Tobacco prices remain depressed
Tabitha Mutenga Features Editor
Financial Gazette 19/5/2019
THE Zimbabwe Tobacco Association (ZTA) says prices of the golden leaf have remained static at an average US$1, 65 per kilogramme this year compared to US$2,91 per kg last season.
Tobacco is Zimbabwe’s leading foreign currency earner, accounting for nearly a fifth of Zimbabwe’s US$5,3 billion export earnings in 2018, bringing in almost US$1 billion.
However, the latest announcement by the ZTA is a blow for a country already in dire economic straits The usual hype associated with the tobacco marketing season has this year been diminished by the confusion caused by RTGS$ and US$50 percent payment component.
It is estimated that by the end of the month close to 190 million kilograms should have been sold and with farmers estimated to complete sales in mid-August, the national crop size could reach plus or minus 230 million kg. (Zimbabwe Tobacco Association)
The situation has also been compounded by the growers’ attitude as they adopted a wait-and-see approach while others who sold their crop were disillusioned by low prices offered by merchants.
The opening bale price of US$4,50 per kg, US$0,40 less than the price of the first bale last season, was not good news for the majority of growers as they were not motivated by the opening price to deliver their crop.
ZTA noted that although a price ceiling of US$4, 99 per kg has been maintained on the floor, very little tobacco had attained this pricing compared to previous years.
“In recent days, there has been an improvement in prices, though daily volumes are declining. On contract floors, after a significant weakening of prices to well under US$2 per kg, there has been a welcome improvement, with daily averages above US$2 per kg, as higher quality leaf grades of commercial tobacco come onto the market and firmer prices are being paid for some lower leaf styles.
“However, with close to 70 percent of the national crop sold, this recent improvement in prices has come too late,” the association said.
On day 57 of this year’s marketing season, 171, 2 million kg of tobacco at an average price of US$1,87 per kg had been sold, a decrease of 11,1 percent in volume and a significant 36 percent decrease in seasonal average price.
The seasonal auction price is down 41 percent, while the seasonal contract price is down 36 percent compared to 2018. Auction volumes remain on the decline, accounting for just 13 percent of the total volume sold to date.
Daily volumes during the month increased significantly, with close to 80 million kilogrammes sold in May 2019. Daily deliveries in June have dropped as a large number of small-scale farmers start completing their sales.
“It is estimated that by end of the month close to 190 million kilogrammes should have been sold and with farmers estimated to complete sales in mid-August, the national crop size could reach plus or minus 230 million kg,” ZTA said. [email protected]