A turbulent Year for Turkish Tobacco

Source from:  TJI 03/18/2010

Turkey produced 80,000 tonnes of tobacco in 2009, the lowest amount since 1945. Turkey produced an estimated 80,000 tonnes of tobacco in 2009, a 33 per cent drop from 2008 with 118,940 tonnes, and the lowest output in 64 years. The nation's tobacco market faces turmoil in the wake of the privatisation of the state cigarette plants and closure of one hundred tobacco processing centres. Turbulence swept the country's tobacco industry after British American Tobacco (BAT) acquired the state cigarette manufacturing company, the Turkish Tobacco Experts Association reported. The chaotic conditions were only made worse by an ongoing strike by 10,500 tobacco workers after the government in 2009 shut down one hundred tobacco processing plants that it could not privatise. "We believe that the tobacco output will be extremely low in 2009 because the government is no longer buying tobacco, and production in eastern and southeastern Turkey, where a low quality weed is produced, is no longer needed and has declined sharply," Oktay Çelik, president of the Izmir-based Turkish Tobacco Experts Association, said in an interview with TJI. Private merchant companies, which act on behalf of western cigarette producers abroad and in Turkey, are shunning tobacco purchases from eastern and southeast regions of the country. Çelik also noted that western tobacco companies' demand for Turkish Aegean and Black Sea tobacco had plunged by 40 per cent and 60 per cent respectively because of high levels of tobacco stocks and uncertainty in cigarette markets in Turkey and abroad, amidst growing pressure from health authorities on cigarette producers and tobacco users. He predicted that Turkey's tobacco output would shrink further in 2010. The Aegean Tobacco Exporters' Association, a trade group also based in Izmir, confirmed that production would be at the lowest level in decades. "Merchants have been saying that Turkish tobacco prices, based on foreign currency, had become very expensive, forcing further drops in production," an official from the association said. Turkey's main tobacco market, the Aegean region, opened in February 2010. Purchase records were being tabulated for the 2009 crop by the state Tobacco and Alcohol Regulation Agency (the Tobacco Authority). The Black Sea, Marmara and eastern and southeastern Turkish tobacco markets open in late March and late April. All tobacco purchases for the 2009 crop will be completed by the end of June 2010 at the latest, tobacco experts said. Turkey produced a record 338,796 tonnes of tobacco in 1993. In 2009, the country had only 181,588 registered tobacco growers left, down from 583,474 in 2000. Tobacco production in Turkey has been in a steady decline since 1997, when the country produced 286,414 tonnes of tobacco. Turkey's tobacco production in 2009 was the lowest since 1945, when the country turned out only 69,599 tonnes of tobacco. Tobacco purchases in 2009 Contracted tobacco purchases of the 2008 crop in Turkey in the first ten months of 2009 stood at 93,403 tonnes, of which 91,689 tonnes were oriental tobacco, while 1,714 tonnes were Virginia and burley tobacco, the Tobacco Authority said. The remaining stocks were expected to be absorbed in auctions and purchases in the coming years. Private merchants and public entities paid growers a total of TRY 618.2 million (EUR 298 million) for the 2008 crop, with merchants paying TRY 524.6 million (EUR 254 million) and the state paying TRY 93.613 million (EUR 45.33 million), the Tobacco Authority reported on its website. The Tobacco Authority also said state agencies purchased 20,408 tonnes of tobacco from 107,619 growers, mainly in the troubled Kurdish southeast Turkey, while some 50 merchant companies had bought 72,995 tonnes of quality tobacco, mainly in the Aegean, Black Sea and Marmara regions, from 73,969 growers. It also said some 59,736 tonnes of the purchased 2008 tobacco crop was from the Aegean region, while 12,220 tonnes came from the Black Sea area, 2,116 tonnes from the Marmara region, 3,806 tonnes from eastern Turkey and 15,525 tonnes from southeast Turkey. In 2009, Turkey earned USD 737.8 million (EUR 542.3 million) from tobacco exports, an increase of 5.5 per cent from 2008, the Turkish Exporters' Assembly (TIM), an umbrella group representing the country's 55 export agencies, said. Turkish export earnings in 2009 increased in only tobacco, hazelnuts, olives and olive oil, and cut flowers, while declining in twenty main categories from 2008. Total Turkish exports fell by 23 per cent in 2009, to USD 101.628 billion (EUR 74.68 billion), from USD 132.027 billion (EUR 97.02 billion) in 2008, because of the global economic crisis, TIM reported. Tobacco workers strike A strike by 10,500 tobacco workers, facing possible long-term unemployment and protesting against the closure of one hundred leaf processing centres, entered its third month in February 2010, as Prime Minister Recep Tayyip Erdogan and opposition leader Deniz Baykal traded accusations over the country's ambitious privatisation programme. Workers of five labour confederations staged a one-day nationwide walkout on 4 February 2010 to support the strikers in Ankara, paralysing public services in some cities in Turkey. The government in December 2009 shut down the facilities owned by the former state tobacco monopoly, Tekel, and said they would lay off their tobacco workers, asserting that the centres and the services of the employees were no longer needed because state cigarette plants had been privatised. The administration offered the workers temporary, low-paying public sector jobs (at one-third the salaries they were receiving as Tekel workers). The workers were also paid a severance fee of an average TRY 41,000 (USD 27,333) on 1 February. After the takeover Turkey's tobacco sector is undergoing sweeping changes following the purchase by British American Tobacco (BAT) on 24 June 2008 of Sigara Sanayii Isletmeleri ve Ticaret, the cigarette manufacturing arm of Turkey's former state tobacco monopoly Tekel, for USD 1.721 billion (EUR 1.249 billion), under the nation's ambitious privatisation programme. In January 2010, BAT announced it would shut down the ultra-modern Tire plant in Izmir province and five of the six factories it acquired from Tekel. BAT plans to produce all of its cigarettes under one roof at the Samsun facilities, on the Black Sea coast. BAT said 400 workers would be laid off. The Tekel plants to be shut down are in Istanbul, Tokat, Adana, Malatya and Bitlis provinces. BAT has a 33 per cent share in Turkey's cigarette market that is estimated at between 112 and 135 billion pieces annually. The conservative government, which faces a huge budget deficit and reduced tax revenues, refused to increase the salaries of the workers or provide permanent jobs. Concessions to the workers could force the government to give in to tens of thousands of others who stand to lose their state jobs through privatisation. "There is no government in the world today that can offer lifetime jobs anymore," Erdogan told the grand national assembly in January 2010, referring to the layoffs. "The government won't dole out money to workers for not producing anything." Erdogan told the strikers the government would give them until the end of February to take the temporary jobs offered or would end the strike forcibly. In January, riot police used tear and pepper gas to break up demonstrations of the tobacco workers in front of the head office of the governing Justice and Development Party (AKP). The tobacco strikers were camped outside the Ankara headquarters of Turk-Is, the country's biggest labour organisation, in makeshift tents, braving chilling winds, freezing temperatures and snow storms. Some of the workers went on a hunger strike, backed by opposition politicians. Former labour and social security minister and an opposition figure, Yasar Okuyan, joined the hunger strikers. "The Tekel workers have struggled against injustice for the past two months. The government should know its political responsibilities and not play with the bread of the workers," Okuyan told reporters. Several protesters were admitted to hospital after refusing food and water. Prime Minister Erdogan asserted that the strike was illegal and was being used by the main opposition Republican People's Party (CHP) to force early general elections. "Everyone knows who is behind the strike," Erdogan told a party meeting. "Everyone is familiar with their faces." The CHP responded with counter accusations. "The Tekel workers' strike will bring the government down, not a military coup," Deniz Baykal, leader of the CHP, answered, referring to the Erdogan's allegations that several military interventions to topple his administration had been foiled. Enditem