The year 2019 is finally coming to an end and many growers are already looking at the year that lies ahead. The present season had several difficulties affecting growers in various parts of the globe. In fact, the year has been ripe with events that further make difficult the grower’s efforts to provide a good quality crop, from weather occurrences to political tensions. Growers might not look back on 2019 very fondly. However, the farmers are sure to look at the last quarter of the year with high expectations as to first capture what may take place in 2020.
In the U.S., the trade war with China has significantly reduced tobacco leaf exports. According to the latest figures, there has been a 35.6% reduction in the value of the tobacco leaf exported, which represents close to US$ 300 million in lost revenue for American tobacco growers. However, farmers can look with hope at the truce agreed on by the two nations and the promise by the eastern dragon to buy up to US$ 50 billion of US farm products of which tobacco will hopefully be a part of it. Ultimately, tobacco products are one of the most important revenue streams of the Chinese government (US$ 170 billion in tax revenue collected from China National Tobacco Corporation), representing around 5% of the total government revenue.
Should the trade war be settled, and the truce not broken, US tobacco growers may benefit from decreases of production in other major tobacco-producing countries. Nonetheless, as an agricultural product, tobacco remains exposed to the forces of the elements. In September, the North Carolina tobacco growers were painfully reminded of this fact: Hurricane Dorian is estimated to have caused considerable losses as 20-25% of the tobacco crop was still in the field waiting to be harvested. The tobacco which was left standing after the hurricane will see its quality deteriorate because of the salt brought inland during the storm.
Brazil, a household name when tobacco is concerned, is expected to, once again, maintain the title of the largest exporter of tobacco in the world. While domestic tobacco production is following a downward trend, due to the decreasing demand for tobacco leaf, the nation is doing so in an organized fashion. The decrease in production is matching the decrease in demand (1-2% decrease per year) while providing revenue for growers to diversify into other crops sustainably without impacting the income generation ability of the farmers. Domestic tobacco growers may reap the benefits from the commitment by the Brazilian government to address the problem of the illicit tobacco trade which would ensure the expansion of the legal business.
Argentina’s 2019 tobacco crop is estimated to remain stable with a projected total production of 104,000 tons. The worst of the problems for the Argentinian tobacco growers lies in the overall economy rather dire landscape and the growing inflation that increases production costs and renders more difficult the possibility to conduct investments that would ensure higher yields and, therefore, higher profitability and returns for growers.
The darkest outlook in the Americas is, without doubt, Colombia, with the unexpected decision by Coltabaco to cease its tobacco leaf processing and cigarette manufacturing operations in the country, thus bringing an abrupt end to tobacco leaf production.
Africa’s tobacco prospect for the 2020 tobacco crop is not as bright as 2019 was expected to be at this point last year. When taking Zimbabwe into account, the harshness of this year’s tobacco crop can severely hamper the prospects for the future crop. Tobacco seed sales are 20% below last year’s value which immediately suggests a lower crop. Tobacco output will hit the ground at a disadvantage, bearing in mind that if the climate is not in favor of the tobacco growers, Zimbabwe’s 2020 crop can be a very disappointing one, especially after this year’s record crop. Zimbabwe may be set for a perfect storm: lower tobacco production, which is one of the major foreign exchange earners, a troubling economic climate, and political turmoil could pose a significant risk for the country as a whole. Malawi is in a similar position. This year, the domestic crop did not beat any production record, as it was the case with Zimbabwe. The problem regarding Malawi is the reduced prices fetched, which could jeopardize the growers’ ability to gather the required funds to produce the new crop. Cyclone Idai destroyed an important share of this year’s crop and negatively impacted the quality of the leaf. The share of rejected tobacco bales on the auction floors climbed to 28%, from 17% in 2018.
The release of IQOS, the heated tobacco product developed by Phillip Morris International (PMI), in the US will provide the ultimate stress test for the heated tobacco category in the western world. If the IQOS and similar products from BAT and JTI succeed in convincing smokers to switch to heated tobacco, it may halt the falling demand for tobacco leaf or at least to slow the process, thus ensuring the sustainability of tobacco growers while giving them more time in their efforts to diversify their productions.
Since 2012 ITGA’s members have embraced the celebration of Tobacco Growers’ Day (WTGD) around the world on October 28th. This celebration has become more meaningful year after year as the need for tobacco growers to pass their message has increased due to the rise of attacks against the sector and the lack of knowledge about the sector’s realities and challenges.
This year’s celebration’s theme #togetherwegrow wanted to highlight the many examples where tobacco growers are in line with the United Nations Sustainable Development Goals (SDGs).
The sector is rapidly changing, and tobacco growers are the most affected link of the supply chain. Small farms, with less than 10 hectares, and family farms are responsible for the production of over 70% of the world’s food. This takes an even more important role in nations in which economies are highly dependent on the agricultural sector. The international drive towards a new sustainable agricultural revolution can only occur if the voices of these farmers are considered. These individuals whose daily struggle helps to earn income that provides their children with the opportunity to go to school which will ensure a better future; it is their hard work that forms the backbone of the economy of many developing countries. A recent report by COMESA made clear what we already knew: smallholder farmers are the basis of the tobacco growing sector. As various agricultural products like tobacco are exported, they provide the countries with an important influx of foreign exchange revenue that can be used to import other necessary products that the country does not produce like machinery, other raw materials and invest in infrastructure to further develop their economy.
As so many developing nations depend on agriculture thus providing the necessary tools to the farmers is key to ensure the sustainable development of the developing world.