South African tobacco farmers should plant more in the coming season to benefit from soaring cigarette prices and fulfil expected orders from China, an official at agribusiness group Afgri said on Tuesday.
Louis Smit, CEO of Afgri’s producer services division, said farmers could increase the size of their crop from 12-million kilograms to at least 20-million kilograms to meet the demand and benefit from surging prices.
He noted that the producer price of local tobacco was R16 in 2006 and has increased by 15% to R18,50 per kilogram this year.
“Indications for the new season are particularly positive and growers have been encouraged to increase production to fulfil expected orders both locally and from China,” said Smit.
Smit said China, the world’s largest consumer of cigarette tobacco, has indicated long-term interest in South African tobacco.
Smit said demand for cigarette tobacco worldwide should exceed supply in 2008 and all indications were that the requirement for quality tobacco would grow significantly in the near future coupled with a marked increase in United States dollar prices.
The restructured South African tobacco industry is set to benefit from this buoyant outlook, Smit said.
South Africa previously had six processing facilities throughout the country but these have since been merged into one factory capable of processing 80-million kilograms. Smit said the consolidation of the factories saved farmers R20-million in the last season.
The upbeat outlook comes in the face of hostile market conditions stemming from government’s raising of excise duties on cigarettes, which culminated in the rapid growth of illicit trade, mostly through smuggled products. ‒ I-Net Bridge