Tobacco production to increase this year

EVEN with a metro-wide ban on smoking to take effect in a month, local tobacco production is expected to earn as much as P5 billion in gross revenues.

Production is expected to increase by 5.4 percent to 77 million kilos for crop year 2010-2011 from 73 million kilos in crop year 2009-2010, National Tobacco Administrator Edgardo Zaragoza said.

“We noticed that even local government units are trying to keep the industry alive by encouraging farmers to plant more given the fact that the LGUs get a share in the excise tax from tobacco,” Zaragoza said.

The government collects a tax of seventy-five centavos on each kilo of tobacco. Of this, the LGU gets a 15-percent share from the total excise tax collection on locally manufactured Virginia-type cigarettes as certified by the Bureau of Internal Revenue.

In 2010, tobacco excise tax collections exceeded the Finance Department’s projected revenues by 22 percent to P31.6 billion.

Zaragoza said that the increased interest of farmers to plant more tobacco stemmed from the increasing market buying price of local burley and native tobacco.

“At present, cigarette manufacturers buy at an average of P77 per kilo in crop year 2010-2010. The average buying price for the last three crop years was about P80 per kilo,” Zaragoza said.

The tobacco industry appears unfazed by recent developments such as the smoking ban to be enforced by the Metro Manila Development Authority and metro LGUs, the renewed drive to curb tobacco consumption, and even moves in Congress to change the tax structure for tobacco products.

Philip Morris-Fortune Tobacco Corp. remains the biggest bulk buyer, chalking up about 92 percent of local production. The balance is shared by Universal Leaf, an exporter of unmanufactured tobacco or leaf tobacco, and Trans Manila, a company that buys directly from farmers and sells to cigarette manufacturers.

The country’s local production comprise slightly over 50 percent of the industry’s demand for tobacco.

Last year, the industry imported about 70 million kilos of tobacco with high nicotine content for blending with local tobacco. The country’s Virginia, burley, and native tobaccos have low nicotine content and can only serve as fillers.

The country gets unmanufactured tobacco from Turkey, China, Pakistan, India and the United States. Manufactured or processed tobacco comes from France, Singapore, Hong Kong, Vietnam, and China.

While the country imports high nicotine tobacco, it also sells filler tobaccos to the US, Belgium, South Africa, Korea, Malaysia Thailand, Singapore, and Vietnam.

Last year, the country exported 30 million kilos at $3.49 per kilo of unmanufactured tobacco and $6.71 per kilo of manufactured tobacco