Govt Sets New Tobacco Support Price

Source from:  herald.co.zw Herald Reporter 04/30/2008

GOVERNMENT has awarded tobacco farmers a $70 million support price for every US dollar earned for the 2008 selling season, scheduled to open this morning. The 2008 tobacco-selling season, which was postponed from last week to this week, is therefore, now expected to start today. The official opening ceremony was expected to take place at 7.30am at the Tobacco Sales Floors. Although in our business section, which was printed earlier, we carry a story that we were not sure of the outcome of negotiations between growers, the industry and Government, last night Agriculture Minister Cde Rugare Gumbo said the support price was arrived at after consultations with the Reserve Bank of Zimbabwe. "I wish to advise tobacco farmers that they have been awarded a support price of $70 million for every United States dollar earned. "This has been arrived at in consultation with the central bank. The move is meant to repay efforts by the farmers and ensure that they go back to the fields. "The price is meant to stimulate tobacco production in the country and to allow farmers to prepare for the next tobacco season,'' said Cde Gumbo. Tobacco is one of the leading foreign currency earners in the country and has seen considerable support from Government the private sector and quasi government entities. The announcement of the new support price is likely to see the opening of the 2008 tobacco crop-selling season. Tobacco support price has been one of the sticking points between Government and the farmers that led to the stalling of opening of this year's selling season. For the past week farmers and Government officials have been locked in negotiations to resolve the impasse. Apart from the support price, tobacco farmers were also asking for a new exchange rate as well as the settlement of the outstanding Foreign Currency Account shortfalls. The tobacco Industry and Marketing has since approached the Reserve Bank of Zimbabwe over the pricing structure in which it is looking for a special exchange rate. Last year, the selling season was postponed indefinitely after farmers indicated that they were not ready to sell their tobacco until they got a special exchange rate arguing that the exchange rate existing then was not viable. Government initially pegged its support price at $40 000 per kg, calculated on a pro-rata basis benchmarked at US$1,50 per kg, which was increased to $55 000 per kg towards the end of the season. The farmers were also demanding an average price of US$4 per kg at a rate of about $500 per US$ against the previous year's US$1,99 per kg at an exchange rate of $105 per US dollar. The average price for contract sales last year was US$2,26 while for auction sales was US$2,40 per kg and the overall seasonal average price was US$2,32 per kg. About 75 million to 80 million kilogrammes of flue-cured tobacco are expected to be delivered to the tobacco auction floors this season compared to 73 million kg for last year. Enditem