Golden leaf price improves

TWO weeks into the tobacco marketing season, the average price per kg for the golden leaf has improved to US$2,56 from US$2,29 recorded last year.

Fidelity Mhlanga

Statistics from Tobacco Industry Marketing Board (TIMB) show an 11,9 % price improvement on day 14 of the 2015/2016 marketing season.

As of day 14, a total of 16,4 million kg of tobacco has been delivered, up from 9,3 million kg sold during the same period last year.

The golden leaf delivered so far is worth US$42,1 million, twofold from the US$21,3 million sold last year.

A total of 4,1 million kg valued at US$8,1 million has been sold at the three auction floors, while contract floors accounted for 12,3 million kg worth US$34 million.

Auction floors average price per kg has also improved from US$1,90 to US$2,77, while contract floors prices have firmed to US$2,84 from US$2,53 offered in the same period last year.

At the same time, contract floors have offered US$5,80 as the highest price, while auction floors offered US$4,99 as their ceiling price.

The ceiling price offered at auction floors attracted a backlash from TIMB chairperson Monica Chinamasa during the official opening of last year’s marketing season.

“My question to the buyers is does it mean that auction tobacco cannot fetch a price higher than US$4,99 while at contract sales, prices as high as US$6,20 per kg were witnessed in 2014? How else can you explain the US$4,99 ceiling price if it is not collusion?,” she queried.

Chinamasa, who sees the need for a better pricing model this year, said the dwindling golden leaf cultivation was a cause of concern, adding the board was committed to improving productivity and ensuring a more predictable pricing and purchasing pattern.

In 2009, tobacco prices averaged US$2,98/kg before falling slightly to US$2,88/kg in 2012 and further declining to US$2,73/kg in 2011.

The average price of tobacco closed the 2012 marketing season at US$3,65/kg and grew further to US$3,67 per kg in 2013.

In 2014, the average tobacco price dropped to US$3,17/kg before sinking further to US$2,93/kg last season, which has prompted some farmers to ditch the crop.

This year, the number of tobacco growers plunged by 22% from 92 430 last season to 71 728 after farmers failed to raise money for inputs due to poor prices.

Production this year is projected to dwindle to 170 million kg from 199 million recorded last year.

According to tobacco experts, with Brazil, India and Tanzania having downsized their tobacco production this year, it is highly estimated that the global demand for the golden leaf will swell, pushing up local prices.