By Allen Liao
Southwest China’s Yunnan province – the largest tobacco-producing region in China, known as the kingdom of tobacco – is taking the lead in increasing the output of high-grade leaf tobacco to meet the tobacco industry’s growing demand for the supply of superior raw materials for producing high-grade cigarettes.
After the State Tobacco Monopoly Administration (STMA) adopted the “532” and “461” development strategies in 2010, Chinese tobacco manufacturers have kept enlarging the scope of production of their competitive cigarette brands and kept improving the quality of their cigarette products. The production of high-grade cigarettes requires the supply of higher grade leaf tobacco in larger quantities. The “532” development strategy provides that in a period of five years or longer, efforts will be intensified to develop two well-known cigarette brands, each with an individual output of 5 million cases (250 billion cigarettes) annually, three brands with an individual output of 3 million cases annually and five brands with an individual output of 2 million cases annually.
And, the “461” development strategy provides that by the year 2015, efforts will be intensified to develop 12 highly influential cigarette brands each capable of generating over RMB40 billion (US$5.9 billion) in annual sales income, including six each capable of generating over RMB60 billion in annual sales income, and one capable of generating RMB100 billion in annual sales income.
However, as far as the status quo of leaf tobacco production in China is concerned, the supply of high-quality leaf tobacco is far from meeting the need of tobacco manufacturers for producing cigarettes of competitive brands in accordance with the “532” and “461” development strategies. Contradictions arising from irrationality of the structure of raw materials for cigarette production are becoming increasingly obvious.
Irrational structure
Firstly, there exists irrationality in the structure of leaf tobacco of all grades.
Just a few years ago when low-grade leaf tobacco would account for a relatively large part of the structure of leaf tobacco of all grades, the supply of high-grade leaf tobacco always exceeded the demand of tobacco manufacturers for cigarette production. As a result, there were often big inventories of high-grade leaf tobacco in those years.
But today, as tobacco manufacturers have all increased their output of high-grade cigarettes, there is growing demand for the supply of high-grade leaf tobacco. As a result, the supply of high-grade leaf tobacco has fallen short of demand. Up to the present, the contradiction in this respect has become relatively serious.
Secondly, there exists irrationality in the structure of all the harvested parts of leaf tobacco. Generally, there is stable demand for the supply of segments of the tobacco plant with the leaves from the middle part of the plant always accounting for 50% of all parts demanded.
Over recent years, the demand for the supply of the superior mid-section of the tobacco plant has kept growing. Over the past two years STMA, in accordance with the actual demand of tobacco manufacturers for cigarette production, has issued quotas to all tobacco-growing regions in China for the supply of high-grade leaf tobacco, typically from the plant’s mid-section, which has contributed to guaranteeing the up-to-standard rate of leaf tobacco of all grades, but which, however, has created obvious imbalances in the availability of leaf tobacco of all grades and the full utilization of all the parts of the tobacco plant.
And thirdly, there exists irrationality in the useable portions of the leaf tobacco plant supplied by all regions.
Presently, the demand for leaf tobacco produced in Yunnan province far exceeds the supply. According to the cigarette production planning of Yunnan Provincial China Tobacco Industry Corporation, the annual demand for the supply of high-grade leaf tobacco for producing cigarettes of its four competitive cigarette brands (Yuxi, Yunyan, Mount Hongtashan and Honghe) will have reached some 10 million dan (500,000 tons) by the year 2015, which is expected to further exacerbate the contradiction between demand and supply.
As the structural contradiction between demand and supply turns increasingly serious, the structure of leaf tobacco inventories is showing signs of imbalance, raising the question of how to make use of some low-grade and inferior quality leaf tobacco.
In an address to the 2011 national symposium on leaf tobacco production and supply, STMA director-general Jiang Chengkang said: “The arrangement for the production and supply of leaf tobacco over the next few years will be focused on reaching a structural balance. Great efforts will be made to settle the problem of imbalance on the part of the structure of leaf tobacco of all grades and the structure of leaf tobacco supply by all regions, in order to reach annual balance between the total demand and the total supply, particularly annual balance between the supply of high-grade leaf tobacco and high-quality leaf tobacco and the demand for them.”
Leading role of Yunan
In the face of the requirement to improve the structure of leaf tobacco, the kingdom of tobacco will definitely play a leading role. Director Yu Yundong of Yunnan Provincial Tobacco Monopoly Administration said recently: “Improvement of the structure of leaf tobacco will be a major measure adoptable by Yunnan to change its model of leaf tobacco production. It is also a major approach for realizing sustainable and healthy development of leaf tobacco production in Yunnan. As improvement of the structure of leaf tobacco concerns the general situation and long-term development of the business of tobacco production, it means both an opportunity and a challenge to the development of leaf tobacco in Yunnan. Whether we can win the hard fight of improving the structure of leaf tobacco by increasing the output of high-grade and high-quality leaf tobacco will be of far-reaching influence on the development of leaf tobacco production in Yunnan.”
Presently, the kingdom of tobacco is making full-scale efforts to improve the structure of leaf tobacco and increase effective supply of high-grade leaf tobacco.
After conducting on-site investigation and verification, on February 16, 2011 Yunnan Provincial Tobacco Monopoly Administration issued a report entitled Opinions of the Provincial Government of Yunnan on Strengthening the Capacity of Effective Supply of High Quality Leaf Tobacco to all tobacco-growing zones in the province. This set of opinions says that Yunnan province will supply 939,500 tons of leaf tobacco it produces in 2011. It urges the tobacco-growing zones across the province to get rid of the unusable leaf tobacco just in the fields, practically improve their way of developing leaf tobacco production, make efforts to improve the structure of leaf tobacco of all grades, and effectively enhance their leaf tobacco supply capacity. Tobacco-growing zones in Yunnan should manage to increase their total output of leaf tobacco while striving to guarantee the fulfillment of leaf tobacco production quotas issued by the state, guarantee continued improvement of the structure of leaf tobacco, guarantee reservation of leaf tobacco for export and guarantee the interests of tobacco growers in promoting the capacity of Yunnan to supply raw materials for cigarette production to a higher level, the report says.
In efforts to promote production of high-quality leaf tobacco, the Yunnan government has decided to issue extra leaf tobacco quotas, firstly to four newly-established tobacco-growing zones with distinctive local characteristics in the province – Wenshan, Pu’er Baoshan and Lincang. In 2011, Yunnan province established 42 tobacco-growing townships comprising 62,000 farm households of 3,408 villagers groups in 578 villages, with 32,333 hectares of newly cultivated tobacco fields. As a result, the total area of tobacco fields in Yunnan has increased to 468,133 hectares.
Meanwhile, Yunnan has strengthened efforts to extend policy support to tobacco growers. In light of the reality that cost of fertilizers has kept increasing, Yunnan Tobacco Monopoly Administration has adopted incentive policies to award the production of high-quality leaf tobacco in a timely manner, instead of merely extending subsidies, urging fertilizer suppliers to step up production to guarantee timely and sufficient supply of fertilizer to tobacco growers in order that fertilizer price increases will not contribute to increasing the economic burden on tobacco growers. Moreover, the administration also offers tobacco growers a subsidy for not curing unusable leaf tobacco at a rate of RMB60 per mu (per 0.067 hectare). Because of the adoption of such favorable policies, tobacco growers have become aware that growing tobacco is lucrative and is not likely to result in losses thanks to improvements of the leaf tobacco structures. Therefore, the enthusiasm of tobacco growers in Yunnan has remained stable.
Besides, in light of technical requirements for improving the structure of leaf tobacco, all tobacco-growing zones in Yunnan have managed to strengthen efforts to integrate applicable technologies and emphasize the importance of formulating unified technical programs, developing tobacco seedlings at specialized farms on a unified basis, applying fertilizer with a unified formula, growing tobacco in joint plantations in a unified way and transplanting tobacco seedlings onto fields at the best time on a unified basis, contributing to strengthening quality control over the whole process of tobacco production and creating favorable conditions for improving the structure of leaf tobacco.
Successful experience of Baoshan
Baoshan City in Yunnan is a region with particularly favorable natural conditions for growing tobacco. At the tobacco-growing area in the Longchuan River valley of Baoshan City, the transplantation of tobacco seedlings onto fields is normally completed in mid- and late January each year. Tobacco crops will enter the prime stage of growth in mid-April. Therefore, Baoshan City has the necessary natural conditions for operating pilot projects aimed at improving the structure of leaf tobacco by increasing the output of high-grade leaf tobacco and reducing the yield of inferior plants. Accordingly, Baoshan City Tobacco Company has decided to launch pilot projects at Xinhua Township in Tengchong County and Longjiang Township in Longling County, both of which are under its jurisdiction.
According to deputy mayor Liu Gang of Baoshan City municipal government, the two townships have 946.7 hectares of tobacco fields. In accordance with the program for executing the pilot projects and the procedures for treating unusable leaf tobacco, the two townships have, in light of their local conditions, designated 360 sites to get rid of unusable leaf tobacco to the tune of 1,223.53 tons, at a rate of 86.16 kgs/mu. Moreover, the two townships have developed a package of technologies to treat unusable leaf tobacco on the basis of exploration, including stacking to turn unusable leaf tobacco into organic fertilizer, burial at tea plantations, orchards or woodlands and conversion into raw materials for making methane gas.
On the basis of adopting such measures to treat unusable leaf tobacco in the fields, Baoshan City Tobacco Company conducted a sample survey of leaf tobacco of all grades newly cured, finding out that the proportion of medium- and high-grade leaf tobacco has reached 97.6%, far beyond the target of 63.3% set by Yunnan Tobacco Monopoly Administration for Baoshan City.
Looking forward
In its exploration to find ways of improving its leaf tobacco, the kingdom of tobacco has succeeded in converting pressure into motive force. It is therefore prepped to harvest the joy of success. Estimates by Yunnan Tobacco Monopoly Administration indicates that as a result of improvement of the structure and a 12% increase in prices paid for leaf tobacco, the tobacco growers in Yunnan are expected to earn a total of RMB18.1 billion in income from tobacco ciultivation in 2011, an increase of RMB4.2 billion over 2010. With the subsidy for not curing unusable leaf tobacco at a rate of RMB60/mu taken into account, the total income of the tobacco growers in Yunnan in 2011 can reach a high of RMB18.5 billion.
Because of its success improving the structure of leaf tobacco by increasing the output of high-grade leaf tobacco, Yunnan will be able to provide tobacco manufacturers with an extra 100,000 tons of high-quality leaf tobacco, which will effectively settle the long standing difficult problems of excessive inventories of leaf tobacco and irrationality in the structure of leaf tobacco of all grades, irrationality in the structure of all parts of leaf tobacco and irrationality in the structure of leaf tobacco from all regions.
As the kingdom of tobacco has scored initial success in improving the quality of its leaf tobacco by increasing the output of high-grade leaf tobacco and reducing the yield of inferior leaf, more and more tobacco-growing regions in China, such as southwest Sichuan province, have also chosen to adopt the policy of improving the structure of leaf tobacco, which is expected to be applied in wider and wider tobacco-growing regions across China. Consequently, the shortage of high-quality leaf tobacco in China is expected to be successfully solved in the future.
