Crop was the last agricultural product whose procurement costs were government-regulated. China has announced that procurement prices for tobacco leaves will now be set by supply and demand, in a country where one-third of the world’s cigarettes are consumed but where sales of high-end cigarettes have dropped during the recent corruption crackdown. The National Development and Reform Commission and China Tobacco Co released a notice to relax procurement prices on more than 160 types of tobacco leaves, which had been the last agricultural product underpricing regulation in China…Full Article: China Daily Jan 2015

Key Point

  • According to the article, China produces approximately 2.5 million MTs (total value of ~US$16.1 billion) of leaf tobacco each year.
  • According to an official of the NDRC’s price department, leaf tobacco only accounts for 5-10% of retail cigarette prices.

ChinaAg Comments

  • A large share of Chinese tobacco production takes places in the southwestern provinces of Yunnan, Guizhou, and Sichuan (~53% of total output by volume in 2012). Other producers of note include the central provinces of Henan (9% of output) and Hunan (7.3%).
  • From 2000 to 2012, Chinese tobacco production rose from 2.5 million MTs to 3.4 million MTs or by 33%. During that same time period, the percentage of farm land dedicated to tobacco production increased from 1.4 million hectares to 1.6 million hectares, meaning that China’s tobacco yields rose from 1.78 MTs per ha to 2.13 MT per ha. In general, approximately 90% of the tobacco grown in China is flue-cured or destined for cigarette production.

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