Zimbabwe: Tobacco Prices Record 22 Percent Decline

Source from:  Financial Gazette 04/17/2015

The average price of the tobacco sold to date is US$2,64 per kg.

SIX weeks of tobacco marketing have raked in US$75 million from 28,4 million kilogrammes of tobacco, down 22,6 percent compared to the same period last year.

In 2014, 31 million kg valued at US$96, 8 million of the golden leaf had gone under the hammer by day 25 of trading.

The 2015 tobacco sales have been characterised by low prices, with farmers complaining that the prices were unsustainable and unfair.

However, tobacco experts have called on farmers to improve the quality of their crop to fetch good prices on the tobacco floors.

Statistics from the Tobacco Industry and Marketing Board (TIMB) show that the average price of the tobacco sold to date was US$2,64 per kg. The bulk of sales emanated from contract sales, currently holding 20,3 million kg of flue cured at an average price of US$2,84 per kg, while auction floors sold 8,1 million kg at an average price of US$2,15 per kg compared to US$3,08 per kg in 2014.

Current year to-date auction sales accounts for 29 percent of total tobacco sales and during a similar period in 2014 auction sales accounted for 31 percent of total sales.

Sales to-date are now 10 percent less than 2014 sales during the same period. The current seasonal average price (US$2,64 per kg) although steadily increasing, remain depressed by more than 14 percent compared to last year's average price after 25 days of selling.

There have been accusations of insider trading at the auction floors, which has also contributed to the decline in prices. Tobacco growers are losing vast sums of money to some unscrupulous buyers who have surfaced at the auction floors, working in syndicates to lower prices and condemn bales that they then clandestinely buy and resell at higher prices.

In 2011, the TIMB suspended Class B buyers after they were accused of lowering tobacco prices.

With the re-surfacing of Class B buyers, farmers do not foresee the prices improving any time soon.

"Buyers have complained about the quality of the crop, that as farmers we understand to a certain extent, but what we have failed to understand is these people who are buying the crop at very low prices and selling the same crop at a higher price. These middlemen who are roaming freely at the auction floors must go," Mashoko Shava from Wedza said.

At the start of the marketing season, TIMB chairperson Monica Chinamasa said TIMB had introduced a new system for re-handling rejected bales, where auction floors would automatically send the bales to certified re-handlers who would in turn re-offer the bales on behalf of the growers.

However, according to farmers, it seems someone had manipulated the whole system and fleecing farmers in the process.

"There is not enough money circulating in the country so tobacco farmers are being targeted by everyone. Everyone who wants to make a quick buck is here at the auction floors and in all these shady dealings happening, the farmer loses a year's hard work," Shava added.

Prices at the auction floors have been ranging from US$0,10 per kg, to US$4,99 per kg (the highest prices so far).

The highest price for contract sales was at US$6,25 per kg.

Rejected bales for 2015 have increased by 18 percent from 30 741 bales recorded during the same period last year, to 45,154 bales. The major reason for bale rejection has been mixed hands.

To date, about 93 450 growers have registered for 2015 season as compared to about 102 396 who had registered by the same period last year, new registration for 2015 are now at 17 466.

2015 Seasonal exports increased to 33,7 million for 2015. Enditem