Zimbabwe: RBZ Hikes Tobacco Support Price 36-Fold

Source from:  The Herald (Harare) April 7, 2006 04/10/2006

THE Reserve Bank of Zimbabwe has increased the tobacco support price 36-fold from $5 000 to $180 000 per kilogramme, ahead of the opening of the sales floors on April 25. The new support price is equivalent to almost US$2 per kilogramme at the ruling inter-bank rate of $99 200 against the greenback. An additional early delivery bonus of $40 000 per kg will be paid to farmers who deliver their crop before 31 July, over and above the floor price. Acting Reserve Bank of Zimbabwe governor Dr Charity Dhliwayo announced the new support price yesterday. She said growers would also get a top-up on any kilogramme sold on the auction floors. Previously, farmers had developed a culture of withholding their produce in protest over low prices, principally driven by exchange rate distortions. Already, there were fears that farmers would not deliver their crop to the sales floors citing a rapid mismatch between input and output costs. The support price cushions farmers from low prices paid by auctioneers during the selling season. Dr Dhliwayo said authorities were dedicated to supporting tobacco farming, which is a key foreign currency earner. She also warned that the new package would not apply to last season's crop that had been withheld by some farmers. "It is imperative that players in the industry note that this support framework will not be applicable on stocks that for one reason or another, were hoarded from yester-year's production (non 2005/06 output)." Dr Dhliwayo also warned unscrupulous merchants who sought to manipulate prices to their advantage. "As monetary authorities, we wish to strongly warn tobacco merchants against any predatory collusion, seeking to deliberately slump tobacco prices in view of the guaranteed floor price and the delivery bonus. "Where such practices are detected, the Reserve Bank reserves the right to automatically cancel the merchant's participation on the auction floor," she said. In previous seasons, some merchants had developed a tendency of downgrading the quality of tobacco with a view to pulling down prices. Agriculture Minister, Dr Joseph Made, yesterday also called on tobacco merch ants to take part in promoting the growth of the foreign currency-earning crop, through paying fair prices. Tobacco is one of Zimbabwe's major hard currency generators but production has declined substantially over the past few years due to farm disruptions and successive droughts. At its peak in 1999, the country produced close to 250 million kg of the golden leaf, raking in several millions in foreign currency. But production dropped to below 80 million kg last year and only about 70 million kg are expected to go under the hammer this year. Enditem