Thai Tobacco Company Considers Raising Leaf Prices

Source from:  Bangkok Post By Wichit Chantanusornsiri Chatrudee Theparat 10/19/2004

The state-run Thailand Tobacco Monopoly (TTM) will consider paying higher prices for the tobacco it purchases next year in order to help farmers cover rising costs. The agency plans to pay 49 baht for a kilogramme for dried Burley leaf this year, two baht more than it paid the year before. It will consider a one-baht increase in the guaranteed price for Virginia leaf, currently at 66.80 baht a kg. A source said the TTM board on Oct 26 would also discuss whether to raise the guaranteed price for Turkish leaf from the current 41 baht. An official from the Excise Department, which supervises the local tobacco trade, said the higher payment would partly offset costs, rising notably from imported fertiliser and pesticide as a result of soaring fuel prices. However, the agency has dismissed a proposal to raise the purchase price by 10 percent from this year's levels. The TTM normally sets guaranteed prices to contracted farmers before planting starts in October or November. Last week, more than 1,000 farmers in the northern province of Phrae called for state help, saying they were receiving lower prices than they did the year before due to lower quality and a surplus of leaves. Farmers in several districts in the province, who earn their living mainly from tobacco, said they were receiving only two baht a kilogramme for fresh tobacco leaf this year compared with three baht last year. Prasit Jampa, a farmer from Song district, said the low prices did not cover rising costs such as fertiliser, seedlings and labour. Supak Naktewan, the chief of the Excise Office in Phrae, said the Excise Department had outlined a proper system to manage the tobacco trade to ensure product quality and control supply in the market. The TTM is the major buyer but some local tobacco is also bought for export at TTM-guaranteed prices by exporters licensed by the Excise Department. Normally, the companies send officials to buy either fresh or dried tobacco from farmers but today there are also independent merchants -- called "cowboys" by locals -- who purchase fresh tobacco at farm sites and deliver it to exporters' drying sheds. "The method is preferred by farmers as they can save transport costs but prices are definitely lower than if the tobacco is sold at the drying site," another official said. "These cowboys also require high-quality leaf, prompting farmers to expand plantation areas, hoping to harvest a larger portion of top-grade leaf at their farms." Manoch Son-Anusin, the director of the leaf department at the TTM, said the oversupply of tobacco this year was not confined to Thailand but reflected a surplus worldwide. He said the Excise Department had outlined a system to regulate the local trade to protect farmers, with guaranteed prices paid only to those under contract to the state enterprise. The TTM and exporters last month just signed contracts to buy 18 million kilogrammes of Virginia leaf, 39.78 million kg of Burley and 8.59 million kg of Turkish for the 2004-05 crop. The TTM plans to purchase less tobacco than it did last year as it currently has enough stock on hand to last 17 months. Enditem