Tobacco auction hit by price row

The opening of Zimbabwe's annual tobacco auction was suspended on Tuesday as small-scale black farmers protested over the low prices on offer due to the country's artificial exchange rate. Felix Mugari's future has never looked this bleak. He has successfully grown tobacco for 20 years, but this could be his last after attending the tobacco auction. "I did not bring any tobacco bales on the first day. I came to spy on the market to see how prices are doing. The prices are very disappointing. In US dollar terms it's reasonable, but to convert it to our local currency, its not working," he told IRIN. The opening of the auction was stopped by around 400 irate small-scale tobacco farmers who disrupted trading on the auction floors demanding a devaluation of the local currency. They said they would camp overnight in protest. Other growers threatened to burn their crop rather than sell at the early bids of around US $2 for one kg, down on last year's prices by about US $1 per kg. "I can't hold onto the tobacco as the law says I should sell within the same growing season. But I won't be able to produce another crop next year. If nothing happens to the exchange rate, this would be my last year as a tobacco farmer. Every tobacco farmer is disappointed," said Mugari. Tobacco growers argue that although input costs have doubled in the past few years, their earnings have not improved since the government artificially pegged the local currency against major currencies two years ago. At the official rate, US $1 is worth ZD $55. But on the parallel market, on which most import costs are based, the value is ZD 350 to US $1. Although tobacco prices are pegged in US dollars, growers are paid in Zimbabwe dollars using the official exchange rate. "These white people (merchants and buyers) want to get the tobacco for free. The Reserve Bank should discuss and come up with something that benefits us. We will not be able to grow next year," said Jabulani Magwenzi, a small-scale farmer. "We want devaluation or the price to be increased." Zimbabwe is the world's second largest producer after Brazil, and tobacco accounts for one-third of Zimbabwe's annual export earnings. This year, about 170 million kg of tobacco are expected to be sold compared to last year's 201 million kg. Under the government's controversial land reform programme, the number of small-scale tobacco farmers has jumped in the last year from 7,000 to 22,000. They are expected to account for around six percent of the current drought-hit crop, AFP reported. "Zimbabwe has had a dryer season than normal and some farmers are still reaping and only at the end of the month should there be significant deliveries," Duncan Millar, vice-president of the Zimbabwe Tobacco Association (ZTA), told IRIN. "Last year's crop was vintage. I would class this year's class as good. But the major issues facing farmers is viability - it depends on what rate the dollar will be set," he added. However, facing a severe foreign currency shortage, the government has flatly refused to devalue. "Farmers have been affected by the invasions but they have been able to grow and that's why we have such a big crop. We hope to be able to grow again next year," said Millar. About 90 percent of all tobacco farms have been hit by farm invasions. But the misery for farmers could continue. As a result of the on-going listing of white-owned farms for acquisition under the government's land reform programme, tobacco growers have found it hard to convince banks to loan them money for next season.