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by Ivan Genov, Tobacco Industry Expert at ITGA
Similar to many businesses in agriculture and beyond, Asia forms a pivotal part of the tobacco universe. It is home to more than half of the world’s smoking population, in addition to being the largest producer of tobacco. What is more, the region comprises a rich variety of tobacco types and a myriad of country-specific tobacco products. The overall decline in both tobacco production and consumption globally, combined with the remaining pockets of growth in the continent means that Asia’s importance in the wider sector dynamics will continue to grow.
The following crop evolution overview is powered by International Tobacco Growers’ Association (ITGA) Atlas: Tobacco Growing in figures, a free tool which is home to the latest worldwide tobacco statistics.
Regional Crop Evolution Highlights
No other tobacco market in the world compares to China. To illustrate the country’s weight in the global tobacco leaf market it is enough to track the latest figures of the world’s most popular tobacco type: flue-cured Virginia (FCV) (see graph 1). China is responsible for half of the global FCV production, exceeding 1.7 million tons in 2020. Nevertheless, Chinese-grown FCV registered a 17% decline in the last five years. However, a certain stabilization in quantities is seen since the 2018 season. The current 2021 FCV projections for China suggest little change in the total volumes. At the moment, the two biggest tobacco leaf exporters to China are Brazil and Zimbabwe, while the US’ place in the top three list was compromised by the ongoing trade disputes between the two countries.
The next three leading markets in Asia in terms of total leaf production are India, Indonesia, and Bangladesh, which all registered growth in the review period (see graph 2). Like China, Indonesia’s production is largely consumed domestically. East and Central Java regions form the majority share of the tobacco cultivated and export value exceeds US$200 million per year. In Bangladesh, the region of Khulna accounts for around half of the tobacco leaf production, while local specific sorts such as Matihari and Jati form a third of the production by tobacco type. The export value of tobacco in Bangladesh is US$90 million. Finally, in Pakistan, production levels are similar to Bangladesh, or slightly over 100,000 tons, but the export value is only valued at US$11 million. Rustica is the second largest tobacco type after FCV and represents a third of the area cultivated.
Case study: India
India is one of the key tobacco markets in the world. It is the second largest tobacco producer, providing livelihood to 46 million people, 6 million of which are farmers, and bringing around US$6 billion in tax revenue to the state. Despite these impressive figures, only 9% of the tobacco consumed comes in the form of cigarettes. The remaining 91% are country-specific products, mainly smokeless, such as bidis, chewing tobacco and hookah.
Naturally, the local crop evolution is strongly determined by the smokeless consumption dynamic. During the 2019 season FCV accounted for roughly 27% of the total tobacco production, or 236 million kg (m.kg), while burley and oriental, for another 10% or 82 m.kg. Since bidis and chewing tobacco are predominantly locally consumed, FCV, burley, and oriental form the largest share of the exported production. However, profit margins have not always been stable in the market (see graph 3). The Covid-19 pandemic had a significant influence on the 2020 season when the initially expected 235 m.kg of FCV were reduced by the local tobacco board to 203 m.kg This was largely motivated by disruptions in global demand. The optimistic scenario for 2021 shows going back to normality, or around 260 m.kg, assuming more demand and higher production.
In January 2021, several organizations urged the Indian prime minister to withdraw a bill introducing new regulations on cigarettes and tobacco products. Among these are banning the sale of loose sticks, adding further restrictions on advertising, and increasing the legal age to purchase tobacco products. The industry believes that some of the pending rules could have a devastating effect on farmers and stimulate illicit trade. In addition, it is believed that illegal operators source tobacco from abroad meaning that millions of people could lose their livelihoods and risk impoverishment.
Uncertainty calls for tighter cooperation
As tobacco leaf production steadily moves to lower-income countries, Asia’s central position in the sector becomes even more relevant. However, fluctuations in crop profitability and overall uncertainty fueled by the global pandemic make the working environment increasingly volatile. ITGA has been the leading voice of farmers since 1984 by defending growers’ interests and working towards a better future for the sector. During 2021 ITGA will continue to support its members in order to overcome the new challenges imposed by the pandemic, help growers make informed production decisions, and promote the long-term sustainability of the sector. Together we grow more.
ITGA Atlas: Tobacco Growing in figures is available at https://atlas.tobaccoleaf.org/