009 been improving on the numbers,” she said.

    “We expect the upward trajectory to continue in the 2017/18 season and beyond because of the favorable prices auction floors continue to offer.”

    The average grower price for flue-cured in Zimbabwe in 2016, at US$2.95 per kg, was lower than it was in 2009, US$2.98 per kg.

    In only two of the seven years from 2009 to 2015 was the price lower than it was in 2016: in 2010, when it was US$2.88 per kg, and in 2009, when it was US$2.73 per kg.

    In 1996, the average price was US$2.94 per kg.