HomeBusiness DigestPrice dispute stalls tobacco sale

Price dispute stalls tobacco sale

Paul Nyakazeya

BURLEY tobacco auction floors remained closed despite an earlier agreement for trade to resume on Thursday last week after a brief agreement between farme

rs and merchants on a favourable price.

However, merchants later on rescinded on the agreement, forcing farmers to withdraw from participating in the burley tobacco auction.

Farmers were demanding that merchants pay them in foreign currency or the local currency at a rate above the official exchange rate.

Businessdigest understands that it was mainly the local merchants who refused to buy the tobacco in foreign currency or at an exchange rate higher than that offered on the official foreign currency market.

Zimbabwe Farmers’ Union (ZFU) deputy president Edward Raradza said the tobacco selling season, which was temporarily suspended early last month, failed to resume as had been agreed after the two parties failed to agree on the selling price.

“Local merchants are against the buying of tobacco in foreign currency, arguing that they did not see the point in buying the crop in foreign currency when they want to use it locally,” Raradza said.

He said farmers were calling for a better price in local currency.

A farmer who spoke to businessdigest said while they saw nothing wrong with selling their crop in local currency, they were not willing to sell it at the current interbank rate of $101 195 against the US dollar.

“Considering the costs of inputs, an exchange rate above the current interbank would be the starting point. Unattractive prices are a hindrance to the production of the crop next season,” the farmer said.

On the parallel market the US dollar is trading at $450 000 while the British pound is at $750 000.

Raradza could not be drawn into revealing the minimum price the farmers were demanding, insisting that farmers wanted an attractive price.

When the 2006 burley tobacco selling season was suspended early last month, farmers expressed displeasure at the selling prices of between US$0,30 and US$0,40. Last year’s selling prices averaged US$1,90 per kg. Raradza said last week an agreement had been reached between farmers, merchants and the Reserve Bank which would allow the crop to be sold in local currency at rates which are attractive.

Raradza could however not give a specific date when the selling season would resume after the latest dispute.

“At present I cannot say when the selling season would resume, but as an association we hope it would be soon,” Raradza said.

The delays in the opening of this years’ burley tobacco selling season have already negatively affected most farmers whose earnings from the crop have been eroded by inflation and rising input costs.

Last week Raradza said it was important for government to intervene in the selling of the crop to enable farmers to recover their expenses and remain viable.

He said the RBZ had to offer viable prices for tobacco as the crop was capable of generating enough foreign currency for the country.

There are three main types of tobacco grown in Zimbabwe — flue-cured, burley and oriental tobacco.

Zimbabwe is the largest producer of tobacco leaf in Africa and the world’s fourth-largest producer of flue-cured tobacco after China, Brazil and the United States.

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