ITGA has been in close contact with its member associations and is working to assess the main difficulties this crisis is posing to tobacco growers. As part of our efforts surveys have been conducted in order to identify possible areas of intervention. The next piece is an interview with ITGA's Ex-President, Daniel Green of Burley Stabilization Corporation (U.S.).
Have tobacco growers experienced shortage in supplies?
Growers are not having problems here getting supplies such as fertilizers, pesticides, etc here. Our restrictions on business have been categorized as an essential and non-essential businesses. For the protection of food supply, agricultural businesses are considered essential and have been permitted to continue operating. Growers do not enter the stores, they order from the outside or on the phone and the inputs are delivered to them outside or to their farm.
Labor has been a complicated issue for us and we have had many scares with labor with the threats of closing borders. USA growers rely on labor from Mexico and Central America. Recently there have been immigration restrictions and closings of the consulate, making things more difficult for workers to cross the border. However, agricultural workers that have been coming in the past have been permitted to arrive, so the impact so far on tobacco growers has been minimal. This issue could get worse though. I think the measures being taken by the government to combat Coronavirus and the general fear of Coronavirus is having an impact on the supply side of the market. Most of our growers are in the high-risk group and some have decided to be less active and not grow tobacco, mostly because tobacco profitability was already too low, but also because they have decided to reduce their overall activity during this time. The demand side of the market for tobacco will be mostly insulated by the impact.
We have not seen major disruptions in the point of sale for consumer products because in most of the USA, gas stations, grocery stores and major retailers have been able to remain open. We will likely see a short term boost in cigarette consumption as a result of consumers stocking up on cigarettes in fear they would not be available later and also per capita consumption increasing since smokers are at home and not subject to smoking restrictions.
We have not yet seen a major change in the cost of production supplies. The market for all agricultural commodities has been affected, especially beef, dairy and vegetables. Vegetables and fruits are spoiling and being destroyed that cannot be consumed. Many food products just aren't consumed at home as they are in restaurants. With schools closed, a lot of milk is not being shipped. Without restaurants serving salads and steaks, the consumption of these products is greatly affected. Americans tend to eat these things in restaurants, but do not cook them at home.
As far as the market for USA flue and burley at this time, the situation is still very bad for both. Flue-cured growers are still suffering from the loss of the Chinese market and it will not change any time soon. The burley market continues to shrink and is expected to be only 30 to 35 million kilograms. Prices are not very profitable and many growers are quitting. We expect to lose many more growers next year. There are new opportunities for growing dark tobacco and cigar wrappers and many growers are trying these types of tobacco this year.