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  • ITGA Announces Annual Meeting

    ITGA Announces Annual Meeting

    Tobacco-producing countries from North, Central, and South America have been invited to participate in the International Tobacco Growers’ Association (ITGA) “Americas Regional Meeting on April 24 in Jujuy, Argentina

    The ITGA is convening stakeholders from the tobacco sector across the Americas to address key issues currently impacting the industry. This year’s discussions will place particular emphasis on the increasing regulatory pressure from the World Health Organization (WHO), driven by its Framework Convention on Tobacco Control (FCTC), which will host its Eleventh Conference of the Parties (COP11) this coming November.

    Brazil—currently the world’s largest exporter of tobacco and the second-largest producer after China—has taken one of the strongest opposing stances in the context of these WHO negotiations. The Brazilian Tobacco Growers’ Association (Afubra) will be in attendance to advocate for the socio-economic importance of tobacco in the regions where it is cultivated and to showcase initiatives that promote family farming both within and beyond the tobacco sector.

    “We must support our Brazilian brothers in defending the sector because it affects us all and must be seen as a joint struggle,” said José Aranda, president of the ITGA.

  • Pride in Tobacco

    Pride in Tobacco

    Photos courtesy of ITGA

    Participants in ITGA’s annual meeting debated the challenges and opportunities facing their sector and obtained an in-depth understanding of U.S. tobacco farming.

    By Ivan Genov

    Jose Javier Aranda

    The International Tobacco Growers Association (ITGA) held its 2024 annual general meeting (AGM) Oct.15–18 in Raleigh, North Carolina (N.C.), USA. The birthplace of flue-cured “bright leaf” was the perfect location to wrap up a year full of activities, which included regional meetings in the Americas and Africa, global campaigns and numerous visits focusing on grower challenges.

    Hosted by the Tobacco Growers Association of North Carolina (TGANC), the meeting included a four-day dynamic program concentrating on the practical side of farming in the U.S. Notably, the association’s members reelected the ITGA’s president, Jose Javier Aranda, for another term. His efforts to defend the legitimate interests of farmers around the world have expanded to most of the leading tobacco-growing markets. As a result, the AGM was attended by a record number of delegates, including representatives from Argentina, Brazil, the European Union, India, Malawi, the Philippines, Tanzania, the USA, Zambia and Zimbabwe.

    The meeting started with a guided tour of the Universal Leaf Factory in Nashville, North Carolina. The facility is the company’s biggest and most advanced plant in the world. Today, it has the capacity to process the entire yearly U.S. crop. Delegates from other regions were able to compare the process to their own markets, but the sheer size of the facility is surely to leave them with a lasting memory. This was followed by a visit to a live auction, a unique experience that is rarely seen in any other place. For example, tobacco growers from Kentucky were sad to note the absence of auctions in their state.

    Mercedes Vazquez

    The open day conference started with an overview of the ITGA’s strategic objectives. Currently, the ITGA focuses on four pillars—information, tobacco sector advocacy, strategic partnerships and reinforcement of the membership base. ITGA CEO Mercedes Vazquez went through the association’s substantial data reserves and capabilities, campaigns to help bring attention to the enormous socioeconomic impact of tobacco growing, such as the May 31 World Understanding Tobacco Farming Day and the Oct. 28 World Tobacco Growers Day, along with the association’s recent participation in the InterTabac/InterSupply trade fair, which presented four ITGA member associations an opportunity to obtain greater visibility. This is particularly important to entities such as Fedetabaco in Colombia, which went through an extraordinary transformation after leading companies left the market with little notice and no alternatives.

    Shane MacGuill, Euromonitor International’s global lead for nicotine and cannabis, provided an in-depth global overview of consumption trends. MacGuill noted that the U.S. market is characterized by an ongoing realignment of consumption behavior in the context of overall flat nicotine volume evolution. Among the most significant global tobacco drivers for the future will be regulatory innovation, including sustainability, cost-of-living crises and risk of impaired sensitivities, along with a broadening of the nicotine universe, according to MacGuill. Currently, the Middle East and Africa are the only cigarette markets experiencing growth, compared with significant declines in Europe and North America.

    The top volume growth cigarette markets in the next five years, according to Euromonitor, will be Ethiopia, the United Arab Emirates, Cambodia, Egypt and Lebanon while the biggest volume declines are expected in New Zealand, Australia, Denmark, the United Kingdom and Ireland. In the reduced-risk products space, heated tobacco is establishing itself as the key format as significant e-vapor value migrates to illicit markets. Euromonitor’s estimates of the total nicotine market (excluding China), which includes legal and illicit sales and all categories, traditional and novel, indicate striking overall nicotine resilience. In stick-equivalent terms, global volumes are expected to remain unchanged from 2018 to 2028. In addition, the reduced-risk categories are gaining share of the total nicotine universe, but by 2028, it is likely that cigarette sales will still account for three in every four nicotine units. Regarding one of the newest tobacco categories, nicotine pouches, growth is predominantly centered in the U.S., with no evidence of serious traction elsewhere. In the “beyond nicotine” category, manufacturers’ activity remains patchy as the cannabis revolution slows down.

    Ivan Genov, ITGA manager of tobacco industry analysis, provided information about tobacco leaf production trends. In 2024, the biggest tobacco variety, flue-cured Virginia (FCV) was characterized by short crops. Unfavorable weather affected some of the leading FCV markets. In Brazil, more humid and warmer climate resulted in lower productivity (see “The Great Scramble,” Tobacco Reporter, May 2024). FCV final volume output was 461 million kg against 551 million kg in 2023. Zimbabwe, which declared a state of disaster during the growing season, registered one of the lowest rainfalls on record. Consequently, production went from 296 million kg in 2023 to 231 million kg in 2024. At the same time, burley production is rising, with Malawi being one of the year’s star performers. The marketing season brought growth in both volume and value terms and expectations for an even better 2025. Another market to pay attention to, Tanzania, was unable to reach the government target of 200 million kg. Nevertheless, local growers produced 116 million kg, twice as much as in 2022. The local ministry of agriculture remains optimistic that Tanzania could become the biggest tobacco exporter in Africa. In summary, demand for tobacco leaf continues to exceed supply on the global markets. Major leaf dealers report low levels of uncommitted stocks, and tobacco is sold very quickly. Current forecasts suggest a larger crop in 2025, but problems that have built up for many years, including thin profit margins for growers, lack of continuity and other social and environmental issues, are now reaching a tipping point.

    The topic was further unpacked in a panel that was moderated by TGANC Executive Vice President Graham Boyd and featured leaf sales executives from Alliance One and Universal Leaf North America. While some expected the FCV market to balance in 2025 and burley in 2026, others, particularly in the audience, saw this happening in a longer time frame. Burley Stabilization Corp. CEO Daniel Green noted that three quarters of the U.S. burley production is now realized on the local U.S. market.

    A panel moderated by William Snell from the University of Kentucky and featuring farmers with many generations’ worth of experience also sparked a lot of debate. Growers were united in the opinion that the issues faced by growers are the same in every market. TGANC President Matt Grissom expressed another sentiment shared by many growers—that they grow tobacco because they love to do it. However, underlying market changes are putting strong pressure on the community. The U.S. tobacco buyout program was also discussed in detail. At its start, stakeholders expected farms to consolidate, individual farm operations to get bigger, production to shift westward and yields to improve. The first three happened as predicted, but the last one failed to materialize, with yields remaining flat. This was also the key focus of ITGA research in 2024. The association interviewed leading agronomy experts to uncover the reasons behind flat or declining yields—a trend that goes against that seen in crops like corn, soybean and cotton. The research identified common factors impacting all growers as well as ones relevant to small scale against commercial growers. After identifying the issue, the ITGA will continue to analyze the underlying factors and come up with ways to address them.

    The session also included a U.S. regulatory update by Universal Leaf Vice President of External Affairs Benjamin Dessart and a global regulatory overview by Michiel Reerink, international corporate affairs director and managing director at Alliance One International. Certain regulatory actions in the pipeline are likely to impact not only consumption but also the whole supply chain, including farmers. These include, for example, the discussions around nicotine reduction in the U.S. and the Due Diligence Directive in the European Union. Tracking regulations that impact growers directly remains a key focus area for the ITGA.

    As part of the AGM, delegates also visited a research farm in Oxford, North Carolina, where Loren Fisher, director of N.C. State Research Stations and Field Labs, explained how the U.S. conducts tobacco production research—how it allocates financing, for example, or how it handles technical aspects related to resilient varieties. ITGA delegates agreed that this is an incredible asset for local growers—one that needs to be kept at all costs. The group also visited a field where experts was noted that crop failures are welcome in the research environment as they help in the pursuit for productivity improvements for the future.

    Finally, ITGA delegates visited the N.C. State Fair, where tobacco featured prominently. The group witnessed a tobacco-stringing contest, visited the TGANC pavilion and came to appreciate the continuing importance of the golden leaf to their host state. This enduring significance was perhaps best captured by a sign stating that “North Carolina still has pride in tobacco”—a sentiment that was not only wholeheartedly shared by the AGM participants but even managed to grow stronger during their short visit to America’s Tobacco Belt.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.
  • Contemplating the Future

    Contemplating the Future

    Tobacco growers gather in Portugal to debate the many challenges facing their sector.

    By Ivan Genov

    The year 2022 marked a return to in-person meetings for the International Tobacco Growers’ Association (ITGA). After successfully conducting regional conferences in the Dominican Republic for the Americas region and in Zambia for the Africa region in August, the ITGA held its annual general meeting (AGM) in Castelo Branco, Portugal—the organization’s secretariat headquarters.

    The event was attended by tobacco growers’ associations from five continents—Africa, Asia, Europe, South America and North America—together with key industry stakeholders and local hosts. Participants included delegations from Argentina, Brazil, Bulgaria, India, Italy, Malawi, the Philippines, Poland, Portugal, Spain, Switzerland, the United Kingdom, the United States, Zambia and Zimbabwe. The three-day event featured an open session, during which a variety of topics were discussed—the latest leaf production dynamics, a global market overview, regulatory updates and three blocks dedicated to sustainable tobacco growing in Africa, the Americas and Europe. ITGA members shared the latest market information regarding their respective regions and highlighted the most pressing concerns going into the 2023 season. Among the frequently mentioned ones were the growing costs of production, unsatisfactory pricing and the importance of being included in major tobacco forums.

    The Consumption Side

    Euromonitor International provided an in-depth briefing dedicated to the global nicotine market. The market intelligence provider’s head of nicotine and cannabis research, Shane MacGuill, identified broadening of the nicotine universe, regulatory innovation (including sustainability) and the opportunities and threats created by Covid-19 as the key future consumption drivers. In 2021, the pandemic effects sent cigarettes to their best performance in years while the category accounted for 83 percent of the total tobacco value sales. With most regions likely to see both volume and value declines in their cigarette sales, the Middle East, Africa and China are where growth is most likely to come from in the future.

    In the illicit sphere, sales are expected to rebound significantly in the short term as costs of living are growing rapidly in many markets. Currently, the countries with the biggest illicit penetration are Ecuador, Peru and Uganda. In emerging products, heated tobacco is seen as the leading reduced-risk format while nicotine pouches show significant potential, mainly driven by sales in the U.S., but starting from a lower base. The importance of sustainability is another key driver in the tobacco and nicotine universe. The growing focus on cultivation and its environmental impact; supply chain emissions, widely accepted as environmentally damaging; and product waste, which is now in part tackled by the EU Directive on Single-Use Plastics, are among the key issues that will shape the regulatory framework. Finally, Euromonitor flagged the potential of legal cannabis, which is forecasted to reach nearly $100 billion in sales by 2026, according to company estimates, with focus on the U.S. and Germany as key examples of how the newly emerging industry could take shape.

    The Production Side

    After a sharp drop in 2020, 2021 marked a slight rebound in production for the biggest tobacco variety, flue-cured Virginia (FCV). This was largely driven by production increases in the U.S., Brazil and Zimbabwe, coupled with good weather conditions and revival of trade after the initial waves of Covid-19. In 2022, further production growth was registered, but this was primarily triggered by a 110 million kg increase in China. The biggest producer of FCV, excluding China, is Brazil, where the season concluded with 60 million kg of FCV less than the year before, with production costs up nearly 30 percent. Projections for 2023 suggest that China will keep the 2022 production levels while Brazil will also increase its FCV outputs, which could lead to additional growth on a global level. Pricing is showing an upward trend in some of the biggest markets for FCV, but the rapid growth in production costs is the biggest concern flagged by most ITGA member associations. As inflation and unstable supply chains are likely to continue shaping trade in 2023, this issue is likely to persist in the medium-term to long-term.

    The trajectory for burley tobacco is downward. Production levels have been consistently declining in the past three years to four years. In contrast, for 2023, leading merchants expect notable production growth for burley in Africa, bringing the global quantities closer to the 500 million kg mark. Whether this forecast will materialize remains an open question. A market of particular importance for burley, Malawi experienced a difficult season. Sales were just under 70 million kg, down from 104 million kg the year before, representing a more than 30 percent drop on a yearly basis. The average price of $2.03 meant that total proceeds for the sector were only 7.7 percent down in comparison. The Tobacco Association of Malawi has indicated that 2021 and then 2022 have recorded a high increase in input prices because of Covid-19-related logistical developments and the impact of the Ukraine crisis, with fertilizer prices almost doubling. Fertilizers will be a big factor going into 2023 as well. In the U.S., another important producer of burley, growers indicated that interest in the variety is rapidly decreasing. Although some have diversified into other tobacco varieties, such as dark air-cured for the growing popularity of smokeless products, next season’s production is likely to register a double-digit year-on-year decline.

    Focus on Other Markets

    The AGM also shed light on some of the smaller markets that do not often enter the spotlight. For example, in the Philippines, production currently stands at 46 million kg, with an expected rise of 3 million kg going into the 2023 season. During the current crop, at least 4 million kg were lost due to rains. In Italy, the season was particularly difficult, with the rising cost of gas, fertilizer and power impacting production. A significant number of farmers took a sabbatical year while climate was hot and dry with several thunderstorms impacting production. The situation in the wider European region is also difficult. In the span of a decade, production went down drastically, with little help for growers on a regional level. Recently, the war in Ukraine has seriously been affecting pricing and availability of fertilizers. Shisha has arisen as a new opportunity for EU growers, especially in Poland.

    Special attention was also paid to Ukraine, where the war has a significant impact on the larger agricultural environment. According to U.N. data, a significant number of markets depend heavily on agricultural commodities from Russia and Ukraine while the wheat dependence of many African and other least developed markets is also noteworthy. In addition to the fertilizer shortage and availability issues, big tobacco manufacturers have large exposures of their cigarettes and heated-tobacco portfolios to Russia and Ukraine, making supply chain complications even more pressing.

    Election of New ITGA President and Future Objectives

    Jose Javier Aranda (Photo: ITGA)

    Among the important outcomes of the ITGA’s 2022 AGM was the election of Jose Javier Aranda as the new association president. Aranda belongs to a family of farmers with roots and traditions in Argentina’s Lerma Valley. His ancestors were among the first Virginia tobacco producers in Salta Province. Currently, he serves as the first member of the Camara del Tabaco de Salta, a founding organization of the ITGA and secretary of the Cooperativa de Productores Tabacaleros de Salta. His leadership experiences are built on 16 years of action in the representative entities of the Salta producers.

    Going into next year, ITGA members highlighted the importance of maintaining and strengthening communications with already scheduled regional meetings in Africa, America, Asia and Europe. The ability to sit in all meetings where the future of the sector is being decided, including meetings hosted by the World Health Organization, is among the goals of the new president. The multiple challenges facing the most vulnerable part of the supply chain necessitates the close cooperation between associations and major industry stakeholders to continue, so the sustainable future of millions of people taking part in tobacco growing can be ensured. Finally, growers agreed that tobacco should be grown in a sustainable way, respecting the environment and making sure all processes involved in production are fully compliant.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.
  • Key Takeaways

    Key Takeaways

    ITGA CEO Mercedes Vazquez

    Tobacco growers reflect on the challenges and opportunities facing their business during the ITGA’s 2022 Americas and Africa Regional Meetings.

    By Ivan Genov

    In August 2022, after almost three years of Covid-19-related disruptions, the International Tobacco Growers’ Association (ITGA) organized two in-person meetings—one in Santiago de los Caballeros, Dominican Republic, for the Americas region and another in Lusaka, Zambia, for the Africa region. The much-awaited events brought together ITGA members, partners and key industry stakeholders to discuss the burning issues of the day and the appropriate ways to mitigate the negative effects of the current multi-vector crises.

    Participants gathered from Argentina, Brazil, Colombia, the Dominican Republic and the U.S. as well as Malawi, Tanzania, Zambia and Zimbabwe, among other countries. Having already visited the Oriental region (Bulgaria and North Macedonia) earlier in the year, the ITGA is now preparing for its first physical annual general meeting, to take place in Castelo Branco, Portugal, since 2019.

    Costs of Production—Drastic Growth in Most Markets

    Although many topics were discussed during the Americas and Africa regional meetings, one stood out—the growing costs of tobacco production. In the U.S., growers continue to face challenges related to unavailability of labor and increasing costs of inputs. Local associations have reported that fertilizer costs alone exceed $1,000/ton. These factors are leading to the most expensive crop in the country’s history. In Brazil, current costs of production are also up significantly, between 27 percent and 29 percent for different tobacco types. In Zimbabwe, the growth is 25 percent against the 2021 crop. This is not an isolated event for the two regions. In Europe, the situation is no different. Tobacco growers in Verona, Italy, have revealed that energy costs have increased fivefold, gas has tripled and growers’ viability is once again in danger. Essentially, growers from nearly all ITGA member associations are afraid that if pricing does not adequately reflect the ongoing economic difficulties, the sector will be in serious long-term trouble.

    Participants in ITGA’s African region meeting in Zambia (Photo: ITGA)

    Leaf Updates—Production Decreases in Leading Tobacco Growing Countries

    The global leaf situation was the other key point discussed by growers. Some of the biggest tobacco producing countries showed notable volume slowdowns during the year. In Brazil, the estimated 2022 crop is about 570 million kg, down from 628 million kg in 2021. The flue-cured Virginia (FCV) share of the totals is 92 percent. In the current season, around 40,000 fewer individuals were involved in the farming of the crop, or a total of just over 600,000 people. Nevertheless, pricing in the country is also up, firmly above the $3 mark for both FCV and burley.

    In Argentina, the total production volumes are around 92 million kg, down from 101 million kgs in 2021. In the U.S., 2022 burley tobacco production is 2 million kg less, or 27 million kg, but dark air-cured tobacco planting area is on the rise. This is in part driven by stable consumer demand for smokeless tobacco products, limited substitutes for U.S. quality dark air-cured tobacco and greater profitability for local growers. In the U.S., popular agricultural commodity prices have sharply risen since 2020, providing viable alternatives to local growers.

    In Zimbabwe, the total quantity of tobacco sold in 2022 is around 205 million kg against 212 million kg in 2021. Average pricing has improved but at a slower rate compared to production costs. The total number of growers is also down 14 percent to around 136,000 people. One of the leading burley producers in the world, Malawi produced 83 million kg of the tobacco variety, or a yearly decrease of 21 percent. In Zambia, production of FCV is up around 2 million kg to 32 million kg, but burley is down 2 million kg to 3 million kg. In Zambia, while production costs have nearly trebled, pricing has only moved up from around 7 percent to 10 percent for different tobacco types.

    Delegates at the ITGA Americas region meeting in the Dominican Republic (Photo: ITGA)

    Regulations—ITGA to Get Growers Back in Discussions

    ITGA CEO Mercedes Vazquez focused on the World Health Organization Framework Convention on Tobacco Control (FCTC) Article 5.3, regarding industry interference, and Article 17, covering the need to promote economically viable alternatives to tobacco production to prevent possible adverse social and economic impacts on populations whose livelihoods depend on the crop. Unfortunately, Article 17 has been highly underestimated. Implementation at country level is poor or simply nonexistent. The WHO FCTC has not provided significant technical nor financial support to growers. The 15-year efforts of tobacco growers demanding inclusion at the FCTC Conferences of the Parties (COP) and how Article 5.3 was misused to prevent growers and their legitimate representatives from attending meetings was also discussed. Tobacco growers will, from now on, put high pressure to ensure their participation and will do their utmost to guarantee their legitimate representation at the future COP. The next one will take place in Panama in 2022.

    Growers were briefed about incoming initiatives, including the regulatory push in the U.S. to prohibit menthol as a characterizing flavor in cigarettes and all characterizing flavors other than tobacco in cigars. As a reference, menthol accounts for around a third of the U.S. cigarette market. The U.S. administration is also considering requiring tobacco manufacturers to lower the nicotine in all cigarettes to levels that are no longer addictive. If enacted, these policies are likely to radically change the industry dynamics in one of the most profitable tobacco markets in the world. The other important regional initiative—the European Union’s €4 billion ($4 billion) Beating Cancer Plan, based on a goal of creating a tobacco-free generation by 2040, is also likely to shape up legislative changes in a variety of markets and affect the supply chain.

    Other Key Discussions—from Cannabis to Climate Change

    Among the other topics discussed was hemp as a potential alternative to tobacco in the U.S. However, initial euphoria led to massive overproduction and a corresponding price crash. Although small-scale projects for crops, including cannabis, are being carried out in both the Americas and Africa, the consensus opinion is that regulatory clarity is still lacking.

    Some markets, including Malawi, Zimbabwe, Argentina and Colombia, among others, have taken steps in their respective local regulatory frameworks regarding cannabis production. However, any meaningful opportunities are nowhere near the opportunities provided by tobacco in these regions at the moment.

    Another topic that was discussed is related to abnormal climate events impacting the crops. In Zambia alone, over the course of the past three decades, the impact of floods and droughts have been estimated to cost the country around $13.8 billion. Small-scale projects have made inroads to support farmers, not only in tobacco, but it is feared that much more trouble is coming—something that no one is adequately prepared for.

    Persistent Issues and Growers’ Resilience

    Tobacco growing, much like all agricultural activities, remains a difficult calling. While many businesses could afford to keep their workforces at home during the Covid-19 pandemic, growers had no other choice but to remain on the fields. The sector proved to be more resilient than many anticipated, and high-quality tobacco leaf continues to be delivered.

    In the past couple of years, tobacco and nicotine consumption has remained stable. The principal category for the entire industry, cigarettes, is even growing in some of the main global markets. Growers are aware that they only take a small fraction of the total industry value while their fundamental role is being constantly undermined. For the industry to survive, prices will have to catch up with the growing costs of production.

    At the same time, the war in Ukraine is putting severe pressure on key agricultural commodities. Many countries, especially in Africa, rely heavily on such imports from Russia and Ukraine. The countries that have the capacity to produce the scarce products could find easier diversification options. However, the growing inflation and general economic uncertainty will keep the international situation tense. Growers have proven their resilience, but their legitimate demands cannot be ignored anymore.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.