Oriental Tobacco: Important Yet Under the Radar

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While global demand for oriental tobacco is constantly increasing, production is dropping drastically everywhere. The crop is deserving of more attention, opine some leading traders. 

By Thomas Schmid

If tobacco were a human family, burley would be the ever so popular firstborn, Virginia out-and-about trendy sister, and oriental the quiet, unassuming wallflower. Although oriental is an important component of many tobacco blends, it rarely receives the same level of attention as its more prominent “siblings.”

Various reasons contributing to the situation goes somewhat under the radar. One is that its global production volume simply is considerably smaller than that of any of the more prominent tobacco varieties, according to Yiğit Özkurter, leaf operations manager at one of the leading oriental tobacco suppliers, Star Agritech International.

ALSO: Balkans and Turkey Oriental Tobacco Crop Report

But the crop also can only be grown in a rather limited number of countries, which adds to its relative obscurity compared to other tobacco types, he says. Last but not least, global market inconsistency paired with production slumps in the past years adds to the picture, too.

A tobacco like no other

Yet oriental is unlike any other tobacco, Özkurter insists. The crop has a unique aroma that no other type can provide and it is, thus, a key ingredient in premium American blends and “light” cigarettes, as well as in certain pipe, RYO/MYO, and HNB tobaccos.

Özkurter says that generally speaking, the commodity’s main supplier countries are Turkey, Greece, Bulgaria, and Macedonia. However, to that list also should be added Thailand, India, Albania, and the CIS (Russia), all of which likewise cultivate particular varietals, albeit in widely varying amounts. China, too, has been growing some oriental for years, but experienced many setbacks related to seed viability. Whatever modest harvest the country is able to bring in is exclusively used up by its own domestic tobacco industry. China, therefore, has to import substantial quantities from elsewhere; sometimes more, sometimes less.

Production slumps cause precious scarcity

As far as oriental is concerned, the global market at scale has displayed rather large yo-yo movements in the last decade, too.

“Yet Turkey still remains the biggest producer worldwide, being responsible for about 65% of the world’s entire supply,” Özkurter explains.

But, even that country experienced a steep production decline after the State Tobacco Monopoly for Tobacco and Alcohol (TEKEL) was privatized in 2008.

“[The privatization] meant that TEKEL was no longer guaranteeing to buy up farmers’ oriental crops at heavily subsidized prices,”says Özkurter. “That resulted in an enormously drastic decrease in crop output from previously 250 million kilograms per annum to only 50 million kilograms within three years.”

Additionally, bad crop years brought on by various circumstances in other producer countries further compounded the already less than favorable situation. As a consequence, prices for oriental almost doubled and especially caused the İzmir variety, a core component of premium American blends, to become one of the most expensive tobaccos used in cigarette production.

A serious bottleneck in the making?

To make matters worse, HNB products suddenly started debuting in force around two, three years ago. As oriental tobacco is also a key ingredient in many HNB blends, the multinationals (including PMI with its IQOS device) had to place additional purchase orders to not only ensure sufficient supplies for their cigarette manufacturing but also their newly emerged HNB products.

“Until a couple of years ago demand for oriental tobaccos was actually lower than the available global supply, but today we see that it has turned into exactly the opposite,” Özkurter observes.

To illustrate how preciously limited –- not to say volatile – the availability of the commodity currently really is, he says that “even an increase of merely 5% in China’s oriental consumption alone could potentially swallow up the combined production volumes of Turkey, Greece, Bulgaria and Macedonia altogether.” While this scenario is highly unlikely to happen at any time, Özkurter nevertheless speculates that “China may indeed cause serious supply bottlenecks in the future.”

Excellent marriage partners

Meanwhile, Hong Kong-based Prestige Leaf Trade Limited has worked with oriental tobacco since 1995.

“We handle orders literally every week, as oriental tobacco varieties are crucial aromatic components of high-quality cigarettes, marrying extremely well with other types in the blend,” says managing director Zafer Atici, whose career in the tobacco business spans more than 26 years.

While he prefers not to disclose his main supplier countries, Tobacco Asia deducts that Atici is undertaking frequent visits to India, Thailand, Turkey, and the Balkan countries. He estimates that the Izmir variety – primarily grown in Turkey but to a lesser degree also in India – accounts for approximately 40% of global supply.

According to Atici, Prilep (mostly from Macedonia and Thailand) and Basma (Greece) clock in at about 20% and 15%, respectively, while other varietals such as Katherini, Samsun, and Krumovgrad contribute only around 5% each. Basma currently is also the only oriental varietal that China is trying to grow more or less successfully. 

Unprofitability jeopardizes future crop

With regards to oriental’s worsening scarcity, Atici remains quite in chorus with Özkurter. He confirms the pronounced production decreases the crop has suffered over the past few years. He also agrees that privatizations of state tobacco monopolies – not only in Turkey but also in Greece and Bulgaria, for instance - had a negative effect.

But, according to Atici, at least some of the blame also must be placed on the abolishment of EU subsidies, as their loss made cultivating the crop a quite unattractive proposition for many smallholders.

“Countless farmers in the Balkans simply abandoned growing oriental altogether [because of the loss of subsidies],” he says. That, Atici adds, was a highly unfortunate development, for it jeopardizes secure future supplies on the backdrop of currently increasing demand.

“After all, oriental tobacco requires arid weather and very specific soil to flourish -- and these conditions exist in only a handful of countries,” he explains. “Oriental is a very undemanding crop due to its minimal water and fertilization requirements, and because it is sun-cured, one could probably also claim that it is environmentally friendly.”

A potential solution in sight

Farming oriental tobacco has always been a strenuously labor-intensive endeavor; even more so than the work effort required with burley and virginia. In European grower countries, where wages are comparatively high, this translates to a substantial cost overhead. It is, therefore, no wonder, Atici elaborates, that many farmers opted to abandon the crop for more lucrative options after subsidies from the EU and national tobacco monopolies dried up.

But one potential way out of the conundrum might be if Asian nations like India and Thailand decided to fill the gap and expanded their outputs of the crop. After all, farmlands in some regions of these countries are indeed perfect for oriental tobacco while labor costs remain low.

“Almost nothing else but tobacco can be grown in certain parts [of these countries] due to dry weather and poor soil… and even small earnings can make all the difference for many impoverished rural communities there,” he suggests.