German and French Tobacco Growers in Crisis?

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Increasingly draconic and rigid regulations, virulent anti-tobacco lobbying, sky-high production costs, and a host of other factors have given German and French tobacco farmers headaches for quite some time now. Tobacco Asia talks to grower associations from both countries about their worries.

By Thomas Schmid

The Bundesverband Deutscher Tabakpflanzer (BdT), the Federal Association of German Tobacco Growers, was established as early as 1917 to represent the interests of tobacco growers across the nation. Privately operated and financed, headquartered in Neuried, and with a representative office in Berlin, BdT is a member of UNITAB. While in its early years the organization foremost engaged on a national level, its scope considerably expanded with the advent of the European Union.

“Our principal responsibilities are the creation and adherence to common quality standards, as well as ensuring an adequate legal framework at EU level,” BdT managing director Sven Plaeschke told Tobacco Asia.

Declining farmer numbers and harvest figures

But the total number of growers BdT represents has been dwindling at an alarming rate over the decades. In the 1950s, there literally were thousands of farmers across Germany who cultivated tobacco as their main cash crop. By 2000, this number had plummeted to just 1,200 growers.

In 2009, it had declined to 365 and merely one year later the phasing-out of EU subsidies for tobacco growing had a further strong effect that more than halved that figure to 162 growers. While numbers have stabilized since 2015, Germany presently harbors only about 100 growers tilling a combined acreage of roughly 2,000 hectares, their sole crop being flue-cured virginia, of which they rather consistently produce around 5,000 metric tons per annum.

Plaeschke explained the phenomenon of industry contraction with the “over-regulation of the tobacco sector and thus the retreat of cigarette manufacturers from the German raw tobacco market”. The bulk of the German crop today goes to Middle Eastern countries, where it is used in the production of shisha tobaccos.

“German flue-cured virginia is competitive in the international market [as] it is very popular with shisha tobacco manufacturers because of its low nicotine content, high sugars, its unique lemon color, its high absorption rate of molasses, and the fact that it doesn’t change its color during further processing,” Plaeschke elaborated.

Seasonal worker wages drive up production costs

But there is more that rattles Germany’s tobacco growers. “Our farmers grow their crops in accordance with GAPs across the board,” Plaeschke asserted. Yet that alone isn’t really enough to lift the industry out of its current doldrums. Apart from having largely lost their traditional markets (like cigarette manufacturing, for example), German farmers are faced with a myriad of additional factors that can make life rather difficult.

“Among others, there are the ever increasing costs for fertilizers, plant protection products, irrigation, the energy needed for drying, as well as accident and hail insurance,” Plaeschke said. But the main problem, in his opinion – the one that supersedes all other issues - is the rise in the minimum wage for seasonal migrant workers from inside and outside the EU who help with harvesting and processing.

In 2014, Germany set a universally applied minimum wage for all seasonal workers and that increased labor costs considerably. Then there is of course the apparent lack of interest for tobacco farming among the younger generation of farmers, who are switching to more profitable crops that are also less troublesome to market due to increasingly hostile anti-tobacco lobbying (which by the way is also one of the reasons why cigarette manufacturers have practically abandoned the country).

BdT calls for tobacco de-demonization

BdT’s demands to national authorities are rather clear cut: “Foremost, there should be exemptions the minimum wage for migrant workers who do not earn their livelihood permanently in Germany but are here only seasonally,” Plaeschke said, adding that such a measure would decrease overall production cost to a good degree.

Meanwhile, the farmers themselves should not only maintain but indeed strive to increase their crop’s quality to ensure international competitiveness. “We are working on a continuous reduction of pesticide residues,” Plaeschke pointed out. But his biggest beef is perhaps with the EU bureaucrats, throwing a passionate appeal their way:

“We want tobacco to be recognized as a stimulant and not just as an addictive substance. It must be acknowledged that there will always be a demand for products that may carry [health] hazards and risks. The current demonization of tobacco completely ignores the fact that people consciously and enjoyably consume these products. Of course, everyone involved in the value chain must make contributions to minimize the associated risks. But dreaming of a tobacco-free world is nothing short of unrealistic.”

France Tabac: situation only marginally different from Germany

In neighboring France, the situation is only marginally different from Germany. A national tobacco growers association in the form of a trade union created in 1906 was, in fact, the predecessor of today’s France Tabac, an economic union of cooperatives established in 1979. “Having to deal with big manufactures in an international market, it was essential for a small growing country such as France to group together all tobacco farmers under one umbrella organization in order to help them sell their crops,” explained François Vedel, who is in charge of communication at France Tabac.

Like BdT, the organization is a member of UNITAB and it actually also hosts the latter’s headquarters and runs its secretariat. Currently representing 800 tobacco growers from three cooperatives, France Tabac - as first processor - maintains the country’s one and only processing plant in Sarlat in the Perigord region. “We receive absolutely no support from the government and are a totally private entity, financed only through farmer contributions of about 7-8% of the crop value sold,” Vedel explained.

He added that by closely collaborating with the farmers, France Tabac “aims to defend the tobacco-growing sector against the sometimes overly drastic sanitary, fiscal and environmental regulations of the European Union.” The other goal, he said, was to “maintain a dialogue with the [global] manufacturing industry so that it continues to source in Europe.”

A general overall erosion of production

Rather similar to Germany, there has been a general overall erosion of French tobacco production (see table) linked to a combination of socio-economic factors, the overall evolution of agriculture, the loss of agricultural subsidies, very high production costs and an increasingly hostile attitude towards tobacco both from national and EU authorities. “All our tobacco varieties are affected, but burley more so than virginia,” Vedel pointed out.

The total acreage currently used or tobacco farming in France is 2,610 hectares, of which about two-thirds are used for FC and the remainder for burley (although there is some negligible acreage for DFC also). “The total cultivated area has declined in France for many years, with a particular crisis arising in 2010 with the loss of CAP [i.e. EU] subsidies,” Vedel said. However, at the same time, the average acreage per individual producer has been increasing steadily. “We have observed increased specialization in tobacco, which nowadays often accounts for 60-80% of a farm’s income.”

The highest production cost in Europe

Yet like elsewhere in Europe, the cost of production has been rising constantly in France, too; and indeed it is by far the highest here due to what Vedel called “a very rigid wages structure”. A seasonal worker costs an individual grower more than €12.00 per hour, including all associated expenses, he explained.

“This is the main reason why tobacco production is in regress… together with anti-smoking campaigns and low profitability – although our selling prices are among the highest in Europe.” And while France has the second-highest cigarette taxes in Europe, trailing only behind the UK, these taxes collected have “never really benefited tobacco producers”.

Instead, it was the loss of CAP support in 2010 that constituted a definite turning point for French tobacco farming. Notwithstanding the circumstance that tobacco quality improvements, the sourcing of new niche markets and an increase in commercial prices partly compensated for that subsidy loss, “sales prices still ought to be around 15% higher [from what they currently are] to make tobacco growing attractive and profitable again,” insisted Vedel.

Onslaught from Eastern Europe and Asia

Then there is, of course, the onslaught from producers in Eastern Europe as well as Asia that puts a dent in France’s international competitiveness. “It is obvious that the competition from third-country tobaccos has a very negative impact on our production,” Vedel admitted. “Even though it is of inferior quality, it is sold at much lower prices than ours, creating a situation of what I would like to call ‘broken prices’ that closes us out from some traditional markets and even competes with us in the new niche markets we have found in recent years.”

With regards to FC, France’s main competitors are India and Bangladesh in the shisha market, but China also is forcefully and increasingly aggressively pushing in the conventional market. Burley, on the other hand, seems to be an entirely different matter. Although annual production of the crop has contracted by almost 1,000 tons since 2015, “we have quite no competition there and our quality is on par with that of US burley,” Vedel asserted.

Concerted efforts needed to improve situation

So what does Vedel propose to improve the competitive situation? First of all, he said, there should be more efforts to decrease overall production costs without making any concessions to quality. “This is the main issue.” Further ahead lies higher mechanization in farming and increased utilization of alternative energy sources for curing (biomass), an area “where some of our competitors have taken a lead”.

Vedel also insisted that while France Tabac’s processing plant already is one of the most efficient in Europe, it is still continuing to expand its load plan via new partnerships to improve profitability while at the same time there are measures implemented “to streamline our organization and structure for grower training and supervision.” He added: “I also would like to put a spotlight on our [tobacco plant] selection and breeding program ‘Bergerac seed and breeding’, which is at the forefront of research in Europe and around the world. We, therefore, benefit from high-performance tools to consolidate our position in the market… if that market is ready to recognize these efforts.”

Shaking a stick at France’s government

Vedel of course also shakes a stick at France’s government for not supporting tobacco growing in any way and calls for “a change of policy and state of mind”. “But unfortunately, we have no expectations of our government to promote French tobacco. We surely have one of the most anti-smoking countries in the world.”

That observation is vividly illustrated by a flowchart supplied by France Tabac, which shows that only 5% of annual tobacco production is actually used within France, while 60% are exported to other EU countries and another 35% to countries outside the EU. “Except for some minuscule niche markets like cigars, for example, a French tobacco market does not exist as such. Our last cigarette factories closed down about one year ago.”

At least still in business… unlike Austria

Yet despite all these issues and problems, Germany and France – both of them currently the two smallest active tobacco producers in the entire EU – are at least still in business, something which cannot be said of some other member states. Take Austria, for instance. The tiny Alpine nation until a couple of decades or so ago had a modest yet burgeoning tobacco growing industry going, which was steeped in tradition.

It has literally died out since, with even the erstwhile Austrian Tobacco Growers Association having been dissolved a few years ago as there literally were no members left. The country has only recently began growing tobacco again… for r&d purposes on a small plot of barely 10 hectares in the Upper Austria region.