HomeBusiness DigestTIMB bullish as tobacco hits US$416m

TIMB bullish as tobacco hits US$416m

BY FIDELITY MHLANGA

THE Tobacco Industry and Marketing Board (TIMB) this week said the country was on track to achieve the 200-million-kg target set at the beginning of the selling season in April after deliveries reached 150 million kg on the 46th day of trading on Tuesday.

The figure was 23% higher than volumes that had been delivered during the same period last year.

TIMB data showed the industry had generated US$415,8 million by Monday, compared to US$296,8 million during the same period last year.

However, concern over low prices that have been obtaining at the contract floors rage on.

In an interview with businessdigest, TIMB spokesperson Chelesani Moyo said while deliveries had slowed down recently, the regulator was expecting another spike during the final weeks of the season.

“With deliveries to date we are still hopeful we might attain the 200 million kg target,” Moyo said.

“However, we are seeing a decline in deliveries from small-scale farmers. The remainder of the crop is expected to come from commercial farmers who usually bring in their tobacco towards the end of the marketing season,” Moyo added.

This year’s average price for both the auction and contract floor tobacco has been firmer at US$2,72 per kg compared to US$2,38 per kg during the same period last year.

But the average price for tobacco sold through the auction system has averaged US$2,80 per kg, which is higher than auction system tobacco.

The industry is worried that this could prejudice farmers as contracted tobacco represents over 90% of the entire crop.

TIMB said prices were firmer at auction floors due to stiffer competition.

“At the auction floors there are several buyers. Therefore there is competition which eventually pushes prices higher. On the other hand contract buyers stand guided by the previous day minimum auction floor grade pricing matrix index, hence the average price offered is slightly lower than at the auction floors,” Moyo said.

Tobacco Association of Zimbabwe president George Seremwe said: “We are worried that the prices at contract floors are falling. The dominance of the contract system will always affect farmers in the long term. We are very much concerned. It is our hope that we will see more free (auction floor) tobacco in the coming season to make sure that the prices remain firm as competition will be fair without shortchanging farmers. We have too many middlemen. This should be scrutinised. It’s an area of concern that needs to be attended to by relevant authorities so that we come up with local funds and have free tobacco sold via auction floors.”

Contract sales were introduced in 2004 to ensure continued and reliable production of the export crop after farmers struggled to raise funding for their operations.

Through the contract system, farmers are given funding to grow the crop.

When they sell their produce, the money will be deducted through a stop order system.

Before that tobacco auction floors enjoyed a 76,8% share of the market.

This has since declined to less than 10%.

The data showed that about 41 contract floors are buying the golden leaf and have so far received a huge chunk of 142,7 million kg valued at US$387,5 million.

The auction floors have handled a mere 10,1 million kg valued at US$ 28,3 million.

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