Source: Govt demands fair tobacco prices as market shows early recovery – herald
Theseus Mauruki Shambare
Agriculture Reporter
THE Government is pressing for higher tobacco prices, directly challenging merchants over low offers to farmers and insisting pricing must reflect production costs and global market realities.
Stakeholders in the industry have, however, begun noticing early signs of improvement in the prices.
There have been concerns over low prices being offered on the market compared to the same period last season.
As of Wednesday, an average price of US$2,70 per kg was recorded compared to US$3,47 per kg in the same period last year.
Early trading has been characterised by limited buyer participation, with only seven of the 43 registered merchants active since the opening day on April 4.
This has seen an increase in rejected bales as farmers withdrew their crop from the sale due to unviable prices.
Statistics from the Tobacco Industry and Marketing Board (TIMB) have shown that since the opening of the marketing season, 55 629 rejected bales have been recorded. This is an increase of 118 percent from the 25 528 rejected bales recorded during the corresponding period last year.
In response, the Government, through the TIMB, issued a 14-day directive compelling non-participating merchants to take up their buying positions or face regulatory action.
Despite the intervention, prices remained subdued in the early days, largely attributed to an influx of lower-grade leaf onto the auction floors.
However, industry players said the market was beginning to recover as better-quality tobacco entered the system, helping to narrow disparities between auction and contract sales.
The developments have raised concern at the Cabinet level, with authorities warning that depressed prices threaten the viability of the country’s second-largest foreign currency earner.
Agriculture, Mechanisation and Water Resources Development Minister Dr Anxious Masuka was tasked to engage stakeholders and address the situation.
Speaking with some of the merchants during a tour of tobacco sales floors on Wednesday, Dr Masuka said the Government’s intervention was aimed at ensuring farmers were fairly rewarded.
“The Cabinet is disappointed and concerned with the prices being offered to farmers, as they risk discouraging production.
“The issue is that it is known that you (Merchants) sell this tobacco on the international market at up to US$8, yet you offer a farmer as little as US$2. While quality may differ, there must be consideration of the labour involved and the cost of inputs,” he said.
Dr Masuka said engagements with industry players had revealed early signs of recovery.
“Today’s tour was motivated by the Government’s concern at the lower prices being offered in both contract and auction floors compared to last year,” he said.
“The visits have indicated that although we are selling lower leaf, prices are beginning to increase. The gap between auction and contract remains, but we expect it to close as the season progresses.”
Zimbabwe is projecting tobacco output of between 385 million and 410 million kilogrammes this season, up from 355 million kg last year, a factor that has also exerted downward pressure on prices due to increased supply.
Dr Masuka said the country was also facing stiff competition from major producers such as Brazil, Tanzania and India, making quality and proper crop presentation critical.
“What we have seen is that better styles are being paid at last year’s prices, while lower grades are being discounted due to oversupply,” he said.
He urged farmers to improve grading, curing and presentation, while calling for stronger collaboration between growers, contractors and technical institutions, including the Tobacco Research Board and TIMB.
Industry players say the early price pressures were largely seasonal.
Ethical Sales Floor, leaf director, Mr Gardner Magandi, said the predominance of lower leaf positions, known as primings, had influenced prices.
“As we move up the plant, prices start to appreciate. The top price paid on auction has been US$4,94,” he said.
Farmers at the auction floors expressed cautious optimism.
Raffingora farmer, Mr Revesai Karambanyo, said he expected prices to improve as the season progresses.
“We are expecting better prices so that we can be able to go back to the fields,” he said.
Banket farmer, Mr Wellington Mhizha, said he had previously received lower prices but was hopeful of better returns as quality leaf enters the market.
Some who had initially withdrawn their tobacco are beginning to return, hopeful of improved returns as better-quality leaf enters the market.
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