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Leaf & tobacco processing

Balkan oriental keeps on giving

06 Mar 2018. Balkan classical oriental tobacco, produced in Greece, Bulgaria and Macedonia, remains resilient in the tightening world market for cigarette tobaccos. Production volumes have sunk over the last decade, but the sun-cured leaf remains a strong commodity, writes Dr Terry Mabbett.

At around 50,000 tonnes per year, production of classical oriental tobacco is well down on 12 years ago when Greek farmers alone produced this amount. But today’s crop increasingly comprises the most sought-after authentic, aromatic styles of universally high quality leaf.

Classical oriental tobacco grown in the Balkans is the leaf which keeps on burning and is impossible to put out. This is precisely what politicians and bureaucrats in Brussels discovered 12 years ago when the European Union tried to stub out tobacco growing across its 25 member states by decoupling tobacco from its long-held and cherished economic subsidy. This was both a watershed moment and a milestone for European tobacco and especially in Greece which was then the EU’s biggest producer of tobacco.

 

A look back

At that time, Greece was the EU’s only mainstream producer of classical oriental tobacco. Farmers in the country would weigh in around 50,000 tonnes of Basma and Katerini classical oriental tobacco leaf. This was before Brussels decided to remove the subsidy from all tobacco grown in the EU. That policy was essentially developed and delivered by politicians in the richer, non-tobacco growing northern European nations and applied to less ‘well-heeled’ southern European nations. In these nations, the policy was imposed on some of the EU’s smallest-scale farmers for whom virtually no economically alternative crop exists.

All this happened years ago and may be a distant memory for many, but it is still fresh in my mind because, not long after the subsidies were dashed, I was asked to write my first article on oriental tobacco for Tobacco Journal International. I shall never forget the detailed figures kindly provided by Francois Vedel at UNITAB showing how, in just one year, Greek tobacco had crashed and burned due to removal of the EU subsidy.

The 106,500 tonnes of tobacco produced by Greek growers in 2005 (the last year of the EU subsidy) was slashed to just 22,000 tonnes in the following year. In just 12 months, most of the flue-cured Virginia and Burley productions had evaporated along with every last leaf of non-classical oriental tobacco styles. Semi-oriental tobaccos, such as Kabakoulak Classic, Elassona, Myrodata Agrinion, Tsebelia and Marva, which had been grown, smoked and enjoyed for centuries, were consigned to the history books and archives literally overnight.

Classical oriental tobacco also suffered. The 25,600 tonnes of Basma and 23,000 tonnes of Katerini tobacco leaf weighed in during 2005 received a heavy but not a fatal blow. When the dust settled and the smoke had cleared, 11,500 tonnes of Basma and 10,600 tonnes of Katerini classical oriental tobacco were still standing and ready for harvest in 2006.

Astute observers at the time recognised that economic decoupling would make the Greek classical oriental origin more resilient and leave this acutely aromatic tobacco leaf in an even stronger long term position. They have essentially been proved right because, in the 12 years since then, Greek farmers have maintained a combined production of Basma and Katerini at or close to the 22,100 tonnes that survived into 2006. This hard-core, high-quality classical oriental tobacco continues to stand strong today. Meanwhile, the reasons the EU failed in wiping out the crop are precisely the same reasons Greek classical oriental tobacco has not only survived, but increased in resilience, albeit smaller in volume: the crop is not only irreplaceable for the tobacco industry, but also for farmers in the countries where it is grown.

 

Greece holding its own

So, after a look back, what is the current situation for Balkan oriental tobacco in Greece and in neighbouring Bulgaria and FYRO Macedonia? To find out, we can look at detailed figures provided by the Greek leaf merchant, SEKE.

2017 proved to be a mixed bag for the oriental tobacco-growing community in Greece. Basma regained the ground lost in 2016 caused by unfavourable weather patterns and growing conditions experienced in the areas the crop is grown. Basma production at 12,600 tonnes, was 800 tonnes (7 per cent) up on the 11,800 tonnes produced by farmers in 2016. Production was still significantly down, however, on the 13,800 tonnes weighed in during 2015.

The area of tobacco planted, at 12,200 hectares, was down on the 12,800 ha planted by farmers in 2016. However, a significant increase in yield from 920 kg/ha to 1050 kg/ha (14 per cent) more than compensated for the fall in planted area and clearly made all the difference to production figures. At 11,700, the number of farmers engaged in growing Basma tobacco in 2017 was only marginally down on the 11,800 recorded in 2016 and 2015. Basma growers were rewarded in 2017 with a useful increase in price for their sun-cured leaf, up from EUR 4.65/kg to EUR 4.84/kg (4 per cent).

Production of Katerini, and price received for sun-cured leaf, told a different and not so happy story. There was a significant fall in area planted, down from 5,200 in 2016 to 4,050 in 2017, which represents a substantial 22 per cent reduction. Yield was up from 1400 kg/ha to 1650 kg/ha but was clearly not enough to stop production falling to 6,600 tonnes from 7,250 tonnes in 2016 – a fall of 9 per cent. The number of farmers growing Katerini was 200 down on the 2016 figure of 3,300.

The most telling statistic, however, was a stalling of price at EUR 4.19/kg, which could be interpreted as a growing disinterest in Katerini by the market. Prices paid and the level of interest in the leaf were duly noted by the tobacco farming community. When tobacco production falls, prices traditionally rise or at least consolidate, but what we are seeing now, with Basma holding up while Katerini slips, is what you might expect in a generally shrinking global market for tobacco: the leaf perceived as being the weaker style is suffering. Indeed, it would appear that oriental tobacco growers in Greece who planted significantly less Katerini in 2017 had successfully read the market well in advance.

 

Macedonia makes up ground

Traditionally, when assessing Balkan oriental production, the origins Greece, Bulgaria and Macedonia have appeared in that order. If this is indicative of a long-standing, unofficial ranking, now could be an appropriate time to bump Macedonia forward in the list. The former Yugoslav Republic is now at least on par with Greece, in terms of the volume and consistency of classical oriental tobacco production.

Despite the vicissitudes of climate and weather, and a shrinking world market for tobacco, Macedonia has managed to increase production of the Prilep and Yaka classical oriental varieties. Together, the country’s Prilep and Yaka crops crept from 19,000 to 21,000 to 23,000 tonnes over the three harvests from 2015 to 2017. The area planted grew year-on-year during this period (13,000 to 13,700 to 14,000 ha) and leaf yields also increased. A yield of 1,460kg/ha was recorded in 2015. This increased to 1,530 kg/ha in 2016 and a yield of 1,650 kg/ha was recorded for 2017. In total, leaf yields of Macedonia’s Prilep and Yaka crops gained a significant 13.0 per cent over this three-year period.

Equally important from the farming community’s point of view is that tobacco provides employment, wages and profits for many thousands of farmers in Macedonia. Here we see another increase, with the traditionally accepted figure of 25,000 farmers rising to 28,000 for the 2017 growing season. This number is at least equal to the current combined total of farmers cultivating tobacco in Greece and Bulgaria.

If I were a betting man, I would put my money on Macedonia to be the most consistent oriental tobacco producer in the future – Macedonia is apparently where the region’s ‘smart money’ is going.

SEKE’s managing director, Mr Alexandros Kontos, told TJI that 2017 was the third year of operations for his company in the former Yugoslav Republic in both the purchasing and processing of classical oriental tobacco leaf.

“Our organisation is fully staffed and fully operational with agronomy programmes already rolled out to all of our contract farmers. Our new factory in FYRO Macedonia is on schedule for completion in April 2018 with a total investment projected to be EUR 6 million,” Mr Kontos said. SEKE is the largest tobacco company in Greece and this significant investment in FYRO Macedonia has clearly been instrumental in propelling SEKE into second place across the Balkan region as a whole.

That being said, Greek classical oriental tobaccos (Basma and Katerini) clearly have more than an edge on Prilep and Yaka tobaccos grown in Macedonia when it comes to the prices paid to farmers for the sun-cured leaf. Though rising in price over the last three years from EUR 2.95/kg (2015) and EUR 3.14/kg (2016) to reach EUR 3.27/kg in 2017, price paid was still significantly below the EUR 4.84/kg and EUR 4.19/kg that Greek farmers were commanding for their Basma and Katerina sun-cured leaf in 2017.

However, trying to compare the leaf quality and smoking profile of two completely different classical oriental tobacco varieties is fraught with difficulties and potential pitfalls. It may not always be instructive or helpful. These classical oriental origins, for the most part, go into specific and long established American blend cigarette tobaccos. Each manufacturer keeps to his own in terms of varieties and blending, depending on the particular aroma, taste and flavour (a combination of aroma and taste) desired for a specific blend of tobacco.

Once established, consistency and continuity of the blend is paramount and, in this context, classical oriental leaf is unlike any other tobacco. Rather, it is more akin to other classic flavour-critical commodities such as roasted coffee beans and processed tea leaves. When it comes to one oriental variety having an edge over the others, I suspect that Greek-grown classical oriental tobacco, and Basma tobacco in particular, will always retain favour, irrespective of leaf quality. As is the case with coffee beans and tea, long-held perceptions of the history, cultural associations and provenance of such commodities can be hard to shake.

 

Bulgarian production continues to fall

Last but not least is the Bulgarian origin, which now appears to be well down the slippery slope of falling production. Bulgaria joined the EU in 2007, bringing with it 20,000 tonnes of oriental and semi-oriental tobacco. The irony of this, with the EU having tried and failed to stub out the cultivation of oriental tobacco in Greece just one year before, was not lost on those in the tobacco industry. However, the 20,000 tonnes which Bulgarian tobacco farmers weighed in during the 2007 season has been progressively whittled away and probably now stands at less than half of what the EU new entrant originally weighed in.

I say “probably” because the 2017 figures for oriental tobacco shown in the Table are for the Krumovgrad variety only, whereas the figures for 2015 and 2016 also include the East Balkan and Katerini types of classical oriental tobacco. As such, it is problematic to compare production, area planted, yield, number of farmers and prices paid in 2017 with 2015 and 2016. However, Mr Kontos at SEKE confirmed to TJI that Bulgarian production slid further in 2017 due to “a significant reduction in the production of the Krumovgrad variety, although other varieties of oriental tobacco were relatively stable.”

However, the facts and figures for Bulgarian semi-oriental tobacco over the period 2015 – 2016 are comparable. They show a severe decline in production from 2,500 tonnes in 2016 to 1,100 tonnes in 2017, clearly caused by farmers deserting the less-esteemed semi-oriental tobacco in a big way. Farmer numbers were down from 3,000 to 900 (-70 per cent) in just one year. A corresponding fall in area planted was also seen, down from 1600 ha to 550 ha (- 66 per cent). One glimmer of light was the significant increase in yield, up from 1600 kg/ha to 2000 kg/ha. If it were not for this increase in yield, the fall in production between 2016 and 2017 would have been much greater than the 56 per cent reduction actually recorded.

Despite a significant fall in production, there was not even a consolidating effect on price which fell to EUR 1.93/kg in 2017 from EUR 2.10/kg in 2016. This is perhaps what might be expected in a shrinking world market for all cigarette tobaccos. Buyers are free to become more discerning and their opting for the more authentic classical oriental origins is leaving semi-oriental tobacco suffering. In the same way, Greek-grown Katerini is being squeezed in favour of the perceived superiority of Greek-grown Basma classical oriental tobacco.

 

Dr Terry Mabbett