Threats and Opportunities
in Tobacco Production
by
António Abrunhosa
International Tobacco Growers' Association
(ITGA)
USA, July ‘09
What Issues Are There?
I. Market Issues ( Consumption/
Production)
II. World Situation: Constraints on
Production
III. 'Regulatory' Issues
IV. Future Trends?
I. Market Issues
Consumption Trends:
- Drop in developed countries (US, Canada, EU,
Australia, New Zealand, Japan, Corea);
- Increase in developing countries, esp. Asia: +30
million Smokers in China in the last 15 years;
- Shift in consumer preferences (e.g
smokeless);
I. Market Issues: Consumption
Trends
56000
54000
54573,9
52000
Million Sticks
2003
2008
50000
48000
47467,5
46000
44000
42000
U.K.
I. Market Issues: Consumption
Trends
95000
94641,2
94000
Million Sticks
93000
2003
2008
92000
91302,5
91000
90000
89000
South Korea
I. Market Issues: Consumption
Trends
10000
9000
8652,4
8000
2003
7000
6450,3
Million Sticks
6000
5000
4000
3000
2000
1000
0
Sweden
2008
I. Market Issues: Consumption
Trends
5800000
5723687,4
5700000
Million Sticks
5600000
2003
2008
5500000
5400000
5346443,1
5300000
5200000
5100000
World
I. Market Issues: Consumption
Trends
3588000
3586923,9
3586000
2003
Million Sticks
3584000
3582000
3580000
3580541,6
3578000
3576000
World minus China
2008
I. Market Issues: Consumption
Trends
2500000
2003
2008
2143145,8
2000000
Million Sticks
1759519,2
1500000
1000000
500000
0
China
I. Market Issues: Consumption
Trends
Index global cigarette volume, value and average
20 stick pack price 2002-7
35,0
index 2002 = 100
30,0
Value (US$ million)
25,0
20,0
Volume (million
sticks)
15,0
price per (20 stick)
pack (US$)
10,0
5,0
0,0
2002 2003 2004 2005 2006 2007
I. Market Issues: Consumption
Trends - Smokeless Tobacco
8000
8000
7500
7500
7000
7000
6500
6500
6000
6000
5500
5500
5000
5000
4500
4500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Snus
Cigarettes
Source: Euromonitor International ('97-'06 snus data from Swedish Match, converted from can units based on 36gr = 1 can).
Note:'07 decline in snus sales is due to stockpiling by consumers in '06 in advance of a tax hike and is not indicative of market trends.
mn sticks
tonnes
Sales of cigarettes and snus in Sweden 1997-2007
Implications of Consumers'
Shift to Smokeless Tobacco
About 15g of tobacco (0.53oz) is contained in a 20stick pack of cigarettes - this is down from 20g
(0.71lb) a pack in the 1950ies.
A 50g tin of snus contains an estimated 20.5g
(0.72oz) of tobacco. An average snus user
consumes approximately one third of a 50g tin.
Consequently, the daily consumption of a snus user
requires about 6.8g (0.24oz) of tobacco.
I. Market Issues
Cost-cutting in Production:
- Delocalisation of tobacco leaf production
from developed to developing countries
(quality, social/environmental issues);
I. FCV Production Trends: China
(million kgs)
3500
PRC
3000
2500
2000
1500
1000
500
0
1995
1997
1999
2001
2003
2005
2007
2009E
I. FCV Production Trends
(million kgs)
800
Brazil
India
USA
700
600
500
400
300
200
100
0
1995
1997
1999
2001
2003
2005
2007
2009E
I. Burley Production Trends
(million kgs)
350
USA
Malawi
Brazil
Mozambique
300
250
200
150
100
50
0
1995
1997
1999
2001
2003
2005
2007
2009
E
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
Note:
Global biofuel production
has tripled from 4.8 billion
gallons in 2000 to about 16.0
billion in 2007
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
Selected Currencies - Trends
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
Soybeans (Cbt) July '09
*1bushel = 60 lb (27.2155422 kg)
Source: The Wall Street Journal
Corn (Cbot) July '09
*1bushel = 56 lb (25.4 kg)
Source: The Wall Street Journal
Wheat - Soft Winter (Cbt) July '09
*1bushel = 60 lb (27.2155422 kg)
Source: The Wall Street Journal
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Limited land available for alternative crops;
g.) Increases in costs of production.
II. The World Situation:
Constraints on Production
a.) World Development;
b.) Increased demand for food crops;
c.) Increased demand for bio-fuels;
d.) Revaluation of currencies against the US$;
e.) Increased profitability of alternative crops;
f.) Reduction in land available for alternative crops;
g.) Increases in costs of production.
Oil Prices – May 2008
Source: http://www.oil-price.net
Oil Prices - Trend
Source: http://www.worldoil.com
Selected Fertiliser
Prices US$/ ton 2008
2500
2000
Ammonia
Urea
CAN
Phos. Acid
1500
1000
500
0
Jan.
'08
Feb.
'08
Source: Yara
March
'08
April
'08
May
'08
June
'08
July
'08
Aug.
'08
Sept.
'08
Oct.
'08
Nov.
'08
Dez.
'09
Oil Prices: July '08 - July '09
Source: http://www.oil-price.net
FCV Grower Prices: Selected
Countries (US$/kg)
Italy
USA
India
Brazil
Argentina
5
4,34
4
3,35
3,3
3,18
3,14
3,19
3,24
3
2,27
2,13
2
1,76
1,46
1,35
1,06
1
0
1,24
1,06
0,8
2004
0,9
2005
2,08
1,92
1,63
1,37
1,15 1,07
2006
1,44
1,44
1,26
2007
2008
2009E
FCV Grower Prices: Selected
African Countries (US$/kg)
Tanzania
Zimbabwe
Uganda
3
2,5
2,25
2,02
2
2,4
2,32
2,02
1,61
1,5
1,39
1
0,87
0,87
0,7
0,87
0,78
0,89
0,91
1
1
1,07
0,5
0
2003
2004
2005
2006
2007
2008
1
Burley Grower Prices: Selected
Countries (US$/kg)
USA
Malawi
Brazil
Argentina
Italy
5
4,5
4,39
3,85
4
3,5
3,61
3,5
3,45
3,18
3
2,39
2,5
2
1,56
1,5
1,26
1,09 1,08
1
0,99
1,18
1,16
0,59
1,93
1,73
1,71
0,84
1,8
1,35
0,95
0,89
0,59
0,5
0
2004
2005
2006
2007
2008
III. 'Regulatory' Issues
i. _ FCTC (World Health Organization's
Framework Convention on Tobacco
Control); ;
ii. _ ECOSOC (U.N. Economic and Social
Council);
iii. _ FDA (USA Food and Drug
Administration).
III. 'Regulatory' Issues: FCTC
Main Provisions:
 Elimination of Advertising and Promotion;
 Protection from Environmental Tobacco Smoke
(Smoking Bans);
 Larger health warnings (30-50%):
 Pictorial warnings.
 Ingredient disclosure;
 Prohibition of sales to minors (age verification,
elimination of vending machines, etc.).
 Price and tax measures to reduce consumption;
 Combat illicit trade (INB).
III. 'Regulatory' Issues: FCTC
Working group on economically
sustainable alternatives to
tobacco growing:
1st meeting in New Delhi, 16-18th
September 2009.
New Protocols and
Anexes?
Intergovernmental Negotiating
Body on Illicit Trade in Tobacco
Products (INB)
III. 'Regulatory' Issues: FCTC
Shifts in Focus: Study (COP1, Geneva, Feb. '06),
Working Group (COP3, Durban, Nov. '08):
1. Diversification;
2. Economically viable replacement crops;
3. Search for “alternative livelihoods beyond crop
substitution”.
4. Elevated to working group with the prerogative to
make policy recommendations;
5. Focus on environmental impacts and
'occupational' hazards of growing tobacco.
III. 'Regulatory' Issues: FCTC
Working group on economically sustainable
alternatives to tobacco growing:

1st meeting in New Delhi, 16-18th September
2009.

Partners: Bangladesh, China, Djibouti,
European Community, Georgia, Ghana, Iran,
Lao, Mali, Philippines, Syria, Thailand, Turkey,
Tanzania, Zambia.

Key facilitators: Brazil, Greece, India, Mexico.
III. 'Regulatory' Issues: U.N.'s
ECOSOC
 Doc. E/2008/59 resulting from the Substantive
Session, NY, 30 June-25 July '08:
- Endorsement of WHO bias;
- Wish to include prevalence of tobacco use as an
indicator of sustainable development;
- Intention to exclude tobacco industry from Global
Compact Initiative.
III. 'Regulatory' Issues: U.N.'s
ECOSOC
“Preliminary research by WHO shows that tobacco
control activities are not yet being included in
national poverty reduction strategies. Based on
more extensive research on the issue, WHO is
planning to develop and propose a strategy to take
into account tobacco control in national
development programmes.”
Document E/2008/59, May 2008
III. 'Regulatory' Issues: FDA
FDA Oversight of the U.S. Tobacco market will
have considerable impacts on growers worldwide who want to export cigarettes and tobacco
to the U.S.
Growers' capacity to meet new standards of
production and comply with tight regulations will
define their competitiveness.
III. Impacts of Anti-Tobacco
Legislation
There is a strong correlation between the
drop in consumption – especially in
developed countries – and the introduction
of anti-smoking measures.
Impact of Regulatory measures + Tax increase
on Cigarette Consumption in Japan
400,00
1998: Advertising
restrictions on main media/
‘brand sharing’.
2001: Underage sales
prohibited.
380,00
360,00
2004: Outdoor
advertising
ban.
320,00
300,00
280,00
260,00
2006: Restrictions
on sponsorship.
240,00
220,00
2008: TASPO cards for
Vending machines.
200,00
19
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
2099
2000
2001
2002
2003
2004
2005
2006
07
Billion Pieces
340,00
Year
Impact of Regulatory measures + Tax
increase on Cigarette Consumption in the
United Kingdom
150,00
1994: Voluntary
agreement restricting
advertising on posters
and point of sale.
100,00
75,00
50,00
25,00
0,00
1983: First voluntary
agreement published
1986: Cigarette
advertising banned
in cinemas by
1965: Cigarette
legislation
advertising on
television and radio
1992: Health and
banned by legislation.
safety legislation
restricts smoking in
the workplace.
2004: Advertising
at POS limited.
2005:Brand-sharing
prohibited.
2007: Public
smoking ban
19
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
2099
2000
2001
2002
2003
2004
2005
2006
07
Billion Pieces
125,00
2002: Tobacco
Advertising &
Sponsorship
prohibited by
legislation.
Year
IV. Future Trends?
- Outside of China, world cigarette consumption
has only grown at a compound annual rate of
+0.3%;
- Female consumption (Japan 14% - China
currently 4%);
- Cigarette sales in China rose by an astonishing
30 billion sticks in the four months January-April
2008, almost the equivalent of a full year's
consumption in Canada or Greece.
IV. Future Trends?
Alternative Uses: GM Tobacco
- Use of seeds for bio-fuel;
- Detection of land mines and counteraction of TNT
contamination
- Creation of Anthrax, Anti-Hepatitis B, cervical
cancer, SARS vaccines;
- Development by Bayer of a new production
process to produce biotech drugs in tobacco plants;
- Purchase by Philip Morris Int. of a large position in
Medicago Inc., a Quebec City biotech company that
plans to make vaccines from tobacco leaves.
IV. Future Trends?
Alternative Uses: GM Tobacco
- Creation of a "biosimilar" collagen to human
collagen;
- Assistance in breast cancer diagnosis and
treatment;
- Economical means of production of novel
feedstocks, such as biodegradable polymers;
- Provision of material for varied wood-based
applications, e.g. particleboards that can be used
as low cost boards for mass housing.
Thank You.