Source: Tobacco auctions back to life | The Sunday Mail

TOBACCO farmers who benefited from the $28 million credit facility from the Reserve Bank of Zimbabwe are expected to produce 44 million kilogrammes this year in what will go a long way in shielding the auction system, which had come under serious threat from the contract system.
Zimbabwe, the world’s fourth largest tobacco producer, has a dual marketing system where the produce is sold through auction and contract.

Over the years, the auction system, which determines minimum grade prices for contract sales, has been falling with 80 percent of the crop now sold through the contract system, according to official data.

Industry players had warned the collapse of the auction system would lead to massive price manipulation through contract sales as the majority of farmers are contracted by private firms.

Some industry players were worried that the gradual decline of the auction system over the last five years could result in price manipulation in favour of the contractors, which would frustrate tobacco farmers from growing tobacco, which earns Zimbabwe nearly a billion dollars annually.

Tobacco is Zimbabwe’s largest foreign currency earner and last year its production totalled 200 million kg, earning the country close to a billion dollars in export revenue.

The auction system used to be the marketing model of tobacco around the world, but “free” tobacco volumes have shrunk as farmers, mostly those who benefited under the land reform, joined contract schemes as they did not have the funding to finance themselves.

The support for tobacco through the Tobacco Industry and Marketing Board (TIMB) amounted to $28 million.

“This support is expected to produce 44 million kilograms of tobacco,” central bank governor Dr John Mangudya said in his Monetary Policy Statement,

“These facilities, which are priced at all-in interest rates ranging between 7,5 percent for exporters and 10 percent for non-exporting activities have had significant impact in supporting production for both local consumption and export generation.

Analysts however, expressed reservations over the projected 44 million kg, arguing the dry spell, which hit most parts of the country, could affect expected production.

“On paper yes, but looking at the situation on the ground, it is difficult to meet the target. The dry spell really affected farmers and part of the crop is a write off,” said an official with a local tobacco contractor.

Last week, Tobacco Industry and Marketing Board chief executive Andrew Matibiri said the dry conditions had withered the tobacco crop and prevented farmers from applying top dressing fertiliser. He said the prolonged dry spell made it impossible for some of the crop to grow.

While he hoped the rains currently received could redeem some of the crop, Dr Matibiri stressed that part of the crop had already been lost.

“Tobacco has been affected because without the rains, most of the farmers could not apply top dressing fertiliser,” Dr Matibiri said.

“Some of the crop has obviously been lost,” he said.

Dr Matibiri said a countrywide crop assessment exercise would be conducted to ascertain the extent of the damage to crop.

Fears abound this year’s tobacco yield will be compromised due to a scorched crop.