Boon for farmers: Pocket 50pc of 2023 tobacco sales value If the average price continues on this trajectory, then last season’s total sales of US$897 million can be achieved from the sale of 252 million kilogrammes of the leaf. (File Picture)

 

Edgar Vhera

Agriculture Specialist Writer

TOBACCO farmers are set for rich pickings after securing 50 percent of last season’s total earnings by Day 40, thanks to a 19 percent rise in the average price from US$3, 00 to US$3, 56 per kilogramme.

If the average price continues on this trajectory, then last season’s total sales of US$897 million can be achieved from the sale of 252 million kilogrammes of the leaf.

The 2023 tobacco marketing season saw farmers delivering 296 million kilogrammes of the crop.

Statistics from Tobacco Industry and Marketing Board (TIMB) show that by Day 40, there was an 11 percent drop in tobacco auction and contract sales from US$500 453 441 last year to US$445 312 669 this year.

The impact of the El Nino drought is being felt as supply of the leaf has since declined by 25 percent from 166 987 605 to 125 104 872 kilogrammes.

The auction system had six percent of all sales after supplying 7 255 854 kilogrammes of the crop worth US$26 827 271 at an average price of US$3, 70 per kilogramme.

The remaining 94 percent of all deliveries came from the contract system after the sale of 117 849 018 kilogrammes valued at US$418 485 398 at  an average price of US$3, 55 per kilogramme.

Price-wise the average auction price is U$0, 15 higher than the contract side for every kilogramme sold.

The bale rejection rate, which was very high at the start of season has subsided to only two percent this year as compared to the same period last year, with the auction system on a high rejection level of 12 percent while its contract counterpart had a slight two percent.

The highest auction and contract prices have remained constant at US$5, 07 and US$6, 99 per kilogramme respectively. The lowest price for both floors has remained static at US$0, 10 for a kilogramme.

An analyst who preferred anonymity said the 2021, 2022, 2023 and 2024 price trend showed that the average price was pretty much within the same range, with the marginal increase this year failing to compensate for increased cost of production.

“There is no much difference in tobacco output prices for the three successive seasons, though currently this season the price is slightly elevated. However, profitability took a knock due to increased costs of production due to lack of patient local financing options as well as diminished quality due to the effect of the El Nino-induced drought,” he said.

Government localised tobacco financing last year, but farmers say they have not yet seen any changes, as local interest rates are still higher than the international ones resulting in them clinging on to contractors thereby perpetuating dependency on off-shore pre-financing loan facilities. Farmers are, however, still optimistic the US$60 million tobacco revolving fund to support the production of an initial 60 million kg initiative will see light following the operationalisation of the Tobacco Value Chain Transformation Plan (TVCTP).

 

 

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