2012 TOBACCO STORY OF THE YEAR
"From sunset to sunrise"
By: Mauricio Victa
Sun Star Baguio
More than a decade ago, local tobacco farmers were producing the salty and off-type variety of tobacco which most cigarette manufacturers started rejecting in 2003. By that time, local tobacco farming was already being dubbed as a "sunset industry," with production levels reaching its lowest from 2004 to 2006.
This was in stark contrast to the glory years of the tobacco industry in the 1990s when the Philippines was a major exporter of Burley and Virginia tobacco.
"We have reversed the trend of deteriorating quality and accelerated the pace of quality improvement," said Winston Uy.
From producing salty, low-grade rejects, Filipino tobacco farmers now grow world-class tobacco that command high farm-gate prices in the local market. For instance, Universal Leaf Philippines Inc.'s Isabela burley used for domestic manufacturing and for export, is now renowned worldwide, according to Uy.
"As of 2011, unmanufactured tobacco exports reached 40 million kilos or more than 50 percent, Uy said in painting a vibrant picture for the future of the local tobacco industry.
A significant boost to the industry is the continued confidence of the stakeholders that things will turn better.
In 2000, Philip Morris International invested $300 million in the Philippines to build a state-of-the-art cigarette manufacturing facility in Tanauan City, Batangas. It was the single biggest investment made by the company in the Asia-Pacific Region at a time when other foreign investors opted to either bring their businesses elsewhere or put off their expansion plans in the Philippines.
"We had faith in the Philippine economy," Philip Morris Fortune Tobacco Corp. President Chris Nelson said. "Despite the lack of investor confidence at that time, we believed in the country. We invested our money. We invested it on the tobacco farmers. We invested it in our product."
The company established training schools for the farmers to make them competitive in Tuba, Benguet and in Luna, Isabela. Philip Morris Philippines Manufacturing Inc.'s agronomy experts taught and continue to teach local farmers in these schools the proper way of growing tobacco and how they can improve quality and optimize production.
The National Tobacco Administration (NTA) and another major player in the industry, Universal Leaf Philippines Inc. (ULPI) with PMPMI, teamed up in implementing the Market-Driven Quality Tobacco Production Program. This initiative, which is done via the Tobacco Contract Growing System, provides local farmers a ready market for their produce, along with the necessary technology and assistance in terms of production inputs like seedlings and fertilizers; modern post-harvest facilities; market access; and even incentives for compliance with good agricultural practices, exceeding production quotas, among others.
In return, tobacco buyer firms were assured of the volume and quality of the tobacco they needed for the local and export markets.
As a result of these mutually beneficial initiatives, the tobacco industry started to rebound in 2007 and continued its steady growth at an average of 17.5 percent, according to government data provided by the NTA. From 2006, when production was recorded at its lowest level at 36.5 million kilos, this figure jumped to 79.33 million kilos in 2011, where the biggest annual growth was derived from burley and native tobacco, at 23 percent and 30 percent, respectively. The production of the Isabela burley, now globally considered to be one of the best types of tobacco for manufacturing cigarettes, increased from more than 7 million kilos to 19.4 million kilos, during the same period, according to NTA data.
"We are very optimistic with the good tobacco quality we get from our hardworking farmer-partners. At the start of every crop year, we provide them full financial and technical support. I believe that supporting our farmers 100 percent creates sustainability," ULPI president Winston Uy said.
ULPI is the biggest tobacco-growing and processing company in the country. It contracts more than 28,000 farmers planting an area of more than 19,000 hectares. The ULPI farmers produce 60 percent of total local leaf.
NTA data show that there were 10 companies/wholesale tobacco dealers competing in the purchase of the leaf through 50 trading centers. The biggest among them is ULPI, which purchased 47.59 million kilos (or 60 percent of the 79.33M total production for 2011). PMFTC is the second largest tobacco buying company, purchasing 14.81 million kilos ( or 18.67 percent); followed by TransManila Inc. (TMI) with 4.85 million kilos (6.11 percent); Isabela Leaf Tobacco Co. with 4.17 million kilos (5.26 percent); Continental Leaf at 3.52 million kilos (4.44 percent); and Companade Filipinas (CdF) at 2.24 million kilos (2.28 percent).
The other wholesale tobacco dealers include the Associated Anglo-American Corporation, La Reyna, Tabaquiera, and Mighty Corporation.
"We contract farmers directly in Mindoro while the rest of our local leaf requirements come from tobacco leaf suppliers. Our farmers receive regular on-site support from our leaf technicians, who visit them weekly and provide them with agronomy training," Nelson said.
Through the Tobacco Contract Growing System, PMFTC directly contracts 3,000 farmers and provide them with steady employment. PMFTC gives them not only on-site assistance but provides them with interest-free loans as well.
Far from being a sunset industry as claimed by some quarters, production increased from 73.76 million kilos in 2010, valued at P4.84 billion, to 79.09 million kilos as of October 2011, with a value of P5.26 billion, NTA data show.
Today, there are now 2.9 million from 2.7 million in 2009 Filipinos who are either employed or dependent on tobacco growing and manufacturing as well as in tobacco wholesale and retail trading.
Tobacco growing has proven to be highly profitable for farmers employed in this industry, compared to those planting other crops like palay, corn or tomato.