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Jonathan Wertheimer, c.e.o. of Socotab. Photo credit: Socotab
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Socotab staff inspecting a field with Izmir oriental saplings. Photo credit: Socotab
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Yigit Tunçel, general manager of Socotab’s local subsidiary, Socotab Yaprak Tütün. Photo credit: Socotab
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Primary sorting line at Socotab Yaprak Tütün. Photo credit: Socotab
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Freshly picked Izmir oriental leaves. Photo credit: Socotab
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Photo credit: Socotab
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The modern operations center of AOTT. Credit: Alliance One Tobacco Turkey
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Oriental tobacco field.
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Selim Jimi, Alliance One country manager in Turkey. Photo credit: Alliance One Tobacco Turkey
As Turkey’s tobacco growing sector has almost returned to normal, the country even saw the introduction of some new varieties hitherto not commercially grown there
Though many of her peers have struggled enormously with tobacco output in recent years due to a plethora of factors ranging from Covid-19 lockdowns to natural disasters and steeply rising production costs, Turkey negotiated her own challenges comparatively comfortably – but not entirely unscathed. Like anywhere else, the country has been experiencing a certain level of tobacco farmers shifting to other, less cost-intensive crops. And yet, while some countries suffered crop declines of 30% or even more due to a multitude of often overlapping factors, Turkey was spared from the worst.
Climbing output figures and new varieties
Data provided by Alliance One Tobacco Turkey (AOTT) suggests that, based on total production size in the 2019/20 season of 69,430 tons, the volume across all varieties declined by only about 5% in 2020/21, i.e. the height of the coronavirus pandemic. In 2021/22, the figure slumped by another 11%, according to AOTT country manager, Selim Jimi. The situation recovered very slightly in 2022/23, with total production clocking in at +1% above the 2019/20 base reference. And for the 2023/24 season, AOTT projects a further recovery of +18%. “The 2020 and 2021 crops saw a decline particularly of the oriental varieties,” Selim Jimi said. “But the Turkish currency devaluation coupled with recent contractions of oriental tobacco volumes in neighboring countries had a positive impact in bringing back Turkey’s oriental tobacco output to previous levels.” In addition, a new government policy introduced tobacco varieties that weren’t previously grown in the country. “These are sun-cured virginia and semi-oriental types, which are used in domestically sold cigarettes,” Selim Jimi explained.
Upcoming Izmir crop will define level of recovery
Meanwhile, another leading global merchant, Socotab, anticipates that the supply and demand ratio could level out rather evenly once the 2023 Izmir oriental crop is brought in. “If the 2023 Izmir crop ends up being 42,000 tons green, then the market should be mostly balanced,” Socotab c.e.o. Jonathan Wertheimer told Tobacco Asia. “Indeed, the 2023 crop combined with the small amount of inventory that remains should be able to satisfy most of the demand, apart from the value grades, where supply remains constricted.” But Wertheimer also added that there was an informal market operating in certain semi-oriental and big leaf varieties, which could have an impact on the more classical varieties if volumes are restricted due to bad weather or diminishing grower interest.
Wertheimer’s colleague, Yigit Tunçel, general manager of Socotab Yaprak Tütün, Socotab’s local subsidiary, confirmed that although Turkey currently was “in a tight supply and demand situation,” this really only applied to the value grades, specifically those of the Izmir variety. Izmir crops had yielded lower-than-planned volumes in the past two seasons due to drought. However, remaining inventory had allowed for the situation to remain generally balanced. Like Wertheimer, Tunçel expects to see a volume increase as of the 2023 Izmir crop that should greatly help alleviate the existing supply bottleneck.
Data shared with Tobacco Asia by AOTT and the Turkish Ministry of Agriculture pretty much corroborate the hopes of Jonathan Wertheimer that the 2023 Izmir crop will reach 42,000 tons. The Agriculture Ministry’s Alcohol and Tobacco Department reported that 37,400 tons of green Izmir oriental was produced during the 2022 season. And AOTT’s Selim Jimi anticipates a year-on-year output increase for Izmir oriental of 10% in the current 2023 crop season. If that increase pans out, it would indeed bring the Izmir oriental crop this year to around 41,150 tons, just falling a little short of Wertheimer’s projection.
The eternal tightrope walk that is supply and demand
One main reason why Turkey’s tobacco growing sector temporarily found itself in a tight spot was local farmers reacting to fluctuating demand. As they should, we might add. When volumes vary, tobacco farmers usually pick up the mood of the market rather quickly. For some years leading up to the pandemic, a combination of existing uncommitted dealer inventories and weakening demand prompted Turkish farmers to downward adjust their new crop volumes, according to Jonathan Wertheimer. All good and well under normal circumstances…but pretty much unforeseen by anybody, cigarette markets worldwide actually experienced a surprise strengthening during the pandemic. “Unfortunately, this positive event took place at the same time as the world entered an inflationary cycle, thus making the situation somewhat more complicated for both the local farmers and dealers to plan the crops,” Wertheimer explained. His colleague Yiğit Tüncel added that, thankfully, Turkish tobacco farmers proved themselves flexible and reactive enough in terms of back-adjusting their upcoming volumes upwards again.
On the best way to recovery… if all factors play out right
“I am confident that we are now on the right track, and if the weather cooperates for the rest of the season - which it didn’t during the transplanting period - the market should be in reasonably good shape,” said Jonathan Wertheimer. Balancing out global supply and demand is one thing. But in the mid- to long-term, Turkish farmers (just like their peers elsewhere) also will require more sustain-ability programs as well as agricultural modernization to combat the challenges ahead, particularly climate change and the increasing cost of crop in-puts, cautioned AOTT’s Selim Jimi. “Other crucial factors include more affordable farmer financing and lines of credit, the exploration of new markets and the diversification of tobacco product offerings,” he elaborated.
Jonathan Wertheimer nevertheless expressed his hopes that conditions should improve overall once the larger economic shocks of abundant post-Covid liquidity and the war in Ukraine get resolved. In any case, Wertheimer said he wouldn’t use the word “crisis” to describe the current condition of Turkey’s tobacco market. “Like all tobacco farmers worldwide, Turkish growers are not immune to the broader economic context.” Yiğit Tüncel even asserted that “the Turkish tobacco growing sector is solid, even if along with the rest of the world it has been affected by Covid-19, high inflation, and political conflicts such as the Russia-Ukraine war.” “But at the same time,” Tüncel explained, “it is important to point out that Turkish tobacco farmers perform very well in terms of ESG, which only adds to the market’s solidity and attractiveness.” And while according to Selim Jimi Turkish tobacco exports to North America declined by some degree, exports to East and Southeast Asia have actually picked up strongly due to the Turkish currency devaluation coupled with expanded import regimes in those regions. In other words, the patient seems on the best way to recovery.