Government hikes prices of tobacco leaves

MANILA, Philippines — The National Tobacco Administration (NTA) has approved higher minimum buying prices for native, Virginia and Burley tobacco for trading years 2018 to 2019.

The new floor prices were approved during the Tobacco Tripartite Consultative Conference held earlier this week.

For Virginia tobacco, which makes up almost 60 percent of total local production, the floor price per kilogram for the top grades increased to P82 for Grade AA, P81 for A, P80 for B, P78 for C, P70 for D, and P69 for E.

For Burley, top grade A rose P2 to P70 per kg, while grade B and C are up to P67 and P58 or an increase of P2 for both.

Low grade Burley also increased to P47 for D, P46 for E and P38 for F.

The floor prices for native high-grade tobacco likewise increased from P70 to P71, medium 1 from P58 to P60, and medium 2 from P48 to P50.

According to the NTA, there will be no floor price increase for low grade leaves or rejects for all tobacco types to discourage farmers from producing inferior quality tobacco.

Farmers actually negotiated for as high as P16.77 increase per kg across all grades but leaf buyers opposed this and asked for a status quo for all floor prices, in order to survive the current conditions of the industry.

This was due to the reduced sales of cigarettes as a result of increasing excise tax rates and the implementation of a nationwide ban on smoking in all public places in the country.

Tobacco farmers were eventually satisfied with the negotiation after leaf buyers agreed for a “small increase” for each type.

“We need any increase we can get to inspire our farmers to produce tobacco as I can’t imagine them working with higher production cost with reduced profit,” National Federation of Tobacco Farmers Associations and Cooperatives president Mario Cabasal said.

NTA administrator Robert Seares said the agency would now focus on the reduction of production cost of farmers, by offering subsidy in the form of production assistance.

The conference, hosted by the NTA every two years, was attended by tobacco farmers’ groups and tobacco manufacturing companies.  Its purpose was to evaluate and negotiate the floor prices of unprocessed tobacco leaves.

The last tripartite conference was held in September 2015.

Floor price is the minimum price allowed by the government for the procurement of tobacco from farmers. This is based on the prevailing market conditions such as production cost, reasonable margin of profit for stakeholders and growing conditions.

The setting of the minimum floor price provides tobacco farmers a guaranteed minimum return on investment of at least 25 percent for expenses incurred in production.