As tobacco prices rise and demand for quality leaf increases while tobacco inventories are shrinking around the world, Indonesia, home to a diverse variety of tobacco, is in a unique position to increase supplies to the global market.
Essentially self-sufficient with regards to its own demand, Indonesia has long been a preferred source of quality leaf for cigar manufacture, and for its Virginia and burley tobaccos. Tobacco is grown in several locations The type of tobacco exported by domestic farmer mainly is Virginia type (from Lombok area)
![]()
Madura is widely known for its rajangan variety used in kretek as well as it dark types. Around 80% Lombok's tobacco production is semi-flavored Virginia tobacco which has been exporting at around US$2/kg. Air and sun cured types and cigar tobaccos are grown in several areas in East Java. The opportunity exists for the country to ramp up production of its exportable tobaccos, such as FCV, cementing its position as a preferred supplier of quality leaf.
There has been a slight increase in tobacco leaf production over recent years, but the country has the capacity to produce more than it currently is growing.
"Indonesia produced 170,000 tons of tobacco in 2006, up 15% from 2005," said Djarum's corporate communication manager, Renitasari. "At its peak five years ago, tobacco plantation production reached 200,000 tons, but this created a large over-supply and the price was impacted severely," she said. "But in the last two years leaf production became more in tune with the demand, and the tobacco leaf price has improved."
BAT has long exported Indonesian leaf as part of its "leaf pooling" program. BAT's tobacco requirements are for its international white stick portfolio and so it is primarily interested in exportable types and grades of tobacco such as FCV and burley. It has developed long-standing relationships with tobacco farmers with whom it contracts. It also buys some leaf from independent traders in one-off deals.
"Since the 1960s we have had programs in place to arrange pre-financing, we provide technological assistance and guarantee to buy all the tobacco produced with contracted farmers, usually at prevailing international prices" said Lekir Daud, corporate and regulatory affairs director of BAT Indonesia. "BAT exports to BAT, and there is high demand for Indonesian Virginia leaf. Indonesian tobacco is priced competitively, although prices are going up. Whatever leaf is produced, there is a demand for it."
"We assume the price for the coming season will increase around 10%, and we expect there will also be an increase in production," added Renitasari.
[b]Skill and experience[/b]
Grading and assessing tobacco in Indonesia requires a level of skill and experience above that required by many other producing nations. The characteristics most desirable in a kretek tobacco, or a cigar tobacco for that matter, are far different than those for white sticks.
"Indonesia's different types of tobacco require different grading techniques and have unique quality criteria," said Martin King, president director of Sampoerna. "Kretek tobacco is sliced green and cured in the sun, a completely different process than that required for burley or FCV, for example. Sampoerna has its own experts to ensure we get what we need for kretek."
The challenge is to develop more and higher quality exportable types, a concept that stirs Sampoerna.
"Leaf production is strong," said King. "Developing more leaf types suitable for export as well as kretek use requires two different styles and approaches. The largest concern is the overall rise in agricultural prices: tobacco is likely to follow the trends. We have to wait and see where the prices end up. In 2006, prices were significantly higher, while in 2007 there was a larger crop and the prices dipped."
[b]GAP strategies[/b]
To develop the industry, tobacco companies work closely with farmers in a variety of programs.
Djarum has developed Good Agricultural Practice (GAP) training programs with its contracted farmers who supply around 10% of total requirements.
"Through the consistent introduction of GAP, the quality of leaf produced by farmers has become much better and more consistent," said Renitasari.
Sampoerna does not own any tobacco and clove farms. It buys its tobacco from leaf suppliers and its cloves from traders who buy them from farmers. Together with its leaf suppliers and cloves traders, Sampoerna works closely with tobacco and clove farmers, government agencies and universities to share and promote best practices in tobacco and clove farming. Its goal is to ensure a reliable supply of quality tobacco and cloves for its products, to improve crop productivity and at the same time to protect and sustain the environment.
"Sampoerna has played a part in rejuvenating clove trees in several clove-producing areas in Indonesia, namely in Gorontalo, Minahasa, Pacitan, Simeleu and Nias, by donating up to 1 million clove seedlings," said King "Millions stand to benefit from this initiative: we have worked with various entities to get seedlings out, provided expert training on how to pick cloves without damaging trees and on proper fertilizer techniques."
Key Sampoerna tobacco suppliers run a number of agronomy programs to develop good agricultural practices and to develop tobacco styles for the company's domestic portfolio and for export. Enditem
