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Strong pace of sales could have been driven by pent-up demand caused by shortage of containers, ships last year

10/05/2022


Despite the strong growth between January and August, Brazil’s tobacco exports are expected to cool down and end 2022 relatively flat in volume and with lower increase in revenue compared to last year’s results.

According to data from the Foreign Trade Secretariat (Secex) compiled by the Interstate Tobacco Industry Association (SindiTabaco), from January to August shipments totaled 349,400 tonnes, up 14.9% year-over-year, and earned $1.4 billion, an increase of 44.7%, thanks to the high average prices.

Yet, Iro Schünke, the association’s head, considers that these increases were inflated by the strong pace of sales in the first four months of the year driven by pent-up demand at the end of last year caused by the shortage of containers and ships. Thus, he expects sales to slow down in the coming months.

Consultancy Deloitte is projecting that tobacco exports will end 2022 with a stable volume compared to last year, when 464,400 tonnes were shipped out of the country, while revenues are expected to increase 6% to 10% year-over-year, to $1.5 billion.

Mr. Schünke believes that the results may come a little better than that, but reinforced that shipments are returning to normal after facing problems last year. In 2020, Brazilian exports exceeded 500,000 tonnes and brought nearly $1.6 billion.

Belgium, thanks to the importance of the port of Antwerp for the segment, continues to be the main destination of Brazilian tobacco sales abroad. From January to August, it was responsible for $360 million, ahead of China ($248 million), the United States ($103 million), and Indonesia ($70 million).

“The production chain survived the pandemic. And shipments are expected to stabilize again around 500,000 tonnes in the next few years,” said Mr. Schünke. This return to normality is a relief for farmers since nearly 85% of production goes to customers abroad.

The harvest is concentrated in the southern states. According to the Tobacco Growers’ Association of Brazil (Afubra), in the 2021/22 harvest, the region reached 560,200 tonnes, 10.9% less than in the 2020/2021 season. The drop reflected mainly a 9.8% reduction in the planted area, to 246,600 hectares, but also the decline in productivity in Rio Grande do Sul due to weather problems.

Given the reduced supply and rising production costs, prices rose. According to Afubra, the Southern producers sold a kilogram of tobacco to industries for R$17.02 in 2021/22, on average, up 61.5% over 2020/21. Thus, the total gross revenue received by tobacco growers in the South rose to R$9.5 billion from R$6.6 billion in the comparison, even with the shrinking harvest in the region.

*By Fernando Lopes — São Paulo

Source: Valor International

https://valorinternational.globo.com/