Tobacco Prices Continue Firming

Source from:  The Herald (Harare) Leonard Makombe 07/19/2005

AVERAGE prices for flue-cured tobacco continued to firm at the three auction floors and contract system last week to close at US$1,48 per kilogramme. This was a marginal increase on the US$1,44 average for a kg the crop was fetching two weeks ago. Tobacco prices usually firm when the tobacco selling season reaches its peak as farmers start delivering quality crop. The season's highest price was recorded on Wednesday last week when a kg of the golden leaf was fetching as high as US$2,85, which is well above the paltry US$1,85 offered when the season opened in April. A total of 40,7 million kg of flue-cured tobacco worth US$60,4 million had gone under the hammer at both the auction floors and the contract system by the end of business on Wednesday last week. At 14,8 million kg contract sales now account for 35 percent of the total tobacco auctioned to date. This year's tobacco season is fast approaching its peak with the total sales so far estimated at about 40 percent of the projected 100 million kg. The season's cumulative total of 40,7 million kg is only 4,18 percent less than the 42,5 million kg which had gone under the hammer by the same time last year. Last year's prices averaged US$2 per kg, which is 25,97 percent higher than this season's average price. It is generally agreed that the average price for this season has been pulled down by the quality of the crop which was affected by last season's erratic rainfall. Average prices have also been weighed down by the low prices offered by merchants in April and early May. Tobacco deliveries started firming in May when the Reserve Bank of Zimbabwe increased the support price from $2 000 to $5 000 to break what threatened to be a protracted stalemate. It is expected that 100 million kg would have been sold by the end of the selling season, representing a 50 percent increase on the 68 million kg sold last year. This could be the first step towards a complete rebound in production of the crop whose fortunes have taken a dip since 2001. A phenomenal 200 million kg were produced in 2000 before production fell progressively to 68 million kg last season. Enditem