Prices firm as tobacco season begins

BY BUSINESS WRITER ZIMBABWE’S tobacco marketing season kicked off yesterday, with the first leaf fetching US$4,30 per kilogramme at the auction floors in Harare. This price was higher than the US$4 per kg at the start of the selling season last year. Farmers’ unions urged their members to hold on to their best quality leaf for now as prices were expected to firm as the season progressed. Opening prices were US$4,50 per kg in 2019 and US$4,90 in 2018. Tobacco is Zimbabwe’s biggest agricultural export and its marketing season is highly anticipated as it beefs up foreign reserves and helps the cash-strapped economy pay off a string of overdue commitments. But in the previous season, farmers were affected by a controversial payment model where they were paid half of their earnings in foreign currency, with the other half being paid in Zimbabwe dollars at a fixed exchange rate of US$1;25, which threw them off the rails. The country was relapsing into dollarisation at the time and most of the inputs required by farmers were paid for in United States dollars. This meant that they used the Zimbabwe dollars to buy foreign currency at extremely high black market rates. But ahead of this year’s new marketing season, the Reserve Bank of Zimbabwe revamped the model and now 60% of their tobacco proceeds will be in US dollars, while the remainder will be in Zimbabwe dollars at the official exchange rate. In an address to farmers as sales started, Agriculture minister Anxious Masuka said the new payment arrangement gave “a better return for farmers this season”. However, speaking ahead of the marketing season, the Zimbabwe Tobacco Association (ZTA) said the retention rates did not reflect production costs. “The 60% falls short of our foreign currency cost of production component which reflects a minimum of 70%. Compounded to this shortfall is that 40% of sales proceeds will be paid at the official rate of $84:US$1 versus re-tooling rates above $100:US$1,” the ZTA said. Last year, Zimbabwe earned around US$460 million from 183 million kg of tobacco sales, according to the Tobacco Industry and Marketing Board. About 96% of this year’s crop was grown under contract, with the remainder expected to be sold at the auction floors. In an interview, Premier Tobacco Auction Floors (PTAF) executive director Owen Murambi said this year’s crop was affected by heavy rains, adding that they expected prices to firm as the season progressed. “The crop was affected by excessive rain, but we expect prices to improve as the season progresses,” he said. PTAF auctioned 450 bales on the first day, compared to about 100 last year. An official at Boka Tobacco Auction Floors said the firm’s volumes on the first day were boosted by decentralisation to other towns outside Harare. Follow us on Twitter @NewsDayZimbabwe The post Prices firm as tobacco season begins appeared first on NewsDay Zimbabwe.

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