Zimbabwe’s tobacco crop has surpassed the 171-million-kilogram target set for this year and has sold 175.5-million kilograms so far, although this year’s crop has fetched much lower prices, an official at the Tobacco Industry and Marketing Board said on Monday.
SA is the second-largest buyer of Zimbabwe’s tobacco crop after Belgium and has snapped up 3.3-million kilograms of tobacco worth $15m this season, while Belgium has bought 6.2-million kilograms worth $25.4m. China trails the list in third place with 3.22-million kilograms bought.
But China is the biggest buyer under the contract system and last year was at the top having bought 34-million kilograms of the crop. Last year, 167-million kilograms were sold and generated $506m in sales revenue, in contrast to the $583m earned to date.
The recovery of the tobacco industry, which plummeted at the height of land invasions in 2000, has been welcomed by the Zanu (PF) government as a sign of the success of its land reform programme.
The Treasury expects agriculture — fuelled by the tobacco industry — to grow 9% this year. The recovery of the tobacco industry has provided a boon for new growers of the crop — mostly black, newly resettled farmers — which was once the preserve of the country’s 4,500 white commercial farmers.
At peak production, in 2000, Zimbabwe produced 236-million kilograms and was second to Brazil on the global scale.
According to statistics provided by the tobacco board, nearly 106,000 growers have registered for the 2014 season compared to about 90,879 in the same period last year. The average price of tobacco is $3.18/kg compared to an average $3.71 last year, a 14.19% drop. Tobacco board CEO Andrew Matibiri said the fall in prices was due to reduced demand and oversupply.
“There is a general oversupply of ‘filler’ [low quality] tobacco on world markets and these tobaccos are available at lower prices than in Zimbabwe,” Mr Matibiri told BDlive on Monday. Industry experts also blamed the poor tobacco prices on a plethora of market challenges that include wrangling over prices between contract growers and auction floors, and the low grade of the crop. “We have seen a lower grade of the tobacco crop presented for sale. Where there is less leaf, buyers complain that there is less nicotine”, Boka Auction Floors CE Rudo Boka said.
Boka Auction Floors said it had handled 11.6-million kilograms of the crop and 12.8-million kilograms more designated for contract sales. Chinese buyers account for nearly 70% of contract sales and are favoured by locals for the higher prices they offer.
Mr Matibiri said the auction system was under threat due to a lack of finance. “The main reason why the auction marketing system is struggling is that there is no funding available from financial institutions. So farmers are left with little choice but to enter into production and marketing contracts with Chinese buyers.”