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Tobacco revenue drops despite more volumes being sold compared to last year

The tobacco market this year has so far been outperformed by last year’s market season in revenue terms, an indication that buyers are offering low prices for the country’s major cash earner.

A recent update from Auction Holdings Limited (AHL) has shown that despite slightly more volumes of tobacco being sold so far, the commodity is being sold at a lower value than last year.

At week 12, all the auction floors in the country had sold about 81.7 million kilogrammes fetching about US$159.5 million as compared to last year’s 79.8 million kilogrammes that fetched US$178 million.

“With equivalent volumes sold, 2012 had earned US$178 million against US$159 million of 2013 translating to better cumulative average of 2012 thus far,” says the update report.

It further says cumulative average for all tobacco types is likely to rise from the current level of US$1.95 per kilogramme due to the increased inflow of high earnings from leaf styles particularly flue cured and dark fired tobacco.

The season, with a total of 156 million kilogrammes, is expected to earn the tobacco industry an estimated value of about US$300 million this year, a substantial increase from last year’s US$179 million, banking on about 90 percent increase of this year’s volumes.

Meanwhile, tobacco buyers in the country have indicated their general preference of contract marketing of tobacco to the auction marketing as non-contracted farmers have had limited space to sell their tobacco this year.

Tobacco Control Commission (TCC) recently said that stakeholders in the industry agreed to allocate three days for contract tobacco sales against two days of auction marketing but, according to statistics from AHL, this has caused a backlog of auction tobacco as volumes do not match the 20 percent quota assigned to it. – By Kingsley Jassi

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