10.8 The tobacco growing industry
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10.8.1 Global
Tobacco is grown in more than 120 countries. In 2004, more than one third of the world's tobacco was grown in China. Other major producers include Brazil, India, the USA and Turkey. Tobacco leaf is an important source of export revenue for Brazil, the USA, Turkey, Zimbabwe and Malawi. In recent decades tobacco growing has declined in more developed countries, moving to less developed regions where consumption trends remain buoyant and the industry has been welcomed by government. If this trend continues, it is estimated that by 2010, more than 85% of the global tobacco leaf requirement will be met by producers in developing countries.115
10.8.2 Australia
10.8.2.1 Brief history
Tobacco growing commenced during Australia's early years of settlement. Governor Macquarie experimented with plantings at Emu Plains in New South Wales in 1818, and by the 1820s tobacco was cultivated by farmers in the Hunter Valley. During the 1850s growing extended to Victoria and Queensland. It is likely that some proportion of the early crop was intended to supply the colony with the makings of pesticide for use in ridding sheep of parasites.116 Growing reached its peak in the early 1970s, when nearly 16,000 tonnes of leaf were sold annually,117 but by 2006 the crop yielded under 4000 tonnes.118 Prior to deregulation of the market, most Australian leaf was purchased by local manufacturers.119
Major influences contributing to the downturn in local tobacco growing include declining tobacco consumption in the Australian population, and successive reductions in the protective tariff on Australian leaf during the 1990s, which permitted manufacturers to purchase leaf more cheaply on the international market (see below).119 This led to an increase in diversion of Australian leaf into the illegal tobacco trade119 (see also Section 10.9).
Commercial tobacco farming no longer occurs in Australia. The industry began to wind down during the mid-1990s, with successive announcements at both state and federal level for government-financed restructuring grants (exit grants) to tobacco farmers to assist them in leaving the industry (see below).
10.8.2.2 Government regulation
Federal government support for the Australian tobacco growing industry commenced in 1936, with the introduction of the Local Leaf Content Scheme (LLCS) which encouraged the manufacturers to use at least a minimum percentage of locally grown leaf. Doing so entitled the manufacturers to a tariff concession on the balance of imported leaf they used.120
Imbalances between supply and demand in the industry, as well as ongoing problems with grading and pricing of local leaf, lead to the passage of the Commonwealth Tobacco Marketing Act (1965). This legislation established the Australian Tobacco Board (ATB) as a statutory authority of the Australian Government. The ATB, which became known in 1990 as the Australian Tobacco Marketing Advisory Committee or ATMAC, advised federal and state ministers on interstate and overseas marketing of Australian tobacco leaf, as well as the various state tobacco leaf marketing boards (established under legislation in those states which grew tobacco) on the same matters. The ATB and later the ATMAC was also responsible for the administration of the main instrument of regulation, the Tobacco Industry Stabilisation Plans (TISP). In brief, TISPs and their key component, LLCSs, served to control supply and guarantee the sale of Australian leaf to local manufacturers at a pre-arranged price. The TISP introduced in 1965 raised the minimum local leaf content to 50% of Australian leaf in the manufacture of their products and in 1977 this requirement was increased to 57%.120
At a state level, each growing area had its own Tobacco Leaf Marketing Board, which was responsible for allocating supply quotas of tobacco to individual growers.120
10.8.2.3 The decline of tobacco farming in Australia
During the 1980s and early 1990s a series of reviews evaluated the structure of the tobacco growing industry in Australia.121-123 In 1990, it was the view of the Industry Commission that taking into consideration statutory marketing arrangements, tariff concessions and all other measures of government support, tobacco was by far the most subsidised agricultural activity in Australia, receiving assistance at about 6.5 times the rate of other horticultural activities, and more than 12 times the average rate for all agricultural activities.124
In 1994 the Industry Commission published a review of the tobacco growing industry in Australia, finding that the succession of TISPs and LLCSs had created an inefficient, non-competitive industry which was now on the brink of collapse. The commission recommended the phasing in of major deregulation of the leaf market to bring it into line with other Australian manufacturing and agricultural industries and to permit tobacco manufacturers to purchase leaf from overseas without penalty. Later that year, the Australian manufacturing industry and tobacco growers submitted a proposal for restructuring which was agreed to by the Commonwealth government in December 1994.125 The package allowed for the winding down of ATMAC and the abolition of the LLCS and TISPs. Tariffs were to be removed from imported tobacco leaf and tobacco products. Manufacturers were to purchase local leaf under arrangements which conformed to the requirements of the Trade Practices Act (1974). In addition, the tobacco manufacturers agreed to provide $10.8 million to aid restructuring, payment to be matched by contributions from the Queensland, Victorian and New South Wales state governments.125
In 1994, the year in which the final TISP ran its course, there were about 600 tobacco growers remaining in Australia. Most of the crop (58%) was produced in northern Queensland, about 38% was grown in Victoria around Myrtleford, and 4% was grown around Ashford and Bonshaw in New South Wales.125 During 1994 and 1995 the Victorian, New South Wales and Queensland state governments announced financial incentives and other support for growers wishing to exit the market.125 By the end of 1995, only 366 tobacco growers remained, 240 in Queensland and 126 in Victoria.125
As foreshadowed, the ATMAC was wound up in 1995,126 and ultimately abolished in April 1997, with the repeal of the Tobacco Marketing Act 1965,127and the organisation's assets were transferred to the Tobacco Research and Development Corporation, a body intended to support the research needs of the industry.125 Over the following years the manufacturers increased volumes of cheaper imported tobacco leaf, and the Australian growing industry continued to fold, not without acrimony on the part of some of the remaining growers.128-130 The Tobacco Research and Development Corporation was abolished in 2003.131
The last sales contracts in Northern Queensland were filled in early 2004,130 and in Victoria and Southern Queensland, a majority of growers voted in support of a federal government and industry-funded buyout of the leaf growing industry announced in October 2006. All outstanding sales transactions are expected to be completed in 2009.132
Most leaf used in Australian-made cigarettes is now grown in the USA, Brazil, Zimbabwe and India.19
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