Tobacco prices improving

by Christopher Makaza

Despite challenges being caused by the deadly Covid-19 pandemic in the country, tobacco prices on the auction floors are firming each day, giving hope to the golden leaf growers and the tobacco industry.

Tobacco Industry and Marketing Board (TIMB) statistics for both contract and auction floors show that on day three of trading, prices were firm, averaging US$2.30 compared to US$1.45 last year.

Prior to the 2019 season, the seasonal average price for the preceding four years was US$2, 96 per kilogram. The current firm prices are due to high demand of the golden leaf despite the effects of the Covid-19 pandemic.

A contact at the TIMB revealed that prices were expected to firm further as the season progresses. According to the contact, farmers first harvest and deliver bottom leaves (primers) whose quality is poor, and the quality improves as they harvest top leaves that fetch high prices.

A visit by this publication at the tobacco floors yesterday revealed that activity was high with 694 496kg of tobacco worth US$1,598 230 being sold compared to 160 080kg of tobacco worth US$232008 being sold in the same period. A total of 604 212kg of tobacco was sold at the contract floors, whilst 90 284kg of tobacco was sold at the auction floor.

Last season had a slow start due to misunderstanding on charging of the 2% tax to merchants and the payment modalities to farmers. However, this season, the payment modalities are clear and farmers are being paid 50% into their FCA accounts and 50% into their ZW$ accounts after deducting loans in foreign currency.

The payments are also being made on the same date of the sale. The number of bales sold on day three of the sale was 9 293 compared to 2 252 last season.

A contact at the Tobacco Sales Floor (TSL) observed that activity could have been higher, but the guidelines on transport which only allow 7 tonne trucks and above to deliver tobacco is restricting farmers’ movements.

“Farmers had invested in small trucks like 2 tonners, for use in transporting their tobacco bales. The guidelines are discouraging farmers because it is expensive for them to use hired trucks which are charging around US$10-15 per bale. The farmers with 2 tonne truck can carry about 15 bales and using fewer fuel costs,” said the contact.

Due to the Covid-19 guidelines, farmers are not allowed to enter the tobacco floors save for those with 100 bales and above. Farmers instead, elect a representative from farmer organisations, associations and farmers’ groups to represent them at the floors.

The arrangement seems to be working well as the rejection rate is at 2.45% compared to 28.8% last year when farmers were participating in the floors. The rejection rate is reported to have gone down because in addition to good prices being offered, there is less direct involvement of farmers.

A visit to TSL, Tian Ze, Export Leaf Tobacco and Shasha Tobacco revealed that social distancing is being maintained and it is hoped that it will be maintained as the season progresses. It was also observed that areas around the floors which are usually congested with vendors are free, with less human traffic.

A contact at EPL indicated that it would be prudent for banks to open branches in tobacco growing areas such as Guruve, Karoi, Macheke, Mvurwi, Chinhoyi and Rusape among others during this Covid-19 period to minimise the movement of people.

A contact at TSL revealed that farmers were being paid both foreign currency and the ZW$ on the day of delivery.

A total of 224 million kg of tobacco is expected from 117 000 hectares planted countrywide.

The improvement of prices is a relief not only to tobacco farmers but the country at large as more foreign currency is going to be realised compared to last year.

The arrangement of sending farmer representatives to the floors is a noble idea as few people will be participating during the sales, thereby minimising the spread of the deadly Covid-19.