Obert Chifamba Agri-Insight

If latest figures from the Tobacco Industry and Marketing Board (TIMB) on the 2020 tobacco sales are anything to go by, it will certainly not require rocket science to tell that free tobacco farming will continue taking knocks that may have a crippling effect later if the economy does not stabilise soon.

Statistics from TIMB indicate that by late last week, 54 million kilogrammes of the golden leaf had been sold, with contract tobacco accounting for 53 million kilogrammes and the remaining one million kilogrammes coming from the auction category.

Contract farmers have since pocketed US$120 million, while their counterparts have only taken home US$4 million, bringing to US$124m the money generated from the crop’s sales since the floors opened on April 27.

At least 688 220 bales of tobacco have so far been sold through the contract floors, compared to 23 075 sold through the auction floors, which may mean that even some producers of free tobacco are choosing to sell their produce at the contract floors in chase of the good prices offered there.

Essentially, merchants at the auction floors may need to revise the way they are trading every year, as they may soon find themselves conducting very little business in the near future should their yearly price wars continue this season.

This development marks a major shift from what was happening at the turn of the millennium when the majority of smallholder farmers who benefited from the land reform switched allegiance from crops like cotton, and in some cases maize that used to generate incomes for them, to start tobacco growing, albeit in quantities they could afford and manage with auction floors forming their sole market.

This allowed them to pick decent earnings that saw most of the growers improving their livelihoods significantly, with many buying properties and building decent houses.

Some bought cars, motorbikes and for the first time, most rural households managed to buy television sets, install satellite dishes and secure decoders to ensure they watched international television programmes.

This generated a lot of excitement among the farming communities and the numbers of growers ballooned , and so did the volumes, to levels which merchants buying the crop may not have expected.

And for a few seasons thereafter, it was highly rewarding for farmers to grow tobacco and the tobacco floors would witness massive numbers of farmers coming and going.

And when most people thought the industry was blooming with new growers registering every season, the once exciting prices took a turn for the worse and merchants started putting in place price ceilings that saw figures set on the first day of the season when low quality leaf is usually on sale being surpassed just slightly.

This defeated the common logic that as the season progresses, the quality of the leaf should improve too.

But it is the seemingly crumbling nature of the auction system that incited the writing of this article.

The idea of contract and free farming naturally depends on the farmer’s choice, whether to produce a crop on their own or to seek assistance from a contractor and tap into the numerous benefits that come with the arrangement.

The fact that contract floors seem to be fast stealing the limelight from auction floors is just but a sign of the difficult economic patch the country is walking through, which does not allow the farmer easy access to basic inputs and room for bargaining when it comes to selling produce.

More tobacco farmers are opting to take to the contract route simply because they need assistance with inputs and a stable market where there is no competition among buyers, as is the case with auction floors where prices are not guaranteed.

In a way, farmers producing tobacco under contract are simply capitalising on the fact that they are guaranteed competitive prices that come as part of the contract package, while their auction counterparts generally take a gamble when it comes to prices.

However, something does not seem to add up in the current price disparities when it comes to the highest figures for both auction and contract floors.

The highest price at the auction floors has been US$4,99 while the contract floors have recorded US$6,60 per kilogramme, yet the reality on the ground is that the tobacco is not different at all, as the farmers usually work together and share the same agronomic tips during the production process.

Maybe the idea that the contractor in most cases ends up being the merchant may explain the price disparities, but farmers producing free tobacco may also need to open their eyes and sell where they want, which includes the contract floors and avoid going where there are no stable prices.

At the auction floors there is competition among buyers for good tobacco, which in most cases is there, but they end up erecting price ceilings to use little cash but acquire big volumes of the crop.

Contractors that later buy the produce do so knowing that if they short-change the farmers they would be shooting themselves in the foot because they will be left without business partners if they treat the farmers badly, leading to the collapse of their arrangements.

It is obvious that all farmers would be comfortable producing free crops if they have resources to do so because there would be no sharing of after sale, which is more rewarding than any other arrangement.

But where there are price wars, it is the farmer who bears the brunt of this ugly scenario and comes off worse than anyone else.