Tobacco industry bullish and strong

MANILA, Philippines – Inspite of the global financial crisis, the tobacco industry is coming out strong and bullish this season.

While many businesses have either downsized their operations or closed down, tobacco production and trading activities have been on the upswing.

Up to P4 billion worth of tobacco leaves are expected to be procured by the end of the ongoing trading season in July. 

More than 31,000 hectares were planted with the crop in the current 2008-2009 season surpassing by 25 percent the areas utilized in the previous crop year, reports from the Philippine Association of Tobacco-Based Cooperatives (PATCO) showed.

PATCO is the umbrella organization of farmers’ groups in the country.

The number of leaf farmers also increased to 47,000, a sizable leap from the more than 39,000 who planted the leaf in the 2007-2008 season.

Tobacco farmers in Northern Luzon where the leaf is mainly grown are in a “celestial” mood as both their yields and incomes have been rising substantially.

Apart from producing more, tobacco farmers have getting a lot better prices for their produce.

Cigarette manufacturers and tobacco buying firms, on the other hand, are greatly pleased that the harvests are of high quality which also explains why they are buying at remarkable prices.

It’s take two for unprecedented leaf prices. Last year, when the financial meltdown began, the previous season’s crop also reached high price levels.

As a result, many corn farmers, attracted by the prospect of earning more, shifted to tobacco this year perking up the number of leaf growers more.

Administrator Carlitos Encarnacion of the National Tobacco Administration (NTA) whose agency is in close touch with the farmers through its branch offices reported that the farmers responded to calls for high quality production.

The agency has been in the center of efforts to upgrade the quality of tobacco leaves. 

NTA has put in place its tobacco production technology for adoption by the farmers. In addition, it has zonified tobacco producing areas such that so-called “salty” farmlands that produce inferior leaves are no longer allowed to be planted with tobacco.

Tobacco buying firms have also designed a related technology package for their contracted farmers. 

“It is as if we are in heaven, feeling celestial kami for getting more than our just due for our crop,” Andy Reyes, president of the Philippine Association of Tobacco-Based Cooperatives (PATCO) told The STAR recently.

His excitement was not dampened by reports of standing tobacco plants damaged by the recent spate of rains which affected the crop of so-called “late planters” who reportedly suffered losses. He pointed out that the prime leaves of the plants were already gathered and sold by the farmers before the rains poured.

Encarnacion acknowledged the “all-out” support of Agriculture Secretary Arthur Yap to the tobacco farmers. “Under him and - on a higher plane, President Arroyo - the needs of tobacco farmers have always been well-attended to,” he said.

NTA records show that prices of virginia leaves have risen to P92 a kilo for the top class “AA” which is 50 percent higher than its pre-trading floor price which is P61.

Robert Bonoan, NTA deputy administrator for operations, said the quality of the leaves is so impressive that buyers are now procuring wholesale without distinction as to class at P85 a kilo. The usually low-priced laggard leaves called “Reject” are commanding good prices too if sold separately, he said. 

The bonanza is also enjoyed by those planting other tobacco types. For burley, prevailing prices are 30 to 75 percent more than the declared floor prices. Class A and B with floor prices of P40.50 and P38.50 are being sold at P64 to P70 a kilo.