There is a continuous demand for tobacco from cigarette manufacturers despite the decline in consumption due to the impact of excise tax-driven price increase, an official of a tobacco-producing city said.
Mayor Albert Chua of Batac City in Ilocos Norte said tobacco production in the city was not affected by higher excise tax as farmer yields per hectare is still good at about 4,000 kilos.
“Income per hectare would be about P200,000. At the current rate, Class A tobacco is P70 per kilo. If your harvest is good, that is gross of P200,000, minus your production cost of about P60,000 or P70,000,” he told reporters in an interview in Batac City and over the weekend.
“We are not affected by declining cigarette demand, maybe the one that will be affected are the manufacturing companies,” he added.
Data from Philip Morris International (PMI) Inc. showed that estimated total cigarette market in the Philippines decreased by 15.6 percent in the first quarter of 2017, mainly due to the impact of excise tax-driven price increases as well as a high prevalence of illicit trade.
The current sin tax on tobacco sets a unitary rate of P30 per pack in 2017, with an annual four percent adjustment thereafter.
Total cigarette market in the Philippines fell to 16.6 billion units in the first quarter, from 19.6 billion a year ago.
PMI cigarette shipments to the Philippines fell by nearly a quarter in the first three months of 2017; from the 14.474 billion units in the same period last year to 10.955 billion units.
PMI’s market share in the first quarter dropped by 7.6 percentage points from 73.7 percent a year ago to 66.1 percent.
Despite this, Chua said tobacco farmers in his city will not stop producing tobacco since it can be considered a “cash crop.”
Besides, he said, lands used for tobacco farming can also be used for planting other crops like rice, corn, garlic and other high-value produce.
“So if your land is idle after harvesting tobacco, you can alternately plant other high value crops like corn, garlic and vegetables,” he said.
In 2015, he said the number of farmers in Batac City alone is at 2,556 for 1,221 hectares of tobacco-producing land.