Articles Q3 09

China Tobacco Exports Better Quality Better Future

By Allen Liao

The quality of leaf tobacco produced in China has continued to improve over recent years, contributing to increasing China’s leaf tobacco export year-on-year.

In keeping with steady improvement of leaf tobacco quality, the structure of leaf tobacco exports has undergone changes, with leading leaf tobacco exports shifting onto medium- and high-grade products from low- and medium-grade ones. Meanwhile, the average price of leaf tobacco exports gradually rose to US$2,353/ton in 2008 from between US$1,000 and US$1,500/ton in 2000.

Official statistics indicate that in 2008 the enterprises authorized to operate the leaf tobacco import and export trade in all tobacco-producing regions in China signed export contracts to the tune of 172,770.50 tons worth US$406.53 million, with the contractual export volume going up 12% year-on-year and with the annual amount of hard currency earned from leaf tobacco export rising 22% year-on-year.

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India is PMD and GLT Equipment Manufacturer

Tobacco Cooperatives

By Allen Liao 

To meet the requirement for large-scale production of tobacco and intensive operation of the tobacco industry, the organizational structure of tobacco growers in China have undergone new changes over recent years from the development of tobacco farms, big rural households exclusively engaged in tobacco production and mutual aid groups of tobacco growers to the establishment of tobacco cooperatives. Today, tobacco cooperatives are mushrooming in all tobacco-producing regions across China.

In 2008, the domestic tobacco industry launched 135 pilot projects nationwide for the development of modern tobacco agriculture. In the fulfillment of these pilot projects, successful efforts have been made to develop increased investment in tobacco cultivation techniques and strategies and boosting the construction of infrastructure facilities for tobacco production. Focus has also been placed on the development of moderate-scale tobacco growing, the establishment of new forms of organizations of tobacco growers, improving the provision of specialized services, and so on.

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Indian Tobacco Looks to the Future

The Taste of Things to Come

By Heneage Mitchell 

Regulatory requirements and consumer demand is driving a rapid increase in ultra low tar and nicotine products. The flavor profiles of these types of cigarette are clearly of interest to manufacturers and smokers alike.

Flavor companies such as Mane have raced to develop effective technologies to ensure smokers of conventional tobacco products switching to these newer segments are treated to the same reassuring flavor profiles they have previously enjoyed.

Ramping up Virginia
Given that typical Virginia brands have not conventionally used full top flavor and casing systems these lower delivery figures dictate that there has to be compensatory technology to ramp up the flavor profiles to bring these up to consumer acceptance.

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FDA Oversight

By E. Edward Hoyt III and Heneage Mitchell 

Following years of false starts, the Federal Drug Administration now has authority to regulate the production, sale, and marketing of tobacco products sold in the US. A new wave of regulations and fees face the industry.

On June 22, 2009, US president Barack Obama signed the Family Smoking Prevention and Tobacco Control Act, which authorized the Food and Drug Administration (FDA), under the guise of the Federal Government to regulate all tobacco products including modified risk tobacco products and requires the agency to assess fees on manufacturers and importers to cover the cost of FDA’s new regulatory activities authorized by the bill. User fees will be assessed only on tobacco segments formally regulated by the FDA which initially is limited to cigarettes, RYO cigarette tobacco, and smokeless tobacco. Fees will be collected from manufacturers and importers quarterly based on share within each market segment and phased in over ten years, starting at US$85 million in 2009 and rising to US$235 million in 2010 and then gradually to US$712 million per year by 2019. According to industry analysts citing by the New York Times, pass-along costs to consumers relative to current state and federal excise taxes appear relatively minor, reaching 6¢ per pack.

The act establishes the Center for Tobacco Products within the FDA, and requires the FDA to reinstate certain regulations that were issued in 1996 intended to limit tobacco sales and marketing. The Supreme Court ruled in 2000 that the FDA did not have the authority to issue such regulations.

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Leading Indian Tobacco Towards Sustainability and Stability

By Heneage Mitchell

As Indian tobacco prices soar into uncharted territory, buyers and traders alike are uneasy about its future prospects. Fortunately for all parties, there is a strong hand guiding the Tobacco Board of India in the person of its chairman Dr. J. Suresh Babu. If anyone can navigate the behemoth that is the Indian tobacco sector through these stormy waters, there is a clear consensus from all sides that he is the man.

"As board chairman I am looking forward to a stable market and also sustainable for future development," Dr. J. Suresh Babu, chairman of the Tobacco Board of India told Tobacco Asia last June, even as auction floor prices reached new record highs - the Karnataka auctions concluded with an average sale price of Rs110/kg (US$2.29/kg), peaking at Rs159 for the top grade.

"The starting price was Rs90 and I was looking forward for reasonable pricing to start from that level and Karnataka farmers earned Rs8,500 million," Babu said. "I would have liked to see AP auctions starting at Rs100 for top grades but the traders insisted for Rs.90. NLS farmers demanded Rs100 to start, comparing the value with Karnataka. But the higher average in Karnataka caused the auctions to be suspended for two weeks and after negotiations the auctions opened with Rs.100 for top grades. We were expecting Rs120 for SBS and SLS and Rs140 for NLS but the market was running at Rs100 in the South and Rs110 in the north. Due to this I had to do some market intervention to raise the prices to a reasonable level and the price went up to Rs165/kg for NLS, Rs138/kg for SBS. But I wish that the trade would work as per the advice of the Tobacco Board to maintain the price balance and also the future sustainability of Indian tobacco."

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