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Business Reporter
ZIMBABWE’S tobacco deliveries for this year are almost 50 percent ahead of last year at the same stage of the marketing season, according to statistics from the Tobacco Industry and Marketing Board (TIMB).
A combination of better prices and the decentralisation of the contract floors are among the major reasons for the massive jump in deliveries this year, industry players have said.
By Wednesday this week, deliveries had reached about 196 million kg, 48,4 percent ahead of 2022 at this point of the marketing season.
The value of tobacco delivered amounted to US$588,9 million from US$396 million in the same period last year,-split as US$46,4 million via auction and US$545 through contract.
The average price was slightly 0,26 percent ahead of last year at US$3 per kg, the statistics show.
There was significant growth in tobacco sales through the auction system, which constituted about 8 percent of the total deliveries so far. During the last selling season, tobacco that was sold through auction accounted for 3 percent of total sales.
“We have seen a huge concentration of deliveries in a very short space of time and some merchants are battling for storage space,” said an executive with a leading tobacco firm.
This year, tobacco output is expected to increase to 230 million kg from about 200 million kg last year.
In a recent interview, the TIMB acting chief executive Mr Emmanuel Matsvaire said the growth in auction volumes was a positive sign that the auction system could be sustained.
Over the past few years, the auction system, which determines minimum grade prices for contract sales, has been falling with only 3 percent of the crop sold through auction last year. Some industry players raised concerns over the potential collapse of the auction system, saying the dominance of contractors in the marketing of the “golden leaf” could see price manipulation in favour of the merchants, which would, in turn, frustrate tobacco farmers from growing this key commodity.
Tobacco is the country’s largest foreign currency earner after gold.
Zimbabwe’s tobacco auction system used to be the marketing model of tobacco in the world, but self-financed tobacco volumes have been shrinking as farmers, mostly smallholders, joined contract schemes because they lack collateral to obtain loans from the banks. Prior to 2004, tobacco marketing was done exclusively through an auction system whereby producers mobilised the necessary cropping resources on their own and took their crop to an auction floor of their choice. However, in 2004, this system was changed after the introduction of the contract growing of tobacco.
Under the contract system, licensed tobacco buyers provide the inputs to the farmers, with the contractor or off-taker guaranteeing to buy the tobacco contracted at prices (per grade) equal to or higher than those prevailing on the auction floors.
While Zimbabwe used to pride itself on a vibrant auction marketing system, the viability of tobacco farmers has, however, been seriously eroded as a result of the introduction of the dual marketing system now dominated by contract floors.
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