LIVINGSTONE MARUFU
Hoarding and declining world production is pushing up tobacco prices, the Tobacco Industry Marketing Board (TIMB) CEO, Meanwell Gudu, has said.
It comes as experts project world production to decline by between 15% and 20%.
They expect tobacco demand to outstrip supply causing firm prices to prevail on the market.
“Due to reduced volumes in Zimbabwe this season, there is more pressure on the demand side to take the crop, which is naturally increasing prices. This is being experienced in the medium to filler grades,” Gudu told Business Times.
He said some “kind of hoarding of tobacco is happening right now and that is influencing prices”.
“Now that the world has lifted the Covid-19 restrictions and uncertainty in the possibilities of other waves, customers are likely going to grab this opportunity to stock up their tobacco, thereby increasing artificial demand,” Gudu said.
As of Friday last week, 11.45m kilogrammes of tobacco were delivered to TIMB, grossing US$31.44m.
This year’s average price per kg was US$2.74 against last year’s US$2.50/kg.
The Zimbabwe Tobacco Association CEO, Rodney Ambrose said prices are good across all grades and “we only expect them to get better as we go to better grades”.
The rainfall season was late with effective planting rains received around end-November to mid-December 2021.
The irrigated crop is medium to heavy bodied, predominantly lemon in colour and reflecting a fair to good quality.
The main dryland crop is medium bodied in the commercial sector whilst being light to medium bodied in the smallholder sector.
The late dryland crop has poor stand due to prolonged dry spell which was experienced post planting time towards end of December.
Gudu said the tobacco sector was still battling viability challenges that include high cost of production, increased US$ component in the cost of production and Anti-Tobacco Production and Marketing Campaign Threat that has hindered the growing of the golden leaf in the country.
“But, we are enforcing additional minimum standards for sustainable tobacco production for both merchants and tobacco growers,” he said, calling for the reviewing of the existing legal framework to enforce sustainable tobacco production.
Gudu also expressed concern over limited local financing and low net tobacco export benefits.
“After export, only the value-added component accrues to the country while the rest of the export proceeds are used to service offshore loans accessed during the buying season.
“Localisation of tobacco production and marketing financing has potential to maximise the net export proceeds. This is an investment opportunity,” TIMB boss said.
The country is currently processing +/-2% of the tobacco leaf into cigarettes.
