Quality burley on the way from Argentina
Salta — As of Jan. 10, 17% of Jujuy flue-cured and 7% of Salta flue-cured had been harvested, according to Universal Leaf Tobacco Co. Quality was similar to last year. High rainfall and some hailstorms led to a reduction in crop size of 4 mn kg.
The 2007 crop is projected to be up 6 mn kg from the 81 mn kg crop that was estimated for 2006. At that volume, Argentine flue-cured would be close in production to the good years of 2004 and 2005.
As of the same date, about 60% of the Argentine burley crop had been harvested, and very good quality is expected. Due to excess rainfall in Misiones, the crop size estimate has been reduced by 1 mn kg. The estimate of the 2006 crops is 52 mn kg, while the projection for 2007 is down slightly at 51 mn kg.
Elsewhere, in Central America, transplanting was completed in all growing regions of Guatemala toward the end of December, according to Universal. As of Jan. 12, about 65% of the Zacapa crop had been harvested, and purchases from that area have started. Deliveries are reported to be of good quality. Volume for the 2007 crop is projected to be about the same as 2006, 11 mn kg.
In Mexico, transplanting of the dry-season crop is complete. The crop size estimate has been reduced slightly by 0.4 mn kg. The estimate for the full 2006 crop is 13 mn kg. For 2007, the projection is 11 mn kg. (Bickers).
Growing Regions See Declines in Prices, Income
Beijing — Major tobacco-growing regions across China registered in 2006 stability in leaf tobacco yield, increases in production costs, and declines in both marketing prices and sales income, according to results of a recent survey conducted by competent national price control administrative authorities.
The survey, conducted in early 2007, covered 1,129 tobacco growers in 117 counties in 14 major tobacco-growing regions across China, including the provinces of Yunnan and Guizhou in southwest China, Henan in east central China, Hunan in south central China, and Fujian in southeast China.
In 2006, the average unit leaf tobacco yield in major tobacco-growing regions across China reached 134.2 kg per mu (per 0.067 hectare), which was basically on a par with that of 2005.
In the year, such major tobacco-growing regions as Henan, Fujian, Sichuan in southwest China, Shandong in east China, and Liaoning and Jilin in northeast China enjoyed relatively fine weather conditions suitable for tobacco growing. Therefore, the unit leaf tobacco yield there went up year-on-year.
In the same year, such major tobacco-growing regions as Guizhou, Chongqing in southwest China, and Shaanxi in northwest China were hit by severe natural disasters including droughts and hailstorms. As a result, the leaf tobacco yield in the three provinces dropped by 9.6%, 12.7%, and 17.4% from the previous year respectively. Meanwhile, the leaf tobacco yield in Yunnan, Hunan, Hubei in central China, Heilongjiang in northeast China, and Guangxi in southwest China also declined to some extent.
In 2006, major tobacco-growing regions across China saw their average unit production costs in cash reaching 610.29 yuan per mu (U.S.$76.3 per 0.067 hectare), up 27 yuan (U.S.$3.4), or 4.6%, year-on-year. The increases in production costs in the year were attributed to increases in spending on chemical fertilizer, mechanized farming operations, fuels, seeds, and insurance premiums.
In 2006, the unit leaf tobacco sales price in major tobacco-producing regions across China was 501.92 yuan (U.S.$62.75) per 50 kg, down 17.06 yuan (U.S.$2.14), or 3.3%, from the previous year. Except Liaoning, Shandong, Guangxi, Fujian, and Yunnan, all the other major tobacco-growing regions in China saw their leaf tobacco sales prices decline in the year, chiefly due to natural disasters. As a result of such natural disasters as droughts, hailstorms, and damage by plant diseases or insect pests, the quality of leaf tobacco grown in these regions in the year worsened, with the proportion of high-grade leaf tobacco in the total leaf tobacco yield declining, and with the proportion of low-grade leaf tobacco growing.
In 2006, the tobacco monopoly administrative authorities in all major tobacco-growing regions managed to increase subsidization for local tobacco growers. Results of the survey indicate that tobacco-growing farm households in major tobacco-growing regions across China were able to each receive 162.18 yuan per mu (U.S.$20.3 per 0.067 hectare) in subsidies for leaf tobacco production, an increase of 24.93 yuan per mu (U.S.$3.2 per 0.067 hectare), or 18.2%, over the previous year.
Despite the increase in subsidization, the actual leaf tobacco sales income for tobacco growers in major tobacco-growing regions across China declined from 947.69 yuan per mu (U.S.$118.5 per hectare) in 2005 to 905.58 yuan per mu (U.S.$113.2 per 0.067 hectare) in 2006, down 42.11 yuan per mu (U.S.$5.27 per 0.067 hectare), or 4.4%, year-on-year, due to increases in production costs and declines in sales prices.
However, as compared with the size of income from the production of cereals, edible oil, cotton, and other field crops, income from tobacco growing remains significantly higher.
Government licenses fifth tobacco buyer
Lilongwe — Premium Tama Limited has been licensed as the country’s fifth tobacco buying company in a move to boost competitive behavior among tobacco buyers previously accused of forming a cartel.
Tobacco Association of Malawi (Tama) will be the majority shareholder in the company with at least 45% holding.
Tama first vice-president Charles Mwansambo confirmed the development in an interview, saying Tama and government have been holding a series of discussions on the formation of the new company.
“Discussions are indeed at an advanced stage and the new company will be in Malawi this year. I am not yet sure as to when we expect it to start buying tobacco but the prospects are high that it will [be here to] foster competitive behavior among buyers at the auction floors.
“The fourth buyer, Malawi Leaf, started buying tobacco last year. This year we will see Premium Tama on the market. This is a good development for farmers, and [they] are happy with these new developments,” he said.
Last year the government allowed Malawi Leaf Co. to venture into the troubled sector, which in 2006 was rocked by poor prices.
Other major buyers on the market are Limbe Leaf Tobacco Co., Alliance One Tobacco Co., and Africa Leaf Co.
Tama will own about 45% while employees in Premium Tama will be granted a 5% share in the company.
Mwansambo confirmed that Tama, which currently represents 45,000 tobacco farmers across the country, will indeed hold some shares in the new tobacco buying company but could not disclose how much Tama will own.
“Premium Tama will also be involved in processing the tobacco leaf they will be buying before it is exported. Tama is interested in the processing plant, that is why we have some shares in this new company,” he said.
He dismissed suggestions that Tama might be caught in a conflict-of-interest situation by joining hands with buyers, saying Tama will not be involved in buying but in processing tobacco for export.
“It has been a plan of Tama to have a tobacco processing plant for farmers in the country. We believe processors and buyers will be partners. After all, this company is owned by local Malawians,” said Mwansambo.
Volume soars in Benguet
Manila — An increase of at least 50% in leaf production in the Philippine province of Benguet has been projected, the Sun Star Baguio newspaper reported in January.
Tobacco is still fairly new in this area, the newspaper said. The impetus for the growth is coming from Philip Morris Philippines, which is buying all the new production.
Volume for the province may soon reach 1 mn kg.
BAT unveils business plans
Kampala — British American Tobacco Uganda has unveiled plans to raise Uganda’s tobacco export profile in 2007 as the key source of quality tobacco for the BAT Group, and secure competitive advantage in the global tobacco export market.
Presenting a market briefing at the Uganda Securities Exchange (USE) recently, BAT Uganda leaf director Serhat Eroglu said all indications at the start of the year showed that the company was on track to achieve targeted volumes of 12,000 tons of tobacco grown this season.
“Our refocusing operations on leaf production for export has already started delivering results that support our plan. The number of farmers who have registered to grow tobacco with BAT Uganda in 2007 has risen from 29,000 to 40,000 as per the beginning of January,” Eroglu said. “Our first seedbed audit, conducted at the end of December and start of January, indicates that the number of seedlings prepared will support an 18,000-ton crop. The delivery of this crop now depends on farmers following good agricultural practices, curing the tobacco properly, and selling it at our Central Purchasing Points.”
Eroglu explained that the global dynamics of the leaf exports industry required the most competitive companies to supply the highest-quality export leaf at the lowest possible cost per kg.
“One of Uganda’s biggest competitive advantages on the global leaf export market is that Uganda produces high-quality tobacco in both the flue-cured Virginia and burley types. The increase in farmer numbers is a sign of improved confidence in BAT Uganda. Now we need to work together toward our mid-term target of 18,000 tons a year,” he said.
BAT Uganda last year sponsored 29,000 farmers to grow 11.8 mn kg of flue-cured Virginia and burley tobacco.
It’s official: No auctions this year for Type 32
Baltimore — Add Type 32 Southern Maryland to the list of tobaccos that are no longer sold via auction.
Maryland still produces its traditional type, but on a very small scale: Only an estimated 54,000 pounds were produced in the state in 2006, not enough to make an auction season feasible.
“There is not enough tobacco sold in the state anymore to warrant an auction,” said S. Patrick McMillan, assistant secretary of the Maryland Department of Agriculture.
It is all now being sold on contract. Maryland had a rich tradition of selling its tobacco via auction, but 2007 will apparently be the first season in over a century in which no part of the crop was auctioned.
McMillan suggested an economic rationale for the decline of auctions.
“The purpose of the auctions was to serve as price discovery to appraise the crop,” said McMillan. “But now a grower’s contract dictates quality specifications, so there is no need for an auction. We don’t believe there’s any hardship for those growing. But a part of our farm history will disappear. It’s the end of an era.”
The disappearance of auction selling in Maryland is part of a growing trend. Before 2000, most of the tobacco sold in the United States was sold at auctions, Will Snell, Kentucky Extension agricultural economist, said in January. But now, up to 95% of the tobacco sold in the country is sold under contract. (Bickers)
Tobacco International - March, 2007
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