All trade in Switzerland of indigenous tobacco is governed by the Société coopérative pour l’achat du Tabac indigene, or SOTA for short. The organization grants purchasing guarantees to tobacco farmers and in return holds sole purchasing rights, buying up their entire harvests at a pre-agreed price.
SOTA accordingly is the only agency in the country that can legally sell on the local produce to tobacco manufacturers. Hence, there exists no free raw tobacco market. Cigarette companies, including the multinationals operating in the country, are obliged to place their domestic orders with SOTA only.
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Furthermore, they are allocated a predetermined proportional annual purchasing volume calculated on their individual market shares, and regardless whether they subsequently actually use the tobacco for manufacturing – or destroy it. However, harvest prices are heavily subsidized. For top grades farmers currently receive in excess of CHF17 per kilogram, while manufacturers can then purchase the produce from SOTA for as little as CHF9 per kilogram.
The price difference is amortized via the SOTA Fund. A major disadvantage of the SOTA system is that produce is not source-labeled, as all harvested burley and virginia crops from across the country are basically pooled together. This effectively denies manufacturers to select crops from producers they trust.
On the positive side the system eliminates farmers’ selling risks and also allows them to plan ahead and reserve appropriate acreage.