Tue, Jan 22, 2008 - Page 2 News List

Soaring commodity prices could boost local tobacco sector

By Chiu Hsien-ming  /  STAFF REPORTER

Taiwanese tobacco growers could see a reversal in their flagging fortunes as international agricultural commodity prices continue to soar.

As the high price for raw tobacco leaves on the world market makes purchasing imported tobacco less attractive, the formerly state-run Taiwan Taiwan Tobacco and Liquor Corp (TTL) has returned to domestic suppliers, increasing the purchase price it set for contracted growers this year to NT$188 per kilogram, up from NT$180 per kilogram last year.

Hualien and Taitung were important domestic tobacco production areas during the Japanese occupation, said Lu San-lang (呂三郎), the head of the Hualien Tobacco Production Cooperative (花蓮煙草生產協進社).

However, because of the increasing cost of local production compared with imported tobacco, TTL gradually decreased the amount of domestic tobacco it contracted farmers to grow over the past decade, Lu said.

TTL had projected ending subsidies to domestic tobacco producers in 2006.

However, facing pressure from farmers, the government chose to phase out the subsidy more gradually.

Then, just as it looked like the end of the road for Taiwanese tobacco producers, the international market for processed tobacco leaf boomed, pushing prices up from about NT$100 per kilogram to more than NT$260.

Moreover, TTL buying agents trying to purchase tobacco abroad found it increasingly difficult to secure supplies.

Realizing that being completely dependent on foreign supplies for raw material was unproductive, the company has reversed its policy of supporting domestic production of tobacco. At least through next year, TTL will continue to contract with local tobacco growers.

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