Cover - FAO Comodity Studies No. 2

FAO COMODITY STUDIES
ISSN 1810-0783
2

ISSUES IN THE
GLOBAL TOBACCO
ECONOMY
Selected case studies

Raw Materials, Tropical and Horicultural Products Service
Commodities and Trade Division

Table of Contents

Food and Agriculture Organization of the United Nations
Rome, 2003



The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

The views expressed herein are those of the authors and do not necessarily represent those of the Food and Agriculture Organization of the United Nations nor of their affiliated organization(s).

ISBN 92-5-105083-X

All rights reserved. Reproduction and dissemination of material in this information product for educational or other non-commercial purposes are authorized without any prior written permission from the copyright holders provided the source is fully acknowledged. Reproduction of material in this information product for resale or other commercial purposes is prohibited without the written permission of the copyright holders. Applications for such permission should be addressed to the Chief, Publishing Management Service, Information Division, FAO, Viale delle Terme di Caracalla, 00100 Rome, Italy or by e-mail to [email protected]

© FAO 2003

ACKNOWLEDGEMENTS

This publication is the result of work by a number of FAO staff and consultants, including Saurav Barratt, Erol Cakmak, Olwen Gotts, Haluk Kasnakoglu, Mauro de Rezende Lopes, Thor Lawrence, Sat Malhotra, Brian Moir, Shangnan Shui and Ping Zhang.



Table of Contents

FOREWORD

ACRONYMS USED IN THE TEXT

1 OVERVIEW

2 TOBACCO IN BRAZIL

2.1 INTRODUCTION

2.2 ANALYSIS OF THE ECONOMIC SIGNIFICANCE OF TOBACCO

2.2.1 At farm household level
2.2.2 At state level
2.2.3 At federal level

2.3 ANALYSIS OF CHANGES IN PRODUCTION, AREA AND YIELDS

2.3.1 Factors affecting production, area and yields
2.3.2 Improvement of tobacco quality and grading
2.3.3 Fuelwood as a major constraint in production
2.3.4 Crop substitution possibilities
2.3.5 Interviews at farm household level
2.3.6 Future developments in tobacco supply

2.4 THE IMPACT OF GOVERNMENT POLICIES

2.4.1 Introduction
2.4.2 Impact of government policies on production
2.4.3 Impact of government policies on marketing
2.4.4 Impact of government policies on consumption

2.5 DEVELOPMENTS IN TOBACCO PROCESSING AND MANUFACTURING

2.5.1 Cigarette industry
2.5.2 Employment in manufacturing
2.5.3 Impact of changes in tobacco manufacturing technologies

2.6 WHOLESALE AND RETAIL CHAINS

2.7 REVIEW OF DEVELOPMENTS IN TOBACCO CONSUMPTION

2.7.1 Cigarette consumption
2.7.2 Cigar consumption
2.7.3 Impacts of price and income
2.7.4 Future developments in tobacco demand

2.8 TRADE IN TOBACCO AND CIGARETTES

2.8.1 Future developments in the tobacco trade

2.9 GOVERNMENT REVENUE FROM THE TOBACCO SECTOR

2.9.1 Source of government revenue

2.10 TOBACCO CONTROL MEASURES

2.10.1 Changes in legislation on cigarette consumption in Brazil
2.10.2 Non-price measures
2.10.3 Bans on advertising and promotion

2.11 CONCLUDING REMARKS

2.12 REFERENCES

3 TOBACCO IN THE PEOPLE’S REPUBLIC OF CHINA

3.1 INTRODUCTION
3.2 PRODUCTION OF TOBACCO
3.3 PRODUCTION PLANNING AND MARKETING
3.4 DEMAND FOR TOBACCO LEAF
3.5 TRADE IN TOBACCO AND CIGARETTES
3.6 ECONOMIC SIGNIFICANCE OF TOBACCO AND CIGARETTE PRODUCTION

3.6.1 Tobacco production and rural employment
3.6.2 Tobacco production and rural household income
3.6.3 Government revenue

3.7 CONCLUDING COMMENTS
3.8 APPENDIX ON CONSUMPTION STATISTICS

4 TOBACCO IN INDIA

4.1 INTRODUCTION
4.2 AREA, PRODUCTION AND YIELD
4.3 IMPACT OF GOVERNMENT POLICIES ON PRODUCTION OF TOBACCO
4.4 CROP SUBSTITUTION POSSIBILITIES

4.4.1 Economics of tobacco versus alternative crops
4.4.2 Micro-level information on shifting from tobacco to other crops
4.4.3 Economics of inter-cropping systems as an approach to agricultural diversification
4.4.4 Economic implications of diversification on tobacco land

4.5 MARKETING CHANNELS AND PRICE DETERMINATION OF CIGARETTES
4.6 INDIAN BIDI AND CIGARETTE INDUSTRY

4.6.1 The bidi industry
4.6.2 Cigarette industry

4.7 ECONOMIC ANALYSIS OF TOBACCO MANUFACTURING ENTERPRISES

4.7.1 Impact of introduction of new processing technologies and equipment

4.8 DEVELOPMENTS IN TOBACCO CONSUMPTION
4.9 TRADE IN TOBACCO AND TOBACCO PRODUCTS

4.9.1 Imports

4.10 ECONOMIC SIGNIFICANCE OF TOBACCO

4.11 COSTS OF SMOKING

4.12 TOBACCO CONTROL MEASURES

4.12.1 Pricing measures to control tobacco demand
4.12.2 Non-price measures to reduce demand for tobacco

4.13 CONCLUSIONS
4.14 REFERENCES

5 TOBACCO IN MALAWI

5.1 INTRODUCTION
5.2 TOBACCO PRODUCTION
5.3 PRODUCTION POLICY
5.4 STRUCTURE OF PRODUCTION

5.4.1 Prices
5.4.2 Tenant system

5.5 MARKETING OF TOBACCO LEAF
5.6 TOBACCO EXPORT DEMAND
5.7 THE ECONOMIC IMPORTANCE OF TOBACCO TO MALAWI

5.7.1 Tobacco in export revenue and trade balance
5.7.2 Tobacco and employment
5.7.3 Tobacco and rural household income and consumption

5.8 ADJUSTMENT IN MALAWIAN AGRICULTURE
5.9 CONCLUDING REMARKS

6 TOBACCO IN TURKEY

6.1 TOBACCO PRODUCTION, CONSUMPTION AND TRADE IN TURKEY

6.1.1 Introduction
6.1.2 Production, area and yields
6.1.3 Production quality
6.1.4 Role of tobacco in income generation
6.1.5 Village case study
6.1.6 Tobacco trade
6.1.7 Stocks and consumption of tobacco leaf

6.2 AGRICULTURAL POLICIES RELATED TO TOBACCO

6.2.1 Domestic price support measures
6.2.2 Border measures
6.2.3 Institutional support through TEKEL

6.3 TOBACCO INDUSTRY

6.3.1 Tobacco manufacturing
6.3.2 Employment in tobacco manufacturing establishments
6.3.3 Value added from tobacco manufacturing
6.3.4 Cigarette exports and imports

6.4 TOBACCO AND CIGARETTE PRICES

6.4.1 Tobacco prices at producer level
6.4.2 Value of unprocessed tobacco
6.4.3 Nominal protection coefficient

6.5 CIGARETTE CONSUMPTION

6.5.1 Total and per capita consumption
6.5.2 Expenditure on cigarettes
6.5.3 Taxes on cigarettes
6.5.4 Smoking restrictions

6.6 CONCLUSIONS
6.7 REFERENCES

7 TOBACCO IN ZIMBABWE

7.1 BACKGROUND
7.2 THE ECONOMIC SIGNIFICANCE OF TOBACCO PRODUCTION
7.3 FACTORS AFFECTING ADJUSTMENT TO CHANGING DEMAND
7.4 FINAL COMMENTS

8 REVIEW OF LITERATURE

8.1 INTRODUCTION
8.2 DEMAND FOR TOBACCO LEAVES
8.3 SUPPLY OF TOBACCO LEAVES

8.3.1 Factors affecting supply of tobacco leaves

8.4 TOBACCO LEAF TRADE

8.4.1 Trade barriers
8.4.2 Impact of trade liberalization

8.5 DEMAND FOR CIGARETTES

8.5.1 Economic models and data used for estimating demand for cigarettes
8.5.2 The effect of cigarette prices on demand for cigarettes
8.5.3 Income effect
8.5.4 Smoking restrictions in public places and private work sites
8.5.5 Summary and discussion

8.6 CIGARETTE ADVERTISING AND PROMOTION

8.6.1 Effect of advertising on cigarette consumption

8.7 CIGARETTE TAXES

8.7.1 Impact of cigarette taxes on demand for cigarettes
8.7.2 Cigarette tax increases and tax revenues
8.7.3 Cigarette tax increases and cigarette smuggling

8.8 SOCIAL COSTS OF TOBACCO CONSUMPTION

8.8.1 Economic costs of smoking

8.9 ECONOMIC SIGNIFICANCE OF TOBACCO

8.9.1 Employment and tobacco

8.10 IMPACT OF TOBACCO CONTROL ON FARMERS

8.10.1 Tobacco control policies and farm revenues
8.10.2 Effectiveness of farm diversification efforts

8.11 REFERENCES

BACK COVER


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