Tobacco Asia

Volume 19, Number 3

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54 tobaccoasia LEAF NEWS 烟叶新闻 Zimbabwe Tobacco Sales Surge Tobacco sales in Zimbabwe have surpassed the 120 million kilogram (mkg) mark for flue-cured tobacco sales despite late rains, dry spells, and floods affecting production. This is the sixth time that the country has scored such a feat. Latest statistics from the Tobacco Industry and Marketing Board (TIMB) have shown that 123.8 mkg of tobacco worth $363 million have been sold since the opening of the auction floors in March. Production fell significantly between 2003 and 2009, but since 2010, production started improving, with farmers producing 124 mkg of flue- cured tobacco. The industry expects about 165 mkg this season. Most farmers delayed planting and TIMB had to shift opening dates from the traditional mid-February to early March since the season was late. The statistics show that 35.9 mkg of flue-cured tobacco worth $89.1 million have been sold through the auction floors, while the remaining 87.8 mkg worth $274 million were sold through the contract floors. There has been an increase in the number of farmers growing tobacco and most of them have notably improved their livelihoods. Stakeholders are concerned with the quality of the crop produced by some farmers, especially those who are still new in the industry. TIMB chairperson Mrs Monica Chinamasa confirmed that every season more than 15,000 farmers were shifting to tobacco production, but lacked technical expertise especially on curing and presentation of the crop for sale. "Most farmers have captured the art of growing tobacco, but still have challenges in curing and presenting the crop for sale and this had an effect on the price of the end product," she was quoted as saying. China Tobacco Price Controls Eased This year, nearly four decades after China first started opening up and implementing economic reforms in 1978, the Chinese government will at last stop its controls on procurement prices on tobacco leaf. Even as market reforms swept the countryside under Deng Xiaoping, the government kept its grip on the hugely lucrative tobacco industry. Tobacco companies remained exclusively in state hands. Prices of the leaf were set in order to assure farmers of an income and dissuade them from switching to other cash crops. Local governments wanted to boost tobacco farming, not least because of the taxes it yielded. Centuries-old taxes on every other crop were abolished in 2006, but not those on tobacco. The southern province of Yunnan derives nearly 80% of local revenue from the crop. The cigarette industry stuffs the central government's coffers too, accounting for over 7% of its revenues. Soaring demand for tobacco products has helped to keep the system afloat. China's five million tobacco farmers now produce more than three million tons of tobacco per year, 43% of the world's total — more than the combined output of the next nine tobacco-producing countries. Thanks to low sales taxes, cigarettes have become more than twice as affordable since 1990. But even in the tobacco industry, command economies have their weaknesses. Yields per hectare have increased slower than for other crops, partly because government incentives have unintentionally spurred tobacco- growing on land unsuited to the leaf. Because sales are assured and prices set, farmers started producing too much low-quality tobacco. Though Chinese leaves are on average cheaper per kilogram than American and Brazilian varieties, they are also inferior. In theory, abandoning price controls should encourage large-scale farming and help improve quality, but it will be hard for tobacco to find a market price because there is still only one legitimate buyer: the China National Tobacco Company. Prices will remain distorted by production quotas and the tax on crop sales. (The leaf accounts for only a small proportion of the price of a cigarette, so smokers will notice little difference.) Ultimately, tobacco will not find its real price until the government butts out of the market. Kenya BAT Soldiers On British American Tobacco Kenya (BATK) says it will continue growing and distributing tobacco in Kenya even in the face of growing anti-smoking campaigns and planned introduction of additional taxation. The company says it will go on supporting the growth of tobacco in Eastern, Nyanza, and Western regions, where it has traditionally contracted farmers. "We will continue processing tobacco leaf across East Africa at our green leaf threshing plant based in Thika," said Simukai Munjanganja, head of legal and corporate affairs. "To do this, we will continue to work with our contracted farmers." "While we cannot comment on the strategic processes or models employed by other players, as a key player in the manufacturing industry in Kenya, we are confident of our future," Munjanganja said. He announced that the firm will give farmers contracts even though another player, Alliance One Tobacco Kenya, announced it is repositioning its operations in Kenya. Alliance One has contracted some 15,000 farmers in Migori County. "Kenya remains a strategic hub for BATK and a net exporter for the manufacturing industry," Munjanganja said in an interview. Zambia BAT Soldiers On Nkeyema district in the Western Province of Zambia produced more than 4,000 tons of tobacco worth over US$5 million this year. Nkeyema district commissioner Fridah Luhila made the disclosure on the occasion to mark the official opening of the 2015 national tobacco marketing

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