‘Tobacco price increase too little to match cost of production’

TOBACCO farmers have described the current 13 percent increase in tobacco prices as a far cry of what is required to both offset the seasonal cost of production currently hovering around 45 percent and improve their welfare.

Zimbabwe Progressive Tobacco Farmers Association (ZPTFA) president Mr Mutandwa Mutasa said the latest price increase was lower than the production costs so profitability had diminished as confirmed by the 13 percent increase in average tobacco prices from US$2, 95 per kilogramme by Day 7 in 2023 to US$3, 34 in the comparable period this year.

“There is nothing to celebrate as the 13 percent increase is lower than the over 45 percent increase on production cost plus inflation. What we are demanding as growers is our inclusivity in the value addition chain where growers can get average prices of about US$7, 49 to US$12 per kilogramme,” the ZPTFA president said.

Mr Mutasa said for as long as there was a price ceiling of US$4, 99 at the auction floors, nothing would change.

“We have challenges with some companies that are not paying for the crop on time, but generally it seems to be a better season compared to the previous ones,” he continued.

Tobacco Farmers Union Trust (TFUT) vice president Mr Edward Dune concurred saying firming of the average price was a positive development adding that farmers wished it would be higher than the current 13 percent, given the skyrocketing input costs and inflation.

It is also very worrying that some companies that bought tobacco are yet to honour their payments or only want to do so after court proceedings, which does not make business sense, he added.

Zimbabwe Tobacco Growers Association (ZTGA) chairman Mr George Seremwe concurred saying since this year’s tobacco were projected to be lower than last season’s due to the El Nino-inspired drought, farmers still wanted the auction price to eclipse the US$4, 99 price cap.

“We have heard of some payment delays and this is expected as the season starts but this should be rectified, as the season progresses as payments should be effected within 48 hours of sale. We have received reports that some farmers were told to come next week for their money. We are investigating the authenticity of the allegations,” he said.

Meanwhile, statistics from Tobacco Industry and Marketing Board (TIMB) show that there has been a 101 percent increase in earnings from US$22 436 850 by Day 7 in 2023 to US$45 189 219 this year.

Volumes recorded a 78 percent increase from 7 599 598 to 13 522 424 kilogrammes by Day 7 at both the auction and contract floors.

The average auction price continued its upward movement to reach US$3, 33 per kilogramme from US$3, 25 by day 5.

It was also the same with the average contract price that went up from US$3, 22 to US$3, 34 per kilogramme.

There was a 13 percent increase in average price from US$2, 95 in 2023 to US$3, 34 this year.

Sales from the contract arrangement account for 92 percent of the volume of all tobacco traded with current deliveries at 12 469 040 kilogrammes while their auction counterparts are at eight percent with 1 053 384 kilogrammes.

Farmers under the auction and contract system have so far pocketed US$3 504 170 and US$41 685 049 respectively.

With farmers paying particular attention grading, presentation and bale handling, bale rejection levels slumped 58 percent this year compared to the same period last year.

The highest price on the auction and contract floor remains at US$4, 99 and US$6, 99 per kilogramme correspondingly. This year’s highest contract price is 27 percent larger than last year’s US$5, 50 while there is no change in the lowest price of US$0, 10.

Herald

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