Tobacco prices remain depressed

Published: 09 April 2014

Prices at the tobacco auction floors have remained depressed resulting in a 15,5 percent disparity with prices recorded during the same period last year.

According to the latest figures released by the Tobacco Industry and Marketing Board, the average price so far this season is $3,16 per kg against $3,74 per kg for the same period last year.

The low prices have been attributed to low quality tobacco that has been finding its way to the auction floors.

The contract system, however, is offering better prices with an average price of $3,31 per kg while prices under the auction system are averaging $2,84 a kg.

The disparity in prices offered under the contract and auction systems has ignited fears over the viability of auction floors as more farmers are opting for contract farming or to sell their tobacco through the contract system which is offering better returns.

Premier Tobacco Auction Floor managing director, Mr Philemon Mangena told members of the Parliamentary Portfolio Committee on Lands, Agriculture, Mechanisation and Irrigation that toured the auction floors last week that they were now losing business as many farmers are opting to sell their tobacco through the contract system.

"We do not get much revenue from the charges paid by merchants if volumes are low. We only realise meaningful profit when we handle high volumes of the crop," he said

The highest price being offered at the auction floors is $4,99 per kg and the same grade of tobacco is being sold at $5,60 per kg under the contract system. Contractors have argued that they are offering high prices because the crop is of high quality and also as an incentive to their growers.

Meanwhile, farmers have so far received $180,8 million from the sale of 57,2 million kg against $180,9 million that was received from the sale of 48,3 million kg during the same time last season.
- The Herald

Tags: Tobacco,