Tobacco auction system under threat

Tobacco auction system under threat

Source: Tobacco auction system under threat | The Herald June 7, 2018

Tobacco auction system under threat
File picture of tobacco bales

Tobacco auction system is under serious threat as it emerged that buyers are conniving with auction floors to lower golden leaf prices, hence farmers are fleeing to contract system which is offering more attractive price.

The highest price for contract so far is $5,80 per kilogramme against $4,99 per kg for the auction floors.

Last year, Government put in place the electronic marketing system which pays the farmer according to the amount of curing, treatment and effort one has put to his or her golden leaf but that system was corrupted by some unscrupulous elements to make it impracticable.

Within two or three days of implementing the system, tobacco auction floors abandoned the system saying it is difficult to implement but the truth was that the system restricted the syndicates to mere spectators as farmers were only rewarded

Having realised that buyers could lose more money to the farmers through e-marketing system, they meddled with it, to ensure total control of the proceedings at the auction floors.

This year, tobacco governing board, the Tobacco Industry and Marketing Board (TIMB) announced that e-marketing would only work when there is less pressure which means buyers can still manipulate the system. But given these exposures, farmers are opting for contract system where they are shielded from such catastrophes.

This has seen contract system taking up to 75 percent of the total tobacco sold every year due to attractive prices offered by the contractors.

Also some farmers not under contract have been diverting their tobacco to contract system in a bid to earn better money.

TIMB chief executive Dr Andrew Matibiri said the regulator is maintaining the current dual marketing system, despite an uproar over wide price disparities between contract prices and auction sales that have been hit by lack of funding.

“Yes, over the past years we have witnessed a number of contract growers growing from time to time but we still believe that the future of the auction floor is still there despite the liquidity challenges in this economy,” Dr Matibiri said.

The TIMB introduced the dual marketing system as a stop gap measure to boost output when production dropped in the early 2000.

The auction system has in recent years led to protests by small-scale farmers over the huge price gap between the tobacco sold through the auction system and that for contract farmers.

Instead of physical clashes with the police and the regulator, farmers have opted to go round the auction floors to give contracted farmers to sell tobacco on their behalf.

Pricing of tobacco for contract farmers is currently based on a grade-price index using the Tobacco Industry and Marketing Board classification system. — BH24.