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ITGA in the Dominican Republic, August 2022.
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ITGA members in the Dominican Republic in August 2022.
By Ivan Genov, ITGA Manager, Tobacco Industry Analysis
The International Tobacco Growers’ Association (ITGA), with its membership base on five continents, has the unique advantage of always being at the forefront of the crop cycle. Having finally returned to physical gatherings in August 2022 after almost three years of Covid-19 related disturbances, the Americas region was the first one to get together and discuss the pressing issues for the sector. The current tobacco growing situation in the five leading regional markets – Argentina, Brazil, Colombia, the Dominican Republic, and the US – reveal common challenges.
In Argentina, where all marketing activities are done through contract, the 2021/2022 season is now over. Currently, the preparations are underway for the 2022/2023 season which will run from July 2022 to June 2023. The last two tobacco campaigns were affected by the La Niña climatic pattern, which led to anomalies, including storms. Although such events occasionally happen, this time around approximately 30% of the crop was impacted. The number of tobacco growers involved in 2021/2022 declined from 17,404 to 16,470 on annual basis. In terms of total production volumes, the 2021/2022 season ended with 91.6 million kg sold, down from 100.7 million kg the year before. Around 70% of the total production is attributed to FCV tobacco, followed by burley, which accounts for around 28% of the crop. Costs of production have skyrocketed, at around 60% for the two leading varieties. Pricing is also up, however only at around 20%. In 2021/2022, FCV tobacco traded at just over the equivalent of US$2 per kg.
In Brazil, the 2022/2023 crop is already being planted. During the 2021/2022 season, more than 17,000 farmers suffered hail damage, while the main tobacco growing regions experienced prolonged drought. Historically, 5% of the crop suffers damage related to climate fluctuations. More than 603,000 people were involved during the latest season, 40,000 less than the one before. The total production quantity in 2021/2022 is 569.5 million kg, down from 628.5 million kg in 2020/2021, a drop of approximately 9%. Costs of production are up by more than 25%, while pricing surpassed US$3.40 per kg for FCV and stood at around US$3.15 per kg for burley.
Tobacco growing in Colombia, which not too long ago was a thriving tobacco growing market, has suffered from the rapid exit of major manufacturers. As a result, the tobacco areas stand at only 1,000 hectares, but the announced entry of a new buyer could lead to a six-fold increase in the years to 2027. The varieties that will be developed are FCV and burley. Being pushed to the edge, local farmers have engaged in a pursuit of alternative solutions, one of which is cannabis growing for medicinal use, with a pilot project underway, aiming to analyze prospective costs of production, productivity, and viability of the crop.
In the Dominican Republic, where some irregularities in the rainfall cycles were observed, the number of growers involved in the 2021/2022 crop was 3,552, around 140 people less than the year before. In terms of production volumes, 13.0 million kg were marketed, down from 12.6 million kg in the 2020/2021 season. While pricing was up more than 25%, reaching US$0.30 per kg, production costs increased by close to 40% per hectare. It is worth mentioning that the Dominican Republic relies heavily on its cigars business, which generates substantial amount of foreign currency – around US$1 billion.
In the US, the total production for the 2022 season is 454 million pounds (or approximately 206 million kg), down from 217 million kg in 2021, with North Carolina and Kentucky accounting to nearly 80% of the country totals. Over the past five seasons, yields have suffered in the USA from abnormally wet growing seasons. American growers have indicated that with the growing costs of production, that includes record prices for fertilizers and labor, the tobacco crop is the most expensive one ever to be grown. Notably, in burley estimated production for the season will be 27 million kg, down from 29 million kg the year before, with pricing around US$4.85 per kg. Alternatively, the number of dark-tobacco hectares in the US in-creased over 2021 by 15%.
Among the key issues raised by all tobacco growers in the Americas region is the skyrocketing costs of production. Although pricing is also generally increasing, it is often below the levels observed for inputs. For the sector to survive and supply the necessary quantities of tobacco leaf, companies will need to react with adequate pricing. This is the fundamental prerequisite for the long-term survival of growers. As a result, ITGA’s next Annual General Meeting, which will be held in Castelo Branco, Portugal between October 26-28, is themed the Sector’s Conversation, gathering growers and main industry stakeholders. This will be the only such event in 2022 with representatives from all major tobacco growing countries and companies in the world.