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April, 2008

Renegade-Auction

US flue-cured tobacco sold for $1.52/lb

The average price of US flue-cured in 2007 was about $1.52 per pound, slightly higher than in 2006, says an Extension tobacco specialist in North Carolina.

Prices for many farmers were discounted because of poor quality as a result of the drought, with significant amounts of tobacco rejected by buyers outright to prices compiled by Loren Fisher, Extension Crop Science Specialist.

Fuel and fertilizer costs increased over the winter, and higher cost and restricted availability of labor pose very significant barriers to further expansion of US flue-cured production, he said.

Escalating costs and flat prices will likely cause many farmers to consider exiting flue-cured production. “This exodus will be more pronounced outside North Carolina’s coastal plain, further concentrating tobacco production in the Interstate 95 corridor,” he said. - (Bickers)


Brazil
KBH&C opens new facility
Santa Cruz do Sul - Brazilian tobacco company KBH&C has opened a new facility in the southern city of Santa Cruz do Sul, Brazil. The move comes from KBH&C needing larger facilities with which they could expand their business and improve customer support.

KBH&C has invested approximately $20 mn in their new facility, and decided to include as much of their old staff as possible, taking with them 123 permanent employees and 1,050 temporary or part time employees. Most of their staff has been working with them for some time, and over 500 of them come from Santa Cruz. “Even though the company is not in Vera Cruz anymore, we still have a commitment with the community that really welcomed us in the beginning. Besides that, we are opening new workstations in the city council, which makes us really satisfied,” said KBH&C’s President Director Claus Kannenberg.

Before the move, KBH&C was one of the first companies in the tobacco world to have achieved the certification of the Integrated Management System. They’re trying to re-establish these standards

as well as the following certifications: ISO 9001: Quality Management, ISO 14001: Environmental Management, OHSAS 18001: Health and Security Management, and SA 8000:2001 Social Responsibility Management.

KBH&C continues to push for the best, improving their machinery and trying to promote an integrated activity to its temporary co-workers, with orientations about the equipment operation as well as the crop.

KBH&C was established in mid-1999 by the American companies J.E.B. International Tobacco Co. and Hail & Cotton Tobacco Inc. and Brazilian company company Kannenberg & Cia Ltda. with the intent to bring together their cumulative broad experience in the world’s most important tobacco markets, North and South America.


India
Government center to provide cover for tobacco crop
New Delhi - The Indian government has, for the first time, included tobacco on a list of crops eligible for specialized insurance. This move strangely follows graphic warnings being added to the packaging of all tobacco products as well as decreases in the consumption and promotion of tobacco.

The Agriculture Insurance Company has been working on a tobacco insurance product, and it appears that the premium subsidy will be approximately 50%; the insurance is designed to cover the costs of replanting in addition to any lost income.

India is one of the world’s biggest tobacco producers, providing nearly 700 mn kg of tobacco per year.


Malawi
Malawi Tobacco prices hit record $11/Kg vs $2/Kg from one year ago
Lilongwe - This year’s auctions in Malawi opened with record highs, prices reaching five times last years average.

A light air-cured type of tobacco is reported to have reached a price of $11 per kg, according to Godfrey Chapola, the General Manager of the Tobacco Control Commission. Last years price for this same tobacco was $2 per kg. President Bingu wa Mutharika instituted a price floor of $1.67 per kg for this year.

Farmers are expected to produce 121 mn kg of burley tobacco, with total tobacco production projected at 147 mn kg.


United States
Dark outlook optimistic
Frankfort - The dark tobacco growers of Kentucky and Tennessee were very optimistic as transplanting of the 2008 crop approached.

“We are looking at the potential of some good prices for dark tobacco [both air-cured and fire-cured],” said Andy Bailey, Kentucky Extension Tobacco Specialist. “Demand is up, and we have some new buyers. We are excited.”

Bailey predicted a big increase in the dark types in the 30 counties where they are grown in Kentucky and Tennessee. The acreage may come at the expense of burley. “We could see a record high dark crop here, and maybe also a record low burley crop in our area,” he said.

Last season, growers increased plantings 12%, but their hopes of a bigger crop were dashed by the drought. Yields were 15% below the original target, Bailey said.

An increase in plantings is expected in the dark fire-cured region of Virginia is expected also.

Kevin Trent of Brookneal, Virginia made a substantial increase in dark acreage in 2007. He also grows burley and until 2007 grew flue-cured also.

Last season, that came to an end: He gave up on flue-cured. To obtain efficiencies of scale, Trent would have had to increase the acreage he planted in flue-cured and would have had to make a major capital outlay to buy more barns.

“Without a large investment in curing facilities, the amount of flue-cured that we could grow wouldn’t have been enough to justify itself,” he said. “We already had enough barns to cure more dark fire-cured, so we made the decision to put our resources into our dark tobacco.”

He wound up with about 32 acres of dark and 12 of burley in 2007. - (Bickers)


Zambia
The bust of the Zambian tobacco boom?
Ndola - The combination of higher production costs and fluctuating currencies seems to have brought the Zambian tobacco boom to a halt.

In the past year, a disturbing number of tobacco farms in Zambia have been placed under receivership in Zambia because of diminishing returns, Albert Van Wyk, Tobacco Association of Zambia (TAZ) president, told the Times of Zambia.

The industry was hoping for a substantial increase in the global price of the crop in order to help boost the industry, Van Wyk said. Erratic power supply and flooding led to a huge increase in production costs in the sector this season and lead to lower yields.

Van Wyk said production of Virginia tobacco, the dominant type in this country, could be down to 12 mn kgs this season compared to 16 mn kgs the previous season.

According to estimates by Universal Leaf, flue-cured production in Zambia rose from five mn kgs in 2002 to a peak of 23 mn kgs in 2006. The impetus came from the deteriorating situation in Zimbabwe, made more pronounced because the Zambian government created a more hospitable environment for expatriate Zimbabwean farmers.

Burley production also rose, peaking at 22 mn kgs in 2005. ULTC predicted burley production in 2007 at 9 mn kgs.

The price in Zambia in 2007 was US $1.01/kg for burley and US$2.01/kg for Virginia, said TAZ. - (Bickers)


Tobacco International - April, 2008
BMJ


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