Rejection rates for tobacco by buyers at the auction floors is reported to be on the increase and it has been observed that it is growers with no contracts with buying companies who are facing more rejection.
Others have actually accused buyers of victimising non-contracted growers through both rejections of their tobacco and lower prices.
AHL Group’s Deputy General Manager responsible for tobacco sales, Henderson Kanjadza told The Business Times at the Kanengo Auction Floors that rejection rates have in some cases reached up to 90 percent.
“It looks like the buyers prefer the tobacco on the contract because they want farmers to repay their loans with the banks,” said Kanjadza.
He said the situation is worse with flu cured tobacco as buyers have indicated that they only need suppliers from contracted growers who were supported with loans under the Integrated Production System (IPS).
This, according to Kanjadza, leaves out over six million kilogrammes of flu cured tobacco who will have no market if the buyers maintain their stand.
“What is surprising is that you find the same tobacco rejected from auction growers being bought by the same buyers from contracted farmers,” said Kanjadza.
Tobacco Control Commission (TCC) Chief Executive Officer Bruce Munthali confirmed that there is a market problem with the flu cured tobacco. “It seems like there is more [flue cured tobacco] than what the buyers are willing to buy,” said Munthali.
“But we been discussing with the buyers on that and we expect things to change soon,” he said.
The Business Times’ visit to the Kanengo floor also confirmed that contracted farmers are getting better prices. The TCC allocates 80 percent of the total tobacco volumes under IPC and 20 percent under auction as the two systems run concurrently.
Despite the problems, the tobacco market is generally showing signs of progress so far with more earnings and volumes. The market, as of last week, sold 52 million kilogrammes of tobacco for US$83.2 million which compares favourably to last year’s figures of 45.8 million kilogrammes that generated US$68 million during the same period.
The total average price at US$1.68 per kilogramme is also higher compared to the same time last year when it was recorded at US$1.46 per kg, according to TCC.
Flue cured in particular has also registered a price jump of 34 percent compared to last year while burley tobacco has registered a 6 percent price increase.
Munthali said this year’s tobacco quality has been satisfactory and that growers are being urged to maintain the standards in order to fetch better prices on the market.
BY CAROLINE KANDIERO AND KINGSLEY JASSI