TOBACCO PRODUCTION ON THE INCREASE

Harvested area being reduced constantly from '66-'67

By Syed M. Aslam
Sep 07 - 13, 1996

Tobacco is one of the major crops of Pakistan alongwith wheat, cotton, rice, sugarcane, gram, rapeseed and mustard.

While production of rice, cotton, sugarcane, gram, rapeseed and mustard in '95-96 increased by 9.7, 7.9, 0.41, 14.1, and 5.7 per cent respectively over '94-95 over the biggest increase was registered in the production of tobacco which increased a sharp 27.2 per cent from 81,000 to 103,000 tonnes during the comparative periods.

Though tobacco production in '95-96 has increased over the '94-95 level it is still much lower compared to the record production of 140,000 tonnes in '66-67. Similar is the case with the total area under tobacco cultivation which has decreased from 72,000 hectates in '66-67 to just 47,000 hectates in '95-96.

Tobacco production increased significantly last year but Pakistan exported only Rs 79 million of raw and manufactured tobacco during the first nine months of '95-96 compared to Rs 143 million during the same period last year. The biggest export was registered in '87-88 when the country exported Rs 318 million worth of the product.

Similarly, during the first nine months of the last fiscal 31,599 million numbers of cigarettes were produced in the country which represented over eleven per cent increase from 23,071 numbers produced during the same period last year.

Being a cash crop, tobacco subjected to high taxation is a substantial revenue earner for the government; the government earned Rs 5828 million from indirect taxes alone in '90-91.

It may be mentioned that according to official statistics the agriculture sector in Pakistan registered a growh of 6.7 per cent in '95-96 compared to 5.9 per cent in '94-95 mainly due to a 9 per cent expansion in major crops, the maximum 27.2 per cent in tobacco, and 4.9 per cent in minor crops, 5.6 per cent in livestock, and 8.3 per cent in fishery.

Thus tobacco cultivation is playing a significant role in the economy of the country as it remains the leading cash crop of the country.

CHART 1

Production of tobacco (000 tonnes)

Year

'93-94 			100 
'94-95 			81 
'95-96 			103 

CHART 2

Area under tobacco cultivation (000 hectres)

Year

'90-91 			44 
'91-92 			54 
'92-93 			58 
'93-94	 		57 
'94-95 			47 
'95-96 			47 

CHART 3

Tobacco production (000 tonnes)

Year

'90-91 			75 
'91-92 			97 
'92-93 			102 
'93-94 			100 
'94-95 			81 
'95-96 			103 (provisional) 

Chart 4

CMI Value of production and Value Added (Rs million)

Value of production

'84-85 		85-86 		86-87 		87-88 		88-89 
7498 		7117 		11465 		9074 		8767 

Value added

5920 		5612 		9776 		7488 		7050 

Chart 5

CMI Employment cost and average daily employment

Employment cost (Rs million)

'84-85 		85-86		86-87 		87-88 		90-91 
197 		185 		198 		232 		225 

Average daily employment (000)

10 		10 		9 		9 		6 

Chart 6

CMI indirect tax contribution and value of fixed assets (Rs million)

'84-85 		85-86 		86-87 		87-88 		90-91 
5325 		4457 		4862 		4790 		5828 

Value of fixed assets

328 		397 		391 		291 		515 

Chart 7

Exports by value

Year Value (Rs million)

'90-91 			116 
'91-92 			217 
'92-93 			171 
'93-94 			134 
'94-95 			185 
'95-96 (July-March) 	79 

 

INTERNATIONAL SCENARIO

According to Commodity Review and Outlook 1994-95, a publication of Food and Agriculture Organization of the United Nations, the world tobacco production again exceeded 8.3 million tonnes in '93 after reaching the record high of 8.328 million tonnes in '92.

The publication attributed the increase to the continued expansion in harvested area in the developing countries which led to their output approaching 6.6 million tonnes or 79 per cent of the world total.

By contrast tobacco production in the developed countries continued to fall by 5 per cent in '93, to 1.7 million tonnes, which was almost 30 per cent less than the record level reached in 1976. This reflected a reduction in the harvested area which in '94 was some 60 per cent of the 1976 level.

On the contrary, area under tobacco cultivation in developing countries increased greatly from 2.2 million hectres to four million hectres in '94.

The lower output in the developed countries in '93 mainly reflected decreased production in the US, following a substantial reduction in the quota for burley tobacco resulting from weaker domestic demand and stronger competition overseas.

The increased production in the developing countries was principally due to a 10 per cent rise in output in Latin America where Brazil's production surged to a record 663,000 tonnes from a slightly increased area. Though Argentina did not maintain the record crop of the previous year, the harvest in Mexico, where the cultivated area has doubled since '91, rose by 41 per cent but remained well below the levels of earlier years.

In Africa, output also rose by four per cent mainly due to a record harvest in Malawi. However, crop quality suffered from poor weather and prices fell consequently.

Good weather conditions in Zimbabwe sustained production, though it was 3 per cent below the record crop of the previous year, and improved quality.

Trade in '93

Tobacco exports worldwide decreased by 1.2 per cent to 1.66 million tonnes; in developed countries it fell by almost ten per cent to less than 38 per cent of total exports from 52 per cent in 1960s to an average 41 per cent between '90-93.

In comparison exports by developing countries increased exceeding one million tonnes for the first time.

Exports by developing countries in Africa exceeded 0.3 million tonnes which was 44 per cent higher than the average in '89-91. Much of this was due to Zimbabwe where exports were over 62 per cent higher than the average of '89-91.

Exports by Latin America, though slightly less than in '92 remained 18 per cent higher than the '89-91 average.

Brazil, which became the world's biggest tobacco exporter with an increase of 28 per cent since '89-91, accounted for 68 per cent of regional shipments in '93.

OUTPUT DOWN IN '94

Production in '94, at 7.8 million tonnes, was 6.6 per cent less than the previous year due to substantial reductions in output by some large producers. Decreased output in the developed countries, 5 per cent less than in '93, largely reflected an 8 per cent decline in output of the US, the major developed country producer. The US grows mainly flue-cured and burley tobacco varieties which were subject to lower production quotas, following high stocks, and reduced domestic and export demand.

In EC, despite the Common Agricultural Policy reforms, output in '94 was only slightly less than what it was in '93. The only major producer with a reduced crop was Italy, where production has fallen sharply during the '90s. Elsewhere in Europe production was slightly boosted following a recovery in output by Hungary and Romania.

In developing countries production in '94 dropped by 7 per cent; nearly 13 per cent in Brazil which had a record crop in '93.

In Asia, China's production fell by 74000 tonnes over previous year and 116000 tonnes from the record production in '92. The country, nevertheless remained the world's largest producer accounting for 43 per cent of the world output in '94.

TRADE SLACKENED IN '94

Exports of tobacco leaf declined slightly for the second successive year in '94. While shipments by developing countries were likely to remain above one million tonnes in '94, exports from developed countries would likely fall to under 600,000 tonnes.

Slower consumption growth in addition to high stocks in the major importing markets was responsible for the decline.

This was accentuated for some traditional exporting countries as cigarette manufacturers continued to switch to alternative cheaper leaf.

In the US, imports in '94 were likely to be dampened by legislation effectively limiting the amount of foreign tobacco in domestically produced cigarettes. Similarly, reforms in the EC and quota reductions in the US reinforced the market decline in developing countries.

Chart

Production
(000 tonnes)

			89-91
			average 	92 	93 	94 
World total 		7182 		8328 	8318 	7789 
DEVELOPING COUNTRIES 	5360 		6501 	6576 	6115 
Latin America 		723 		856 	945 	868 
Africa 			345 		442 	457 	400 
Near East 		318 		398 	387 	274 
Far East 		3974 		4804 	4788 	4573 
China 			2849 		3515 	3474 	3401 
DEVELOPED COUNTRIES 	1821 		1827 	1742 	1655 
North America 		779 		853 	816 	743 
Europe 			678 		630 	580 	583 
EC 			437 		421 	396 	389 
Oceania 		13 		12 	12 	9 
Area of former USSR 	245 		217 	236 	228 
Other developed countries  107 		115 	98 	92 

Chart

Value of exports
(Million $) (Million $)

			89-91 average 		92 		93 
World Total 		5013 			5820 		5029 
Developing countries 	2458 			2851 		2636 
Developed countries 	2555 			2969 		2393 

Chart

Exports
('000 tonnes)

			89-91 average 		92 		93 
World total 		1534 			1684 		1664 
Developing countries 	847 			991 		1039 
Developed countries 	687 			693 		626 

Chart

Imports
('000 tonnes)

			89-91 average 		92 		93 
World total 		1501 			1709 		1656 
DEVELOPING COUNTRIES 	315 			367 		330 
Latin America 		30 			49 		48 
Africa 			53 			51 		53 
Near East 		81 			89 		78 
Far East 		148 			176 		149 
DEVELOPED COUNTRIES 	1187 			1342 		1326 
North America 		221 			333 		370 
Europe 			804 			814 		702 
EC 			645 			677 		553 
Oceania 		13 			13 		13 
Area of former USSR 	36 			35 		105 
Other developed countries 112 			147 		137 
Japan 			89 			117 		119