Will cigarette price hikes help farmers?<\/p>\n
By Slamet Hadi Purnomo<\/p>\n
SURABAYA (Antara): Retail prices of cigarettes have increased
\nup to 100 percent since the beginning of April. Will the increase
\nbenefit farmers?<\/p>\n
The opinions on the matter are divided.<\/p>\n
An observer of agricultural and socio-economic issues, Prof.
\nDr. Kabul Santosa of Jember University in East Java, says the
\ndecision by the director general of customs and excise should
\nresult in higher profits for farmers.<\/p>\n
In his opinion, the increase in cigarette prices will create a
\nbetter opportunity for tobacco farmers to sell their produce to
\nfactories at a higher price.<\/p>\n
\"I am optimistic that the increase in cigarette prices will
\nhave a positive impact on tobacco farmers who will be able to
\ngain bigger profits,\" says Kabul, who is rector of Jember
\nUniversity.<\/p>\n
He explains that although planting costs have been on the
\nincrease due to the monetary crisis, tobacco prices stand a good
\nchance of being adjusted to market conditions.<\/p>\n
\"There is no need to fear that tobacco will not sell. The most
\nimportant thing now is how to create a good partnership between
\nfarmers and cigarette factories for mutual benefits,\" he says.<\/p>\n
While the monetary crisis persists, cigarette factories are
\nhighly unlikely to rely on tobacco imports which must be financed
\nin dollars. The taste of imported tobacco also may not match
\nconsumer preferences, he says.<\/p>\n
Tobacco farmers, however, are not so optimistic. Farmers from
\nJember and Bondowoso now face high planting costs like their
\ncounterparts in Bojonegoro, Lumajang, Paiton and Madura, which
\nare the tobacco production centers of East Java.<\/p>\n
The increase in cigarette prices may only benefit the
\nbelandong (tobacco traders), they suspect. Past experience has
\nshown the farmers that tobacco market prices are determined by
\nthe belandong who have a special working relationship with
\nwarehouse owners.<\/p>\n
\"It is the belandong who lead a happy life because they never
\nlose,\" says Misnadin, 42, a tobacco farmer in Ambulu district,
\nJember.<\/p>\n
The same opinion is voiced by Priyo Soemanto, a tobacco
\nconsultant, who says the increase in cigarette prices is not sure
\nto benefit tobacco farmers.<\/p>\n
\"It may happen that in the current monetary crisis, the income
\nof tobacco farmers decreases because cigarettes are not a basic
\nneed. People will give priority to essential staple foods,\" says
\nPriyo, former chief of the Jember Tobacco Institute in East Java.<\/p>\n
Caution<\/p>\n
The current head of the institute, Surachmad, says the
\nincrease in cigarette prices should be considered with caution.<\/p>\n
He reasons that logically there should be a positive
\ncorrelation between the increase in cigarette prices and that of
\ntobacco prices because the raw material for cigarettes is
\ntobacco.<\/p>\n
However, because the market is strongly influenced by various
\nfactors such as the economic situation and the market chain of
\ntobacco, the positive correlation may not come into play.<\/p>\n
Citing an increase in cigarette prices in 1991, he says
\ntobacco was warehoused because cigarette consumption at the time
\ndecreased drastically.<\/p>\n
Cigarette prices in 1991 increased for some time in line with
\nthe increase in cigarette excise taxes, forcing consumption down
\nfrom 138.5 billion cigarettes in the previous year to 129.7
\nbillion in 1991. The cigarette consumption in 1992 increased to
\n134.6 billion cigarettes and totaled 170.4 billion in 1997.<\/p>\n
With a possible decrease in demand to come, Surachmad says
\nfarmers should not hastily increase tobacco production with the
\nobjective of gaining big profits.<\/p>\n
Should tobacco flood the market during a downturn in demand,
\nhe says, tobacco prices could fall and create hardships for the
\nfarmers who still would have to deal with high production costs.<\/p>\n
As of 1997, Jember had 18,000 hectares of tobacco producing
\nland with an output of 16,020 tons.<\/p>\n
Surachmad says the 1997 price of tobacco was good but that
\nquality was not at its best. \"However, once again, the increase
\nshould not induce the planting of tobacco on a big scale.\"<\/p>\n
Top quality dried tobacco leaves cost between Rp 1.25 million
\nand Rp 1.75 million per quintal, with medium quality costing
\nbetween Rp 800,000 and Rp 1 million per quintal and \"filler\"
\ncosting from Rp 500,000 to Rp 700,000 per quintal.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/will-cigarette-price-hikes-help-farmers-1447893297",
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