Global demand buoys tobacco prices

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Action at a tobacco auction floor

BY FIDELITY MHLANGA
THE rising global demand for flue-cured tobacco has buoyed the firming of local golden leaf prices this season compared to last year.

According to latest figures from a Germany company specialising in market and consumer data, Statista, Zimbabwe is one of the top four producers of tobacco in the world after China, India and Brazil.

According to statistics from the Tobacco Industry Marketing Board, as of day four of sales, average price firmed 10% at US$2,66 this season from last year’s US$2,43.

Tobacco valued at US$11,75 million was delivered in the first four days of the season.

However, this is 21% lower than US$14,9 million realised in the same period last year.

Zimbabwe Tobacco Association chief executive officer Rodney Ambrose told NewsDay Business that the strong world demand for tobacco was pushing prices northwards.

“The season has started on a good note with the average price up 11% on last season and we anticipate a further firming up of the market as volumes increase and higher qualities and styles of tobacco are delivered. The higher prices will be primarily driven by strong world demand,” Ambrose said.

“Growers on contract will start accessing their full 75% retention once they have repaid their contractors’ loans. At present, there are no major issues with regards to sales proceeds.”

Reserve Bank of Zimbabwe governor John Mangudya increased farmers’ retention threshold to 75% from last year’s 60%.

This means farmers will receive 75% of their earnings in foreign currency, with 25% being paid in the Zimbabwe dollar, converted at the prevailing official exchange rate.

Tobacco Association of Zimbabwe president George Seremwe said it was the farmers’ wish to get all proceeds of their sales in hard currency.

“Farmers are still hoping for a positive response about a proposal that they get between 90% and 100% of the retention,” Seremwe said.

Farmers operated in a challenging environment, characterised by climate change-induced erratic rainfall patterns with heavy rains in January causing waterlogging and leaching.

Although a higher irrigated crop was grown, planting of the late dryland crop had to be extended to January.

Consequently, this, according to Agriculture minister Anxious Masuka, is expected to affect yields and overall national output.

With 211 million kg sold last season and 133 million kg coming from small-scale farmers, this year’s output is envisaged to tumble.

“Farmers look forward to getting a decent return for their effort. Contractors look forward to recovering their loans in full and making a decent profit. Banks, too, are holding their breath, looking forward to the full repayment of loans advanced in good faith to many value-chain financiers. Our merchants, local and abroad, wait to see the quality of the crop and consummate deals to ensure that the entire run of the crop has a market,” Masuka told delegates at the official opening of the marketing season last week.

“As the minister responsible for this subsector, my gaze, and mind, are fixed on the entire value chain — on fairness, on ethics and probity, on transparency, on accountability, on discipline, on equity and on sustainability. Such is the thrill, anxiety, and business that this golden leaf brings to the industry and the entire country.”

This year’s tobacco was planted on 110 155 hectares by 122 841 growers, with 600 growers registering for the first time.

The board has licensed three auction floors for the 2022 marketing season, which are Tobacco Sales Floor, Boka Tobacco Floors and Premier Tobacco Auction floor.

There are 35 licensed A class buyers and 33 contracting companies.

The board has approved decentralised contract sales in Karoi, Mvurwi, Bindura, Marondera and Rusape.

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