Tag: Star Agritech International

  • Star Agritech Expands

    Star Agritech Expands

    Photo: schankz

    Star Agritech is expanding its global operations.

    Headquartered in Istanbul, the company has begun constructing a reconstituted tobacco factory in Bizerte, Tunisia. The new facility will be the company’s fourth such operation worldwide.

    Comprising two plants with an annual capacity of 1.2 million kg each, the factory is the first of its kind in the region. The facility will serve the domestic market and may expand its business to serve customers in Morocco and Algeria, depending on the success of the operation.

    Star Agritech expects the new factory to be operational by the middle of 2023. Prior to announcing the new recon facility, Star Agritech established offices in Tunisia, Egypt and South Africa. The Tunisian office will assume responsibility for Star’s business in north Africa, the Sahel and west Africa.

    In November 2022, Star Agritech established Star Agritech Commodities Trading in Yaounde, Cameroon, to strengthen its cigar leaf growing and sourcing operations in Bartouri and Bertoua. The Cameroonian facility will also implement sourcing at the farm gate for Cameroonian cacao and coffee.

    In December, Star Agritech set up shop in New Delhi to further develop its sourcing of Indian tobacco. In the same month it incorporated Star Agritech Zimbabwe to enter the domestic market for flue-cured Virginia tobaccos. Star Zimbabwe will participate in the 2023 marketing season, which kicked off March 8.

    Meanwhile, Star Agritech has set up a company in Norfolk, Virginia, USA to supply the North American market with tobacco and tobacco derivatives.

    The company believes its nano fiber reconstituted tobacco, which can help cigarette manufacturers reduce their products’ tar and nicotine levels, has considerable potential in the United States, given the Food and Drug Administration’s intention to mandate reduced levels of nicotine in tobacco products.

  • Star Enters Turkish FVC and Burley Markets

    Star Enters Turkish FVC and Burley Markets

    Photo: MrPreecha

    Following the Turkish government’s decision that all cigarettes produced in Turkey for sale in Turkey must contain 30 percent of Turkish tobacco, Star Agritech International (SAI) has decided to enter the market for locally grown flue-cured Virginia (FCV) and burley tobaccos commencing with the 2022 season.

    Based on current cigarette consumption, local manufacturers will require between 25,000 to 30,000 tons per year of locally produced FCV and burley. SAI has therefore opened its agricultural branch office in Mus, Turkey, as the project center.

    The office is adjacent to the Turkish Tobacco Cooperative Union on which SAI will lean heavily for tobacco production by its farmer members.

    SAI’s project envisages the cultivation 5,000 tons of cured tobacco by 2025, the creation of 110,000-square-meter industrial park encompassing green leaf storage, curing barns, a green leaf threshing line, a hand stripping center, a processed leaf warehouse, a CRES line, a recon line and administration offices.

    The complex is slated for phased completion in 2022 and 2023. The project will be initially managed by Yagiz Turk assisted on the technical front by Furkan Aslan and on the leaf front by Gokhan Akca. Other Istanbul functions will provide support as required.

    The project is SAI’s second direct involvement in tobacco cultivation after its Cameroon cigar leaf plantations. It is projected stimulate the regional economy and create employment.

  • Enduring Resilience

    Enduring Resilience

    Photo: Taco Tuinstra

    Emerging from the pandemic, the leaf tobacco industry has once again proven its mettle.

    By Stefanie Rossel

    One and a half years into the Covid-19 pandemic, the world has yet to return to normal. Leaf merchants around the globe have felt the impact on their business, too, as they had to cope with new challenges in their operations. Yet tobacco has once again proven its famed resilience in times of crisis, and leaf traders have found solutions to handle the unprecedented circumstances. Tobacco Reporter asked several of them to describe their experiences and provide a snapshot of the current global leaf market.

    “Global leaf markets have come out of the gate sizzling hot in 2021,” says Jay Barker, founder of U.S.-based JEB International Tobacco. “The dynamics of the Brazil crop have been heavily affected by the Covid lockdowns, and prices have subsequently skyrocketed. Zimbabwe seems to be quite firm also, and contracted volume in the U.S. was up substantially from 2020 levels. These are the times when being in the tobacco business is the most fun; there is never a dull day.”

    “At this stage in the tobacco calendar, we are noticing an increased demand which exceeds supply in certain key export markets,” notes Alex Mackay, CEO of Premium Tobacco Group, which is headquartered in Dubai. “This in both the flue-cured Virginia (FCV) and air-cured burley varieties. The overall increase in demand will have a positive impact on all unsold inventories of which are at lowest levels seen for many years.”

    Mackay has noticed a further reduction in the production of air-cured burleys this year. “We believe that certain manufacturers may face supply challenges as core sourcing origins deliver less volume than demand requires,” he says. “However, smaller niche markets could see increased interest as a result. Outside highly specialized and high-value cigar products that are still enjoying reasonably good demand, dark-fired production for the medium[-value] to super-value segments predominately for the Middle East, North African regions have dropped steadily for the past few years. We are expecting supply to stay restrictive and demand set to increase as crop production in African and Indian origins continue to decline.”

    Hardy Kohl Jr.

    Brazil plays a special role this year. The price of Brazilian flue-cured has surged recently, according to Mackay, and higher-than-expected demand continues to be seen across all quality segments. “We believe certain manufacturers are keen to capitalize on the current crop quality, and the potential threat of a shorter crop next year may necessitate longer range buying patterns to strengthen durations,” he says.“In Brazil, we have a signal for a reduction in production for 2022, among other reasons, due to the excellent gain of farmers with other products,” confirms Hardy Kohl Jr., general manager of Kohltrade in Brazil. “It has also been a challenge for players to deal with Brazilian exchange rate volatility, which, together with the reduction in margins, has increased the risk of operations.”

    Miguel Goerck, sales director of ATC-Associated Tobacco Co. Brazil, also observes strong demand for tobacco, especially out of Brazil. “There will be no stocks available after the current season,” he says.

    “Brazil has always been, along with Zimbabwe and USA, a source of quality tobacco. On the past two seasons, the demand has increased because of a few factors. The Brazilian Real suffered a steep devaluation; Zimbabwean tobacco is expensive and committed to a few customers; Chinese tobacco stocks are lower, and there are not as many lots available at very low prices as before. Many customers are looking for price and cheap tobacco only. With commodities’ prices and tobacco growing costs increasing, it will be interesting to observe what will be the market reaction already on the next crop.”

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    Kohl anticipates the market to head toward a shortage of certain tobacco grades for the next few years. This is also a trend in the U.S., says Rick Smith, founder of Independent Leaf Tobacco Co. in Wilson, North Carolina, who observes a tendency toward tighter supplies of flavor styles and domestic underproduction of these types, especially dark types. “Other flavor markets are also beginning to show the same tendencies,” he says. “Prices are inching up, cutting into the dealer’s ability to make a profit. Filler styles are available.”

    Oscar House, president and CEO of U.S. Tobacco Cooperative (USTC), has singled out a new business opportunity for U.S. farmers. “Given that USTC only deals with flue-cured tobacco, the most significant thing that has occurred is China returning to the market to not only buy the 2018 and 2020 crops but also with indications for the 2021 crop,” he says. “This gives our farmers an opportunity to increase their growing contracts by up to 80 percent with the cooperative, which will greatly help their farming operations with the cuts of the past two years. With China back in the U.S. buying tobacco, it will be a boost for the flue-cured crop going forward.”

    With China back in the U.S. buying tobacco, it will be a boost for the flue-cured crop going forward.

    Oscar House, president and CEO, USTC

    Quality Remains Key

    While the South American and African tobacco crops are in mid-season, with both FCV and burley in high demand, marketing of the African crops has recently begun with demand again appearing to be in line with projected crop size, notes Jim Schneeberger, director of global leaf sales at CNT in Germany. “But quality will be the determining factor if indeed demand is to align with supply,” he says. “Weather continues to play an important role in the quality of tobacco crops and in turn farmers’ viability. Demand for competing agricultural crops is increasing, and there are some indications that tobacco growers may convert to food crops.”

    “Tobacco demand is firm in most countries, and unsold stocks are in line with pre-pandemic average volumes,” says Rainer Busch, managing director and owner of Germany-headquartered NewCo Global Tobacco Trade & Service. “What is surprising is that, although the seasonal workforce is large and infection could be easy, the harvest volumes have not decreased dramatically. The same applies to the intensive workload in the factories, but no significant effects were found.”

    Aylin Bahcevan, marketing supervisor of Istanbul-based Star Agritech International, hints at a development that began impacting the leaf market long before Covid-19 entered the scene. “Traditional tobacco product consumers are gradually inclining toward smoking alternatives due to the rising awareness about health concerns,” she explains. “Thus, the introduction of innovative tobacco products with unique taste options has become essential.

    As a result, manufacturers have shifted their focus on premium tobacco products produced with flue-cured tobacco and fine whole leaf. The launch of low-nicotine and alternative smoke products are expected to rise and fuel the market growth of the next-generation tobacco products segment.

    Prominent players in the industry, including us, are investing in research and development more than ever to meet the changing needs of the industry and lead the way of innovation. Such efforts bear the potential to help attract a larger customer base for tobacco products.”

    Aylin Bahcevan

    Traditional tobacco product consumers are gradually inclining toward smoking alternatives due to the rising awareness about health concerns.

    Aylin Bahcevan, marketing supervisor, Tar Agritech

    The Challenge of Logistics

    Last year’s season saw disruptions in key markets due to the Covid-19 pandemic. Travel restrictions not only caused shortages of agricultural inputs and seasonal farm workers, but also prevented many buyers and sellers from visiting the sales floors. In TR’s survey, leaf merchants unanimously named logistics as an issue of concern.

    “By far, the most pressing issue for me is logistics,” says Smith. “With the pandemic raging, it is hard to get a shipment from point A to point B in a timely manner. What used to take 45 days now takes 90 if you are lucky. This seems to be true for all sources.”

    “We face higher shipping and transportation costs and delivery delays due to the overbooking of certain routes,” echoes Busch.

    For House, the biggest concern for his company is the supply chain. “This has been exacerbated by the Covid-19 pandemic, and it will take some time before shipping lines have a good handle on where goods are coming from and going to in order to smooth out the disturbances in the system,” he says. “Trucking has also been affected in the U.S., and it will also take time before there are the right amount of trucks for the right amount of drivers for the right amount of customers.”

    “The impact of Covid-19 is still adversely affecting the leaf supply sector; we have seen some delayed decisions within the trade last year as customers postponed placing orders, tried to better utilize or manage existing inventories and gauge potential cigarette sales given restrictions and lockdown requirements,” says Mackay. “To further compound matters, the dramatic increase in freight rates from Asia and the general lack of availability of containers and shipping routes caused dramatic cost increases and caused longer than usual transit times. As we continue to deal with the potentially longer-term impact of this pandemic, we sense the industry will inherently be more cautious in tobacco production and financing. The cost of business could be more restrictive and might limit worldwide production plans and see diminished inventory levels that could lead to an undersupply in some segments.”

    Nevertheless, leaf merchants remain optimistic. “The tobacco industry has proven to be very resilient in the face of Covid-19, and the only significant decline in combustible products is from the inactivity in global duty-free shops at airports and the like,” explains Schneeberger.

    “The Covid-19 virus and the challenges that came along with it have made it our priority to facilitate a transformation for ourselves and our industry—a transformation that calls for a better understanding and improvement,” Bahcevan points out. Kohl expects a stabilization of the pandemic that should generate a recovery in investments. “It is a transition moment as we believe we are seeing this imbalance in basic market rules, such as the balance between supply and demand.”

    For Dora Gleoudis, managing director of Nicos Gleoudis Kavex, which specializes in Greek oriental tobacco varieties, business life has returned almost to normal. “We are travelling a lot,” she says. “It’s good to see some recovery.”

    Global leaf markets have come out of the gate sizzling hot in 2021.

    Jay Barker, founder, JEB International Tobacco

    Supply Chain Challenges

    Meanwhile, strong demand for leaf tobacco is pushing farmer prices “to the roof,” according to Goerck. “The recent strengthening of the Brazilian Real is also pressuring the free-on-board prices up, which can make some customers source tobacco from other regions,” he says.

    Ever stricter regulations only add to the pressure. In the EU, pending legislation will require companies to examine their supply chains for risks to human rights and the environment—and fix any shortcomings. The U.S., too, is enforcing social governance policies with regards to tobacco trade and delivery.

    “Since the introduction of the U.N. Guiding Principles on Business and Human Rights in 2011 and the U.N. SDGs in 2015, there has been a rapid shift in focus to ensuring companies implement supply chain due diligence,” says Mackay. “The focus is on: ‘Was there minimal social and environmental impact during production?’ Companies are expected to follow and implement transparent programs using the procedure of: Identify. Prioritize. Respond. Measure. Report. The new STP program [Sustainable Tobacco Program—an industry-wide initiative that helps to drive standards in agricultural practices, environmental management and social and human rights areas] focuses on several themes, social and environmental issues being of particular significance.”

    A prime example are chemical residues. “As with all agricultural products and increased consumer awareness, the elimination and use of highly hazardous pesticides in the supply chain is critical,” says Mackay. “To achieve this, the implementation of proactive programs focusing on safe application of reduced-risk products, coupled with robust traceability systems, is key for suppliers. For some regions and suppliers, this will be challenging, which could redefine the tobacco industry going forward. The regulatory landscape is rapidly evolving, and the ability of suppliers to effectively address and fulfill new requirements will determine their long-term success in an increasingly competitive industry.”

    Compliant crop production, along with sustainable and responsible supply, will become more essential, according to Mackay. “The requirements and obligations by all future suppliers could have a dramatic effect on the way tobacco is produced, crop sizes and the countries and companies that can implement these potential requirements. The elements needed to ensure all tobacco is grown, processed and delivered in an environmentally, socially responsible, compliant and transparent manner that is likely to redefine the tobacco industry soon.”

    Schneeberger believes the regulatory environment will remain a major factor within the tobacco industry. “The focus on the ESG [environmental, social and governance] footprint of manufacturers and suppliers alike will further regulate the way tobacco is produced, and countries that are unable to satisfy international sustainability standards will most likely lose their markets for tobacco, especially as relates to exports,” he says. “The apparent impact of climate change and resultant drought conditions in certain nonirrigated tobacco crops will continue to increase production of certain ‘nondesirable’ styles of high nicotine FCV and burley for which there is little demand.”

    Spotlight: Macht Tabak

    Leaf tobacco trade has a long tradition at Macht Tabak MIJ (MTM). The family-owned business, which is part of Macht Global Holdings, has roots in the tobacco industry dating back to 1951. Headquartered in Hong Kong, the leaf-dealing company has presence in Dubai, Izmir, Moscow and Luxembourg.

    MTM provides a wide variety of leaf tobaccos from a selection of origins tailored with custom value-added services to become an essential solutions partner to its clients’ supply chain. While primarily supplying directly from the origins, MTM holds select tobacco stocks in Belgium and Dubai to fulfill the prompter requirements of its clients in the respective regions.

    Furthermore, the company offers in-house cut rag blend selections for traditional American and Virginia blends as well as a tailor-made service to provide its customers with their very own rich taste signature blend.

    In collaboration with its partners, MTM additionally serves in the supply of DIET and CRES products.

    Hand in hand with activities of its affiliates, MTM supports its very own impact investment platform that focuses on sustainable solutions for a greener energy and resource-efficient future.

     

    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.