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Tobacco floor prices up

NTA has approved new floor prices for tobacco for the next two trading years, 2018 and 2019.

The new prices for the three tobacco types—Virginia, Burley, and Native—were approved during the continuation of the Tobacco Tripartite Consultative Conference held at the NTA Central Office in Quezon City on September 19.

The price increases came almost two weeks after negotiations on price adjustments between the tobacco farmers and leaf buyers at said tripartite conference on September 6 ended with a deadlock, paving the way for another round of consultative meeting.

For Virginia tobacco, which makes up almost 60% of the total tobacco production area in the country, the floor price per kilogram increased to P82 for Grade AA, P81 for A, P80 for B, P78 for C, P70 for D, P69 for E, P60 for F1, and P57 for F2. The former prices are 81 for AA, P79 for A, P77 for B, P75 for C, P68 for D, P67 for E, P59 for F1, and P56 for F2.

For Burley, the top-grade A rose by P2, bringing the price per kilo to P70 from the current P68. The floor prices for grades B, C, D, E, and F are now P67, P58, P47, P46, and P38, respectively, an increase of P2, except for Grade F which increased by P1, from the current price per kilo.

The floor prices of Native were increased as follows: High-grade, from P70 to P71; Medium 1, from P58 to P60; and Medium 2, from P48 to P50.

However, there would be no increase of floor prices for Rejects, which remain at P46 for Virginia; P28 for Burley; and P40 (L-1) and P25 (L-2) for Native.

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 mar-ket conditions such as production cost, reasonable margin of profit for stakeholders, and growing conditions.

During said tripartite meeting, the farmers negotiated for as high as P16.77 increase per kilo across all grades, taking into consideration the increase of prices of farm inputs for tobacco production.

But the leaf buyers had earlier wanted a status quo for all floor prices, in order to survive amidst reduced sales of cigarettes as a result of increasing excise tax rates, and lately, the implementation of Executive Order No. 26 that bans smoking in all public places nationwide.

Farmer leader Mario C. 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 prices.

"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 but with reduced profit," said Cabasal.

According to NTA Administrator Robert L. 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 or fix 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.