Leaf tobacco is among the top ten cash crops in major consumption centres such as the United States and China behind crops such as corn, wheat, hay, soybeans, cotton and rice. As far back as 1995, the tobacco crop produced across 15 United States valued at almost US$2.3 billion, representing approximately 2.7 per cent of the total for all cash crops and farm commodities.
Similar data is not currently available on the local industry, but major stakeholders in the tobacco trade in Jamaica including the Ministry of Agriculture led by Minister Christopher Tufton, the Rural Agricultural Development Authority (RADA), tobacco company Carreras and local farmers are investigating the capacity of the local industry and working on initial plans regarding how the farmers can capitalise on the large export market for their products. According to Richard Pandohie, managing director of Carreras, the move is being made to help manage the growing trade in the potent leaf products.
"We are seeing a shift in consumption to what you call 'grabba' and those types of things, tobacco products mixed with other things. So we are working with the Ministry of Agriculture now to actually regularise those farmers to get their products onto the international market," Pandohie told the Business Observer on Monday. "So we are doing a study now with RADA to find out the extent, how many farms, how many acreage and we are sitting down with Tufton and our external partners to see how we can get those farmers to export," Pandohie added.
Tufton said the Ministry would provide the farmers with land and technical support in order to get the project which is being led by Carreras, off the ground.
"Jamaica used to grow a lot of tobacco in the past and we still have the environment to grow it," Tufton said. He said the product would be branded and promoted abroad.
In the meantime, RADA is currently undertaking a study to determine the features of an industry that is largely informal.
Pandohie, who runs Carreras, the local arm of the multinational tobacco company British American Tobacco (BAT) told the Business Observer that Carreras' stake in the success of the leaf tobacco industry locally rests with ensuring continuity of his company and the business of the local farmers. The company does not manufacture cigarettes in Jamaica and as such is not a direct beneficiary of the trade in the unprocessed tobacco leaves here. However, with declining revenues resulting from the illicit trade in cigarettes and tobacco products such as 'beadies' and 'grabba' (the cured tobacco leaves) mixed with marijuana, there is an enlightened self interest in regulating the local trade. With regulation and exportation, the government stands to benefit from increased revenue collection from the industry. The farmers can tap into a wider market for their products as well.
Pandohie predicts that Jamaican tobacco can be as big as Jamaican coffee on the world market.
"I am not sitting back saying taxes, taxes, taxes. How do we find solutions that make everybody win. If people don't win, nobody wins and at the end of the day everybody wants to do what's right for their family, for themselves in terms of living," Pandohie said. "The country is tough and I can't tell a farmer not to grow tobacco, you have to give him an option. We are working on those types of solutions and this is a big, big opportunity to get it right," he said.
Carreras has been struggling with the effects of the illicit trade in cigarettes and what it has described as 'excessive' taxation. Last year, the company contributed $10 million in taxes following three consecutive increases in taxes. There was a 100 per cent increase in excise on cigarettes in April 2008, a 42 per cent increase in May 2009 and a 23 per cent increase in January 2010. Carreras, which controls 99 per cent of the market for cigarettes in Jamaica, has been active in the call to temper the level of taxation on cigarettes. On Monday, Pandohie revealed that the company has continued to bleed as a result of the trade.
"In terms of volume. Our volume has declined 40 per cent in three years," Pandohie told the Business Observer. "It is an unsustainable business model and a big part of it is just a loss of volume to the contraband trade. We are saying to the government lets just back off the tax a little bit and put some more investment behind border enforcement, working with customs enforcement and other measures to deal with this."
In its third quarter financial results dated December 31, 2010 Carreras recorded a seven per cent decline in total operating revenue when compared to the corresponding quarter of 2009. Net profit declined 16 per cent to $713 million as a result of a combination of volume declines and a 38 per cent or $21 million decline in interest and investment income.
In a statement to shareholders, chairman Christopher Burton pointed to the "high levels of price increases resulting from excessive increases in Special Consumption Tax (SCT)" as a cause of the declining sales of the cigarette products. He said interest income continues to decline following the Government's successful Jamaica Debt Exchange (JDX) programme.
source: www.jamaicaobserver.com
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