Zimbabwe: firm tobacco prices expected at auction

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Preparations for the opening of the 2022 tobacco marketing season are advanced and prices are expected to strengthen due to the expected reduction in volumes.

This year, the auction floors will open on March 30 while contract sales will begin on March 31.

Most of the tobacco will be sold through contract floors as 118,465 registered farmers are under contract while 4,530 self-financed producers will sell through auction floors.

Ninety-five percent of tobacco is produced under a contract system while 5 percent of farmers are self-financed.

This season, tobacco growers will receive 75% of their sales proceeds in foreign currency and the remaining 25% in local currency, converted at the prevailing exchange rate at the auction on the day of the sale.

The 75% will be paid directly into producers’ foreign currency accounts and will be treated as free funds, while 25% in local currency will be deposited into producers’ local bank accounts or e-wallets.

There will be strict Covid-19 regulations on all floors of auctions and contracts to curb the spread of the disease.

Auction floors are needed to consolidate tobacco deliveries to minimize the number of farmers coming to Harare.

Briefing reporters on the readiness yesterday, TIMB Managing Director Mr. Meanwell Gudu said prices are expected to improve this season due to increased demand.

“Brazil is at risk of being 80 million kilograms below its usual production level due to the drought. This creates less competition for us. India has pegged its 2021-22 production of Flue Cured Virginia at 270 million kilograms, compared to 236 million kg the previous year.

“Prices for premium tobacco grades for premium brands are expected to remain unchanged ($3.5-$5.40/kg) from last season. The premium market for this grade has reached its price increase ceiling. The main market for these grades is in China and there is no indication of price increases,” he said.

Mr Gudu said Brazil had a flavor almost similar to that of Zimbabwe, but faced consistency issues in sourcing orders and some flavor shifts sometimes due to natural disasters like floods. .

“Due to the expected reduction in volumes in Zimbabwe this season, there will be more pressure from the demand side to take the crop, which should naturally increase prices. This will likely occur in intermediate to filler grades.

“Some sort of tobacco hoarding is likely to occur which could influence prices to be better due to logistics disruptions caused by Covid-19.

“Supply chains have been disrupted from 2020 to 2021 due to ship shortages and the closure of some shipping lines. Now that the world has lifted Covid-19 restrictions and uncertainty over the possibilities of other waves, customers are likely to take this opportunity to stockpile their tobacco, thereby increasing artificial demand,” he said.

Acting Director of Operations of TIMB, Mr. Blessing Dhokotera, said 122,995 growers had registered with TIMB for the season compared to 145,000 farmers during the same period last year.

Of the registered producers, 607 are registering for the first time compared to 1,600 last season.

Mr. Dhokotera attributed the drop in the number of registered producers to the strict measures taken by TIMB to ensure compliance with the regulations.

“TIMB approved 33 contractors compared to 39 last year, 33 Class A buyers compared to 31 last season and we also approved wrapping paper suppliers.”

“Auction prices will be determined through the bidding process, with the highest bid being the final price for each bale of tobacco.

“A grade price matrix derived from the average grade prices from the previous day’s auctions will determine the floor price for each grade on contract sales,” he said.

The head of the inspectorate, Mr. Savior Muvirimi, said that TIMB has put in place measures to combat parallel marketing.

“We have set up an inspection service to combat illegal activities, including parallel marketing.

“We are urging farmers to deliver their harvest to their contractors. We have also hired contractors to buy only from their contracted growers and we have recruited informants to get information on the activities illegal parallel marketing,” he said.

The 2021/22 tobacco campaign was affected by late rains.

The irrigated crop is medium to heavy bodied, mostly lemon colored and reflects medium to good quality.

The main dryland crop is medium bodied in the commercial sector, while it is light to medium bodied in the smallholder sector. The late dryland crop is showing poor performance due to the prolonged dry spell that occurred after planting in late December.

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