BAT raises tobacco farmers pay to Sh1.3bn on improved quality
What you need to know:
Although the BAT affiliated farmers earned more money collectively, the sector in general has seen some tough times this year following the decision by a major buyer—Alliance One— to stop buying leaf from Kenyan farmers citing low quality.
British American Tobacco (BAT) raised the price per kilo for its contracted farmers to an average of Sh175 for leaf delivered by end of May, marking an increase of Sh8 over the 2015 price.
BAT says its total pay-out rose to Sh1.31 billion for the 2016 harvest from Sh1.24 billion received in the 2015 harvest, which was a Sh60 million drop from 2014.
The amount paid rose even as the number of farmers and tonnage delivered registered only a marginal increase. The BAT had 5,546 growers under contract for the 2016 season compared to 5,537 as at May 2015.
“In the 2016 tobacco growing season which ended in May, our farmers delivered 7.5 million tonnes of leaf and received over Sh1.3 billion (Sh174.93 per kilo) in payment due to further improvement in the quality of tobacco grown and delivered,” BAT told the Business Daily.
The tonnes delivered in 2015 stood at 7.45 million, having dropped significantly from 2014 due to poor weather and a drop in number of contracted farmers. In 2014, the company had taken delivery of 8.1 million tonnes from 5,900 farmers.
Adverse weather
“The drop of about 500,000 metric tonnes tobacco grown and delivered in 2015 was caused by adverse weather conditions in the tobacco growing areas. However despite this reduction, our farmers received more per kilo—Sh166.72 per kilo in 2015 compared to Sh163.33 per kilo in 2014,” said BAT.
Although the BAT affiliated farmers earned more money collectively, the sector in general has seen some tough times this year following the decision by a major buyer—Alliance One— to stop buying leaf from Kenyan farmers citing low quality.
Alliance One ceased operations in Kenya last year in favour of Uganda and Zimbabwe, leaving more than 10,000 farmers without a buyer for their crop.
The BAT had earlier this year already ruled out purchasing leaf from non-contracted farmers, citing rules passed in 1994 that prohibit tobacco purchase from growers without a contract. The contracted farmers have a set amount of product to deliver to the processors.
The other major buyer of leaf in Kenya is Mastermind Tobacco, makers of the Supermatch brand of cigarettes.
In addition to the exit of a key buying company, tobacco farmers have also had to contend with what they say is difficulty in getting their produce assessed at a high grade, resulting in low prices per kilo of tobacco for most of them.
The price of tobacco is determined by leaf grade, with the highest grades fetching above Sh200 and the lowest less than Sh100. They could also face lower prices should the processors choose to pass on the additional cost of new regulations to their suppliers and customers.
