Brazil Swallows Zim Tobacco Share

Source from:  Financial Gazette (Harare) Rangarirai Mberi 04/29/2005

NEWS of a massive tobacco harvest in Brazil has raised fresh worries about the future of Zimbabwe's tobacco industry, still struggling to return to the top of world production after five straight years of decline. And it is not only Brazil's 757 million kilograms of tobacco that have worried the local tobacco industry. An even greater worry is that Brazil and other producers have now begun to muscle in on Zimbabwe's remaining trump card on tobacco's world markets - quality. Zimbabwe's tobacco which is traditionally geared for the unmanufactured international leaf market has over the years had a reputation for quality and is in demand for blending purposes. Brazil has seen the fastest growth in output among the world's flavour type flue-cured tobacco producers, through a strategy of lifting its grower numbers and expand the planted area. The number of growers in South Brazil, the area which solely produces that country's crop, rose from 170 830 in the 2002-03 season to 190 270 in the 2003-04 crop, representing an increase of 11.4 percent. The planted area also kept pace with the number of growers, rising from 353 810 hectares in the 2002-03 season to 411 290 in 2003-04. Yields per hectare went from 1 697 kilos in 2003 to 2 069 kilos last year. According to leading US tobacco market researchers and economists, Brown and Snell, strong world demand allied with the frequent reductions in the US and Zimbabwe - which are Brazil's main competitors - account for Brazil's 10 to 12 percent increase in the planted area. Zimbabwe's own statistics compare unfa-vourably with Brazil's huge growth figures. Production has progressively come down since the 2000 peak of 267 million kg, sliding to 202 million kg in 2001, 165 million kg in 2002, 80 million kg in 2003 and a paltry 68 million kg last year. Some 85 million of what was once the golden leaf kg are expected this year. And while Zimba-bwe has been losing its share of the world market, Brazil has been picking up more. "Zimbabwe's flue-cured production has continued to erode, down from 267 million kg in 2000, with Brazil picking up much of Zimbabwe's lost production," Brown and Snell said in a recent report. "Increases in the United States likely would come as merchants shifted some production from Brazil to the United States and moved future decreases in Zimbabwe production to the United States." Brazil, experts say, will remain the dominant producer and exporter of flavour-type flue-cured tobacco, at least in the foreseeable future. Executives of Zimbabwe's tobacco industry concede that Zimbabwe is unlikely to catch up with the kind of quantity that Brazil's is putting out on the market, but are holding out for an even tougher battle on the quality front. According to Rodney Ambrose, the chief executive officer of the Zimbabwe Tobacco Association, the local industry should concentrate less on quantity, and instead look to lead the world market in terms of quality. "Our strength has always been in flavour-style tobacco. Our production levels are not that bad, but it's in the quality that we need to continue to improve," Ambrose said. "If we can concentrate our efforts on improving quality, then everything else will follow; we can get better prices for our crop and better foreign currency earnings for the country." However, even if Zimbabwe was able to retain its reputation as the leading producer of the best quality crop in the world - a reputation increasingly coming under threat - buyers say a key task for Zimbabwe will be to overcome emerging concerns worldwide that the country may struggle to maintain a reliable supply to the global market. "There is no doubting Zimbabwean tobacco. The local leaf is a league ahead of the crop from other countries that produce this (flue-cured) type of tobacco. But the question is, will we still get tobacco from Zimbabwe in the next five years? Buyers need to know that for sure," a buyer told The Financial Gazette at the Tobacco Sales Floors last week. Because of the big Brazil crop, and an even larger crop from China, world prices have been depressed at the start of this marketing year. However, Zimbabwe's situation has been made worse by the poorer quality crop delivered to the auction floors, the buyers say. Because of the constant threat of disruptions to production and supply blamed on government's alleged mishandling of land reforms, buyers are likely to look elsewhere for a reliable supply of good quality crop. The Brazilian integrated tobacco growing system is probably unique in the world, whereby every grower signs a one-season contract with the buying company, which then supplies all the inputs, paid on crop delivery, provides technical assistance, and purchases the entire crop, regardless of quantity and quality. It is a controversial plan, but one which has guaranteed supply. Enditem