The ‘floored price’ of tobacco


CANDON CITY — Every two years, just before the tobacco cropping season starts, stakeholders from the tobacco industry meet to discuss the floor price of tobacco. While the country’s agriculture sector produces a number of industrial crops, tobacco is the only one that enjoys state-regulated minimum buying price.

The gathering, Tobacco Tripartite Consultative Conference (TTCC), transpired in September last year. It was the first tripartite meeting under the leadership of Dr. Robert Seares, Sr. as administrator of the National Tobacco Administration (NTA).

In principle, floor prices for the different types of tobacco function as “safety net for the tobacco tillers/farmers, especially during abnormal conditions.”

The objective of the TTCC as stated in the document is to ensure “that the leaf tobacco farmers get a fair income, by protecting and maintaining a 25% return on investment (ROI) from their produce.” It is deemed as “an effective scheme of setting the floor prices” of tobacco produced in the country with consideration of important factors in production such as growing cost and conditions.

A measure of profitability, ROI intends to reflect tobacco’s efficiency compared to investing with other crops and/or its profitability to farmers.

The cost to cultivate a hectare of land for tobacco ranges from P151,000-P185,800 as of 2016-2017 cropping season according to NTA’s documents. Production cost for 2017-2018 is much higher considering the 3.2% inflation rate in end 2017 and implementation of the government’s tax reform law in January 2018.

What 25 percent?

However, data from NTA’s central office paints an image nearer to what the Solidarity of Peasants Against Exploitation (Stop Exploitation) calls “detached from reality” than their claim for a 25% ROI.

Documents obtained by Nordis from the tobacco agency contain the estimated net income and ROI using the production cost and estimated yield per hectare for 2016-2017 cropping season. The official figures show estimated ROI hitting rock bottom, with rates as low as -33.84% for the Native tobacco used as cigar fillers, which is widely planted in Isabela. Native batek, with a 9.22% ROI was the only one with positive projection among the types cultivated Ilocos.

Virginia tobacco, comprising 60% of domestic tobacco production and the dominant variety grown in the region, also had a disheartening ROI rates. Based on the computation, farmers are losing at least P6.00 and P2.00 per kilo of improved and neutral flavors respectively.

According to Zaldy Alfiler, Stop Exploitation general secretary, they formally protested the formula used by NTA to project yield and sales during the 2013 pre-TTCC study meeting and reiterated it in the 2015 and 2017 negotiations.

“The computation is flawed and misleading. With the agency’s computation, value of production in 2015 should be P1.92 billion and P1.71 billion for 2016. But since its lower, it means most of our yields were classified under lower grades and bought at a lower price,” he said.

NTA annual reports show that sales for cited years were P1.71 billion respectively not P1.78 billion and P1.57 billion respectively.

Inspiring increase?

During the September 2017 TTCC, farmers were urging for a minimum of P16.00 increase. The amount was the result of the Pre-study Group Meeting conducted by NTA together with farmer-leaders a month before the negotiations.

Stop Exploitation was demanding a flat P128 per kilo for unclassified Virginia tobacco. The group said the P16 increase is meager and reprehensible since it will only translate to P272 daily income for farmers. The cost of living for farmers with a family of five members during the same period was P830 per day.

NTA and the corporate sector turned down both demands with the former declaring the September 6 TTCC a deadlock. The participants agreed to reschedule the negotiations.

In the second consultation held on September 19, NTA only invited officials from the National Federation of Tobacco Farmers Association of Cooperatives (NAFTAC), leaving other farmer leaders who attended the first round out of the negotiations. The TTCC participants for this round approved an increase of P1.00-P3.00 on the existing floor prices of different tobacco types.

Press release from NTA to announce the new floor prices quoted Mario Cabasal, President of the (NAFTAC) saying they are “satisfied with the increase”, calling it an increase that inspires farmers. In the same agency news, Seares stated the negotiation was a success.

Leaders of Stop Exploitation and other farmer leaders excluded from the second meeting accused NAFTAC and NTA of conniving with the corporate sector for the incident.

“This recent figures from the government proved that Cabasal and NTA indeed betrayed the farmers during the negotiations,” said Alfiler.