Tobacco International / January 2002
By Larry Luxner
Political unrest in Zimbabwe and a devaluation of the Brazilian real have combined to give a major boost to Brazil's tobacco leaf industry and its No. 1 exporter, Souza Cruz.
In 1999, Brazil produced 550,000 tons of tobacco, placing it fourth in the world after China, India and the United States. In terms of exports, Brazil led the world with 358,000 tons exported in 1999 (followed by Zimbabwe at 205,000 tons, the United States at 189,400 tons and Turkey at 125,500 tons).
But Zimbabwe's production has since fallen by around 10%, following the invasion of tobacco plantations stemming from disputes between white farmers and the Mugabe government. As a result of this crisis, Brazil has taken up the slack, and Souza Cruz has seen its exported average price increase nearly 6% this year.
In the first nine months of 2001, Brazilian tobacco leaf export volume grew 30.8% to 71,300 metric tons, while tobacco export revenues rose nearly 100% to R$264.5 million (US$105.8 million) compared to the same period in 2000.
"The balance of international demand and supply, which is much tighter than in previous years, the 37% exchange depreciation [of the real against the dollar] and the reduction in production levels of other world exporters are all important factors for Brazilian crops remaining extremely competitive in the international market," says Santander Central Hispano in a Nov. 1 report to investors.
According to figures released in late October by the Brazilian Tobacco Leaf Association (known by its Portuguese acronym AFUBRA), tobacco production in southern Brazil for the 2001-02 crop is likely to increase 10% to a total of roughly 564,000 tons.
If these estimates are confirmed, this will be the biggest harvest in recent years. Despite the possible annual increase in tobacco production of approximately 55,000 tons, if the trend in exports in the first seven months of this year is maintained, the growth in foreign sales would outperform this 10% increase in production, meaning that Brazilian tobacco prices would at least remain stable. The AFUBRA data indicates that the difference between the volume exported in 2000 and 2001 will be more than 100,000 tons.
According to Souza Cruz, the typical Brazilian producer has a farm of around 20 hectares, of which 10% is planted with tobacco for about four months of the year. Tobacco is the principal economic activity of more than 600 municipalities in Brazil's three southern states -- Paraná, Santa Catarina and Rio Grande do Sul.
"Since its foundation, Souza Cruz has invested in education, conservation and environmental recovery," says a company press release. "Over the last two decades, these programs have been structured and expanded to reach out not only to the company's manufacturing facilities, employees and contracted farmers, but also to the communities in which it operates."
For example, Souza Cruz says that a successful partnership between Souza Cruz and its contracted farmers resulted in the reforestation of 4,400 hectares of land during 1999. It adds that the adoption of "loose-leaf" curing barns have reduced the use of wood by 35% in the tobacco leaf curing process.
The Soil Master Plan, which promotes management techniques to help conservation and recovery of productive areas, now covers 95% of the 90,000 hectares planted by contracted farmers, 45% of whom carry out crop rotation and 60% of whom practice green fertilization, which safeguards against soil erosion.
In addition, more than 50,000 students take part in environmental activites spread among 1,100 Tree Clubs, with the involvement of 2,800 teachers. In 1999, these clubs produced 400,000 seedlings of native species. For this work, carried out over an 18-year period, the ADVB -- a major Brazilian philanthropic organization -- named Souza Cruz "Corporate Citizen of the Year."