US$4.99 tobacco price cap removed

By ZBC Reporter

THE Tobacco Industry and Marketing Board (TIMB) has finally resolved to review the long-standing price cap of the golden leaf sold through the auction system, in a development expected to enable farmers get real value for their hard work.

For many years, the highest price per kilogramme of tobacco sold through the action system stood at US$4.99, a cap that has been attributed to less sales through auction as compared to the contract system, where the average price is well above five United States dollars per kilogramme.

However, TIMB Chairperson Patrick Devenish says this is set to change, owing to a resolution by the country’s tobacco regulatory board to review the price ceiling.

Yes we will be doing that, remember the Auction floors has best competition. The average price of 2.82 per kg was at auction floors while contract was lower. There is actual price of the leaf depending on quality. So the beauty of removing the cap will see buyers competing, hence triggering high prices for the benefit of farmers. So, there will be a new cap for auction to compete with the US$5.40 prevailing at contract system, he said.

Farmers and auction floors hailed the development but feel that tobacco pricing matrix should be determined by the principles of demand and supply, as well as the quality of the leaf.

We welcome the removal of the 4.99 cap, because we want to see auction system bouncing back. We hope TIMB will go an extra mile to remove the cap totally so that price matrix will be determined by quality of the leaf.

This move is good and has been long overdue. It will enhance profitability of the farmers and auction floors viability which has nosedived over the years.

The removal of the 4.99 auction system cap comes on the backdrop of a 60 million United States dollar local funding availed by government to revive auction floors, which are expected to boost the country’s tobacco net foreign currency revenue from 12.5 percent to 30 percent in coming seasons.