Low price as tobacco auction floors open

via Low price as tobacco auction floors open – The Zimbabwe Independent February 28, 2014 by Taurai Mangudhla

PRODUCERS of Zimbabwe’s number one cash crop — tobacco — were left with a bitter taste in the mouth when the country’s auction floors opened with very small offers of as little as US$0,10 per kilogramme of the golden leaf.

With low cotton and maize producer prices obtaining over the past few years, many farmers have turned to tobacco, but the current marketing season does not look promising for the leaf producers.

Speaking at the official opening of the 2014 tobacco marketing season, acting Agriculture minister Ignatius Chombo recently said the agriculture sector was expected to grow by 9% with tobacco as the main driver.

Chombo said about 50% of the population was now dependent on tobacco earnings, adding that the crop was now contributing around 20% of gross domestic product. He said the sector accounted for 40% of exports and supplies 63% of raw materials to agro-industries.

Youthful Chinhoyi tobacco farmer Nyasha Purasi said the current prices had dealt a huge blow to farmers who were hoping to realise decent earnings from their produce.

“My farm is not very big and I have just used five hectares to grow tobacco because I could not afford inputs for a bigger portion of land. I had brought three bales just to get some bit of cash and see how the prices are going, but I had to take my tobacco back with me last week because the prices are not profitable to the farmer,” he said.

“Such low prices are demotivating to the farmer who suspends so much in inputs and has to equip his farm for the next season. It’s very bad because you are left stranded, exactly where you started or even worse.”

The 27 year old farmer said he was considering growing other crops in the coming season such as soya beans, sugar beans and maize.

However, Zimbabwe Tobacco Association (ZTA) CEO Rodney Ambros said it was too early to panic as better prices were expected once contract sales kick in.

“We are only five days into the season and the prices are improving each day in terms of averages,” he said.

“Contractors open next week and these will take the bulk of tobacco because 70% of the tobacco is expected to be sold under contract.”
Ambros said the rainy season was different from other years, resulting in a change in the harvest cycle.

He said about 70% of the crop is estimated to be currently in the fields compared to 50% in the same period last year.

“The only concern perhaps is on the lowers stock, which is fetching much lower than last year,” Ambros said.

Tobacco Industry Marketing Board (TIMB) CEO Andrew Matibiri said the prevailing low prices are normal when marketing begins, with better prices expected as the season progresses.

“There is nothing abnormal about US$0,10/kg because the minimum price is US$0,10/kg. Remember prices also depend on the quality of the leaf. We expect that people are now basically bringing low leaves that have the lowest quality in terms of components like nicotine content,” Matibitri said.

“This is generally expected to improve as we go further into the season. However it’s not all farmers that are bringing low quality leaves because some are getting as much as US$4/kg.”

Pricing problems were a challenge last year with officials saying farmers generally needed to improve on the leaf quality.

At the opening of the 2013 marketing season, TIMB chairperson Monica Chinamasa said growers should engage the expertise of agricultural extension services and farmers’ unions to improve their tobacco agronomy.

She said higher prices are not the only way to ensure that growers become viable in the face of increasing production costs.

Chinamasa said farmers should aim to produce tobacco that can be competitve on international markets by investing in efficient curing, grading, presentation facilities as well as skills in order to avoid compromising the price offered and the buyers’ final export product.

Latest TIMB statistics show that the 2014 tobacco selling season, which commenced on Wednesday 19 February, saw a total of 1,47 million kg being sold in the first three days.

TIMB said the seasonal average price closed at US$2,38/kg. In 2013, the first three days of sales realised 1,2 million kg averaging US$3,33/kg.

Currently, only six contractors purchased tobacco amounting to 245 090 kg at an average price of US$2,58/kg compared to a total of 621 078 kg which were also bought by six contractors in a similar period in 2013 at an average price of US$3,66/kg.

On day four, a total of 2,1 million kg valued at US$5 million were sold. In terms of value, tobacco revenue slid 20% on prior years US$6,2 million.

The proportion of rejected bail went up by 19,19% to 8,34%.
The tobacco selling opened with three auction floors participating- Premier Tobacco Auction Floor, Tobacco Sales Floor and Boka Tobacco Auction Floors.

About 180 million kg are expected to be delivered at the country’s three auction floors. Last year, farmers failed to meet a target of 170 million kg after they delivered 166 million kg.