Zimbabwe Asks Tobacco Buyers to Explain Decline in Price

Source from:  Bloomberg.com 04/01/2015

Zimbabwe's tobacco industry regulator told buyers and auction floors to explain why prices for the leaves have fallen for a second year as growers protest, a document from the regulator shows.

Tobacco prices so far this selling season, which began March 4, have averaged $2.43 a kilogram (2.2 pounds), 15 percent less than in the same period last year, according to the Tobacco Industry Marketing Board. Prices for the whole of the 2014 season averaged $2.69 a kilogram and $3.54 in 2013.

Buyers include units of Universal Corp. and Alliance One International Inc., the world's biggest tobacco leaf merchants. Chinese companies also buy the crop and cigarette manufacturers such as British American Tobacco Plc purchase the crop from buyers.

"The tobacco industry has of late been attracting negative publicity mainly over prices," the Harare-based board said in a letter to buyers and auction floors obtained by Bloomberg. "We therefore request every company to make a submission on the above to be received before end of day on March 30" and those will be collated into an industry response.

Zimbabwe's tobacco industry, the country's biggest source of foreign exchange until the seizure of white-owned commercial farms began in 20O0, supported more than 106,000 registered growers as of 2014. Many black, small-scale farmers, moved onto the formerly white-owned farms by the government, have turned to tobacco as a cash crop. Production, which reached a record 236.9 million kilograms in 2000, has risen for six consecutive years with 216.2 million kilograms sold last year.

Price Protests

Sales at the Boka Tobacco Auction Floors in Harare, the country's second-largest, were disrupted by growers on the first day of the season and police were called when early prices were 28 percent below last year's level.

The buyers "have started to respond to the issues we've raised, I will take their submissions to the board," Andrew Matibiri, chief executive officer of the TIMB, said in an interview, declining to give more detail because he said the issue is confidential.

The country, Africa's biggest tobacco producer, exported 135.5 million kilograms of tobacco last year and farmers sold a total of 205.5 million kilograms, with tobacco also processed locally, earning $652 million.

The government cited the biggest sales total in 13 years as vindication of President Robert Mugabe's land-transfer campaign. This year, the customary February start of the sales season was delayed after crops were damaged by heavy rains followed by dry periods, which prompted TIMB to predict a smaller harvest. Enditem