 There is plenty of unsold leaf remaining from the U.S. 2019 crop if the Chinese want to buy it. But will they? This flue-cured leaf was sold to a dealer in Wilson, N.C., in October. Photo: Chris Bickers. |
The US/China trade deal is still evolving, and I can find no indication that it specifically includes tobacco at this point. If, as has been speculated, China agrees to buy $40 to $50 billion in U.S. agricultural commodities, that would seem like enough that tobacco could well hope to get some of it. But I see many imponderables here: It has always been speculated that the original purchases by China of U.S. leaf were made to some degree for political purposes. Are the Chinese still interested in being popular in the tobacco states? China has gone substantially without American tobacco for one full season with another one beginning soon. But it seems to have been able to get enough flue- cured to meet its needs from Brazil and Zimbabwe, mostly Brazil. Now, adverse  weather caused Zimbabwe's just-harvest-ed crop to be of poor quality, perhaps not good enough for the Chinese, and Brazil had a shorter crop in 2019 so it may not have replenished its un-committed stocks. Poor quality in Zimbabwe and little excess leaf in Brazil mean the Chinese may feel pressure to buy some U.S. leaf for their top quality cigarettes.I have heard often enough that I have to think there is some truth that the Chinese involved in the American market like working with the U.S. Tobacco Cooperative-the flue-cured cooperative that handled most of the U.S. tobacco exported to the PRC--and would like to salvage a relationship with USTC if they can. That's a long-winded way of saying there seem to be a lot of reasons that trade with PRC might revive sooner or later. But there are some enormous logistic reasons why it probably won't happen in time to affect the 2020 crop. Watch this space for more details. A major leaf buyer says this: Pieter Sikkel, president, c.e.o. and chairman of Pyxus International, Inc., the parent company of the leaf dealer Alliance One International, issued the following statement on December 16 regarding the new trade agreement. "Pyxus applauds the initial trade agreement finalized by the United States and China [Friday] and both governments for their perseverance in reaching this consensus. The agreement is a welcome first step to reopening China's vast consumer market to U.S. agricultural products, including tobacco. While this compromise is only one piece of a much needed comprehensive trade agreement, and additional steps need to take place to restart leaf exports, it is an encouraging move in the right direction, helping to foster enhanced trade and promote greater opportunities for success in the global economy." The stakes are considerable, as anyone who reads this publication knows. "In the year preceding the trade dispute, the U.S. exported $162 million worth of tobacco to China," said Sikkel. "Last year, that number decreased to only $4 million. This agreement should positively impact the U.S. agricultural industry and American tobacco farmers, who have been hit hard by the on-going trade dispute. We are excited to build on the positive momentum and are hopeful that this signifies sustainable progress in United States-China relations and gr eater economic opportunity for farmers." OVERSEAS REPORT A revitalized market in Argentina: In the meantime, Alliance One International is taking steps to restructure its Argentine leaf operations (AOTA) in anticipation of increases in exports and improved competitiveness on the global market. The main step will be relocating AOTA's laf-processing operations from El Carril in the Salta province to Philip Morris International's Argentine affiliate at Rosario de Lerma, also in Salta. This move will occur in time for the 2020 crop and will reflect a closer commercial relationship with PMI. AOTA will continue to contract with growers. "The restructuring of AOI's Argentine operations will help to improve overall efficiency and strengthen price competitiveness," said Sikkel.  In Brazil, harvest is well under way in the big tobacco-producing state of Rio Grande do Sul, according to a report from the leaf dealer Hail and Cotton. Due to excessive rainfall in October and early November and high winds and hailstorms, tobacco has been showing indications of premature yellowing and loss of yield.Other tobacco news: Cureco curing controls are no longer for sale at Cureco Inc. of Seven Springs, N.C., but they are still available from Suretrol, the Canadian company that invented the technology. Suretrol has an office in Wilson, N.C., at 5838 St. Rose Church Rd.. Interested farmers can go there or call the main switchboard at (252) 991-0533. Suretrol president Joe Bucek says the perfect heat and humidity control you get with Suretrol/Cureco equipment along with the flexibility of monitoring with a phone are its strongest points. |