TIMB panics over low tobacco prices

THE Tobacco Industry and Marketing Board (TIMB) has pressed the panic button, requesting input from players to respond to “negative publicity” over low prices at the auction floors.

BY NDAMU SANDU

NewsDay reported last week that a number of buyers were getting the golden leaf at low prices at auction floors and reselling the crop to contractors at higher prices.

TIMB chief executive officer Andrew Matibiri wrote to buyers, contractors and auction floors last week for input before the regulatory body compiles a response to the low prices.

“The tobacco industry has of late been attracting negative publicity mainly over prices of tobacco. TIMB would like the industry to be pro-active in responding to this negative publicity.

Resultantly, TIMB is soliciting for industry’s views to be reflected in this response,” Matibiri wrote in a letter dated March 27 2015.

Players were supposed to have submitted input by close of business yesterday amid indications they won’t be as candid as expected fearing a backlash from the regulator.

Matibiri said the responses would be collated as an industry position “on prices and other pertinent matters affecting the industry”.

The move by TIMB comes as NewsDay heard yesterday that a number of contractors licenced by the regulator have no capacity to buy the crop. The contractors (names supplied) then enter into an agreement with a big contractor to buy the tobacco they contract on their behalf.

This, experts said, would result in the low prices and the contractor has to make a profit when selling to the big contractor.

“A contractor is supposed to be a real ‘A’ class buyer with intention to export most of the crop they buy. If a contractor becomes a middle man, buying from farmers on behalf of bigger contractors, then the farmer becomes vulnerable, because essentially, that contractor is a middle man,” a contractor said yesterday.

“The real motivation of the big contractors to agree to come and buy on behalf of smaller contractors is essentially selfishness! They are happy to buy a crop that is not on auction floor where there is more transparency in the open bidding with other real ‘A’ class buyers. On contract floors, there is no open bidding hence its less transparent.”

Farmers have in the past complained of low prices being offered by buyers with TIMB arguing that it had implored buyers to offer prices commensurate with the quality of the crop.

At the official opening of the tobacco marketing season, farmers stopped the auctioning of the crop over low prices. The process resumed after the intervention of farmers organisations and TIMB.

Speaking at the official opening of the tobacco selling season early this month, TIMB board chairperson Monica Chinamasa questioned the huge disparity in prices prevailing at auction and contract sales.

She said the maximum price ceiling of $4,99 per kg that had prevailed at the auction floors for the last two years was not desirable and not reflective of the true value of the leaf.

“My question to the buyers is that, does it mean that auction tobacco cannot fetch a price higher than $4,99, while at contract sales, prices as high as $6,20 were witnessed in 2014?”