Threats and Opportunities in Tobacco Production by António Abrunhosa International Tobacco Growers' Association (ITGA)

1. Threats and Opportunities in Tobacco Production by António Abrunhosa International Tobacco Growers' Association (ITGA)‏ USA, July ‘09

2. What Issues Are There? I. Market Issues ( Consumption/ Production)‏ II. World Situation: Constraints on Production III. 'Regulatory' Issues IV. Future Trends?

3. 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);

4. I. Market Issues: Consumption Trends

5. I. Market Issues: Consumption Trends

6. I. Market Issues: Consumption Trends

7. I. Market Issues: Consumption Trends

8. I. Market Issues: Consumption Trends

9. I. Market Issues: Consumption Trends

10. I. Market Issues: Consumption Trends

11. I. Market Issues: Consumption Trends - Smokeless Tobacco 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.

12. Implications of Consumers' Shift to Smokeless Tobacco About 15g of tobacco (0.53oz) is contained in a 20-stick 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.

13. I. Market Issues Cost-cutting in Production: - Delocalisation of tobacco leaf production from developed to developing countries (quality, social/environmental issues);

14. I. FCV Production Trends: China (million kgs)‏

15. I. FCV Production Trends (million kgs)‏

16. I. Burley Production Trends (million kgs)‏

17. 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.

19. 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

21. 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

22. Note: Global biofuel production has tripled from 4.8 billion gallons in 2000 to about 16.0 billion in 2007

23. 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

24. Selected Currencies - Trends

25. 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

26. Soybeans (Cbt) July '09 *1bushel = 60 lb (27.2155422 kg)‏ Source: The Wall Street Journal

27. Corn (Cbot) July '09 *1bushel = 56 lb (25.4 kg)‏ Source: The Wall Street Journal

28. Wheat - Soft Winter (Cbt) July '09 *1bushel = 60 lb (27.2155422 kg)‏ Source: The Wall Street Journal

29. 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

31. 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. II. The World Situation: Constraints on Production

32. Oil Prices – May 2008 Source: http://www.oil-price.net

33. Oil Prices - Trend Source: http://www.worldoil.com

34. Selected Fertiliser Prices US$/ ton 2008 Source: Yara

35. Oil Prices: July '08 - July '09 Source: http://www.oil-price.net

36. FCV Grower Prices: Selected Countries (US$/kg)‏

37. FCV Grower Prices: SelectedAfrican Countries (US$/kg)‏

38. Burley Grower Prices: Selected Countries (US$/kg)‏

39. 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).

40. 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).

41. 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)

42. 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.

43. 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: FCTC

44. 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.

45. 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

46. FDA Oversight of the U.S. Tobacco market will have considerable impacts on growers world-wide 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. 'Regulatory' Issues: FDA

47. 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.

48. Impact of Regulatory measures + Tax increase on Cigarette Consumption in Japan

49. Impact of Regulatory measures + Tax increase on Cigarette Consumption in the United Kingdom

50. 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.