Tobacco Prices Firm Marginally

Source from:  The Herald (Harare) 04/22/2005

THE third week of the tobacco-selling season has seen tobacco prices firming marginally from an all-time low of US$0,23 a kg in the past fortnight to an average of US$1,08 a kg yesterday. However, in spite of the price of the golden leaf going up, there was minimal activity at the auction floors as farmers and merchants are still deadlocked over prices. The merchants are insisting that the crop currently being delivered to the auction floors is of poor quality which is why they were reluctant to review the price upwards. Farmers are demanding as much much as US$3 a kilogramme, up from the US$2,90 prevailing at the end of the last tobacco-selling season. "We are not satisfied with the price on offer so we are holding on to our crop until such time as the price gets better," said one farmer, who declined to be named. Asked whether it was not better to sell at the going price than risk their crop deteriorating, another said: "We could be able to pay for the inputs that we got through the credit scheme, but we will be left with no profit, something that would not make production viable next season as we would produce to finance credits only." This stand-off has seen reduced activity at the country's three major auction floors, namely Tobacco Sales Floor, Burley Marketing Zimbabwe and the Zimbabwe Tobacco Industry Auction Centre. On the other hand, the slight movement in prices at the auction floors could be a signal of an improvement in the quality of tobacco being delivered to the floors. Meanwhile, contract farmers with their pre-agreed selling arrangements are likely to be smiling all the way to the bank as they are not affected by the dip in prices. However, the Tobacco Industry and Marketing Board (TIMB) is still optimistic an amicable solution will soon be found to the stalemate that threatens to paralyse the tobacco industry. Said TIMB: "We are still optimistic that we will witness improvements in the deliveries of tobacco if all parties agree on the price." The market is still waiting for feedback on negotiations between officials from the Reserve Bank of Zimbabwe, farmers' representatives and merchants on the way forward. The opening of the current selling season was expected to ease the shortage of foreign currency in the country as it is paid for in hard currency. In addition, tobacco growers have been granted exporter status. The Government is also giving exporters an incentive of $2 000 as support for each kg of the golden leaf sold. By this time last season, an average of 6,9 million kg had been sold compared to about 1,2 million kg so far this year. However, in spite of the ongoing price wrangle and disagreement over quality, tobacco remains the country's major agricultural foreign currency earner and is expected to retain its status if a way out of the current impasse is found. Enditem