Tobacco industry shifting focus to export market

MANILA, Philippines — The local tobacco industry is putting focus on the export market as domestic consumption of cigarettes continues to decline amid government’s smoking ban and tax reform program.

The National Tobacco Administration (NTA), a line agency of the Department of Agriculture, said the nationwide smoking ban which started last year would cause further reduction in the consumption of cigarettes, thus impacting production of tobacco leaf.

“The strict anti-smoking campaign has a foreseen reduction of consumption. Last year, we produced 48.22 million kilograms of tobacco and this year, we are expecting to reach just 40 million kg,” NTA Regulation Department manager Rohbert Ambros said in a recent briefing.

There is also a decrease in the number of farmers and planted areas which have been declining already in the last few years.

Area planted in 2017 stood at 31,214 hectares and this is expected to drop by nearly 30 percent this year to reach 22,058 hectares amid farmers’ decision to shift to other high value crops.

To cushion the effect, the NTA is now concentrating on the production of tobacco for export and for substitution of the blending tobacco being imported for domestic manufacturing.

Last year, tobacco exports totalled to 58.61 million kg valued at $319 million and NTA is looking at a five percent increase in both volume and value for this year.

“Even if we see minimal decrease in production and further decrease in consumption, we can have an alternative market which is our exports,” Ambros said.

Of the total tobacco production, bulk or 60 percent is still allotted to the local manufacturing and the remaining 40 percent to the export market.

Even with the projected decrease in consumption due to government regulations, NTA is optimistic that local manufacturers will remain in operations in the country.

“We are preparing for the scenario that local manufacturers may close their shops here, but that probability is still very remote,” Ambros said.

“Data from the Department of Health actually showed smokers in the late 20s to 30s are decreasing, but the younger people are the ones increasing,” he added.

The NTA continues to implement the tobacco contract growing system where tobacco buyers provide the inputs required for the production and guarantee to buy all the tobacco contracted at the prevailing prices, but in no case shall be lower than the floor price per kilogram per grade of tobacco.

Farmers under the contract growing system has been assured of ready access to new technologies, extension, training and information, credit assistance and prompt payment of their harvest, among others.

NTA is also focusing on production assistance and inputs, irrigation facilities and flue-curing barns for Virginia variety and air-curing sheds for burley and native tobacco.

Last September, the NTA approved higher minimum buying prices for native, Virginia and Burley tobacco for trading years 2018 to 2019.

For Virginia tobacco which makes up almost 60 percent of total local production, the floor price per kilogram for the top grades increased to P82 for Grade AA, P81 for A, P80 for B, P78 for C, P70 for D, and P69 for E.

For Burley, the per kilogram price for top-grade A rose by P2 bringing the price to P70 from the current P68. The floor price for Grade B is now P67 and P58 for C or an increase of P2 for both.