LAOAG CITY -- The National Tobacco Administration (NTA) has approved new floor prices for tobacco for the next two trading years, 2018 and 2019.
The price increase came almost two weeks after negotiations on price adjustments between the tobacco farmers and leaf buyers at a tripartite conference on September 6 ended in deadlock, paving the way for another round of consultative meeting.
For Virginia tobacco, which makes up almost 60 percent of the total tobacco production area in the country, the floor price per kilogram for the top grades increased to Php82 for Grade AA; Php81 for A; Php80 for B; Php78 for C; Php70 for D; Php69 for E; Php60 for F1; and Php57 for F2.
The former prices are lower by Php1 to Php7.
For Burley, the top-grade A rose by Php2, bringing the price per kilo to Php70 from the current Php68. The floor prices for grades B, C, D, E, and F are now Php67, Php58, Php47, Php46, and Php38, respectively, an increase of Php2, except for Grade F which increased by Php1, from the current prices per kilo.
The floor prices of the native-type were increased as follows: High-grade, from Php70 to Php71; Medium 1, from Php58 to Php60; and Medium 2, from Php48 to Php50.
However, there would be no floor price increase for rejects, which remain at Php46 for Virginia; Php28 for Burley, and Php40 (L-1) and Php25 (L-2) for native type.
Leaf buyers have insisted that there should be no price increase for low grades or rejects for all tobacco types to discourage production of low quality tobacco leaves.
Tobacco is the only industrial crop in the country that enjoys a minimum floor price set by the government.
This is based on the prevailing market conditions such as production cost, reasonable margin of profit for stakeholders and growing conditions.
During said tripartite meeting, farmers negotiated for as high as Php16.77 increase per kilo across all grades, taking into consideration the increase of prices of farm inputs for tobacco production.
But leaf buyers had earlier wanted a status quo for all floor prices, in order to survive with the current conditions of the industry, particularly on reduced sales of cigarettes as a result of increasing excise tax rates, and lately, the implementation of Executive Order No. 26 which imposes a nationwide ban on smoking in all public places in the Philippines.
Farmer leader Mario Cabasal, president of the National Federation of Tobacco Farmers Associations and Cooperatives (NAFTAC), said they were satisfied with the conclusion of the negotiation for floor price increases.
He added that during the impasse, leaf buyers, through Director Rodolfo Salanga, have hinted that they were open to recommendations of farmers 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,” Cabasal said.
According to NTA Administrator Robert Seares, with the success of the negotiation, the agency will now focus on the reduction of production cost of farmers in their venture, by offering subsidy in the form of production assistance.
The setting of the minimum floor price provides tobacco farmers a guaranteed minimum return on investment of at least 25 percent for expenses.
The actual buying price, which is based on prevailing market prices, is usually higher than the minimum floor price.
NTA is authorized to set tobacco floor prices, as mandated by Presidential Decree (PD) No. 627 s. 1974 (for all tobacco types except Virginia), PD No. 1481 s. 1974 (for Virginia), and PD No. 1143 s. 1977 as amended (for Burley), by adopting a tripartite consultative conference. (PNA)