Developing country growers set to gain

IN FOCUS/ Tobacco

Population and income growth, particularly in developing countries, were likely to lead to a rise in the demand for tobacco and products made out of the leaf, the United Nations Food and Agricultural Organisation (FAO) has said in its report titled 'Projections of tobacco production, consumption and trade'.

The report analyses demand till 2010. It also predicted a shift in tobacco production from developed to developing countries like India.

Developing countries were in a good position to benefit from this expansion in demand and shift in production base, the Tobacco Institute of India said quoting the FAO report.

However, the rate of growth of tobacco demand worldwide till 2010 would increase only at rate that was lower than that in previous periods studied, the report said.

Demand would increase in spite of declining tobacco consumption per adult by as much as 10 per cent between 1998 and 2010.

According to the projections made in the report, expansion of demand in developing countries was expected to drive the tobacco economy of the world and compensate for lower per capita use.

Production of tobacco leaf would respond to demand trends. The crop size would rise in countries where domestic demand was increasing and production costs were competitive, said the report.

Countries with good transportation systems and access to the international market could also hope to cash in on the growth in tobacco demand.

These factors would favour developing nations and encourage a shift of tobacco leaf production there.

The report predicted that only a reduction in support for tobacco production in developed countries would lead to a shift in world tobacco production in favour of developing countries, such as Brazil, Zimbabwe, Malawi and perhaps, India, Turkey and China.

World tobacco demand was expected to rise by 2010 to 7.1 million tonnes in dry weight, up from 6.5 million tonnes in 1997-99.

However, there were two different strands in the demand scenario.

In developed countries, demand was already declining slowly and consumption was expected to be around 2.05 million tonnes in 2010, or about 10 per cent lower than the 2.23 million tonnes consumed in 1998.

However, tobacco consumption in developing countries was expected to increase to 5.09 million tonnes, up from 4.2 million tonnes in 1997-99.

Thus, global tobacco demand and prices in the period were likely to be determined mainly by developing countries.

Production policies supporting tobacco in developed countries are under constant pressure and tobacco profitability at farm level is expected to decline further.

Conversely, tobacco production returns and tobacco profitability in most developing countries are much higher than in any other cash crop and thus there are good prospects for increasing production, especially of those types of tobacco which have an expanding world market.

Thus, the developing countries are expected to further increase their share in world tobacco production.

The report projected volume of global trade in tobacco at 2.2 million tonnes in 2010, up from 2 million tonnes in 1998.

Developed countries were expected to step up imports and cut back on exports.

Developing countries were expected to step into the gap and raise their exports at a rate higher than import requirements, reflecting the shift in production from developed to developing countries.

Several developing countries emerged as exporters of tobacco leaf during the period 1970-1998, the report pointed out. Major exporters of tobacco leaf today included Brazil, Zimbabwe and Malawi which have raised exports over time.

Traditional exporters such as the United States, the EU producers and Turkey were losing export market shares and developed countries in general were becoming major importers of tobacco leaf, it added.

The United States, EU member states and countries which were former constituents of USSR were leading importers.

The report said Brazil, Zimbabwe and Malawi would continue to be strong competitors in the global market.

However, the export unit value of tobacco leaf from the United States was more than twice the world average, reflecting the superior quality and higher production cost of US tobacco.