Govt eyes bigger earnings from high tobacco prices

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National Tobacco Administration (NTA) Administrator Edgardo Zaragoza expressed optimism that this year’s season for all tobacco variants will be a success following the increase in floor prices of Virginia, Burley and     Native tobacco.

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The government wants to achieve a bigger sales volume to take advantage of the high buying prices of tobacco as the trading season for Burley and native tobacco varieties started.

Tobacco growing areas in Ilocos have started trading for Virginia tobacco as early as the third week of February.

To recall, the NTA approved the P6 increase for floor prices across all grades for Virginia and P3 to P10 increase for Burley and native tobacco for the trading year 2014-2015.

“The rate of high-grade Virginia leaf (AA) is now P78, while high-grade Burley and native fetch P61 and P66,” Zaragoza said.

Tobacco is the only industrial crop in the country that enjoys a minimum floor price support set by the government.

The floor price is the minimum price allowed by the government for buyers of tobacco from farmers. This is set based on the prevailing market conditions such as production cost, a reasonable margin of profit for stakeholders and growing conditions.

The actual buying price, which is based on prevailing market prices, is usually higher than the minimum floor price.

The setting of the minimum floor price provides tobacco framers a guaranteed minimum return on investment of at least 25 percent for expenses.

As of December 2013, the NTA said that at least 66.6 million kilograms of locally grown leaf tobacco, with a farmgate value of P4.6 billion were traded with major buyer firms.

But with a higher farmgate price for this year, Zaragoza said, there is plenty of room for growth of local production of tobacco.

The NFA chief also said that he is optimistic that with an increased share in the excise tax of tobacco, and continued commitment of buyer-firms and manufacturers to purchase all the farmers’ produce for the crop year, local production will remain high.

For this year’s trading season, the agency announced that it has granted requests for the official opening of 11 registered/licensed trading centers on the early weeks of trading seasons in Ilocos provinces.

The agency through its Regulation Department, in compliance with the Rules and Regulations on the trading of locally grown leaf tobacco, has issued licenses to 54 trading centers, 21 of them for Virginia type in Ilocos Sur, Ilocos Norte, and La Union.

The agency has also issued permit to purchase to 10 wholesale tobacco dealers, and certificates of authority to buy leaf tobacco to 288 field representatives.

The agency had conducted a month before the trading season an orientation seminar in Candon City on the rules and regulations on the trading, wholesaling and redrying of locally grown leaf tobacco.

The orientation seminar is a prerequisite for applications for licenses or permits to buy or redry leaf tobacco, and Certificate of Authority to the tobacco traders, trading center operators and field representatives.

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