Tobacco sales lowest in 25 years

Tobacco sales at the close of Zimbabwe's annual auction this week recorded the lowest volume sold in nearly 25 years, but the country's regulatory body remained optimistic over the sector's prospects for recovery. Sales on all three auction floors ended on Monday at 79.9 million kg of flue-cured tobacco, almost 20 percent below the government's expectations of 100 million kg, and less than half the 166 million kg sold in 2001. "The sales are disappointing, but there are plans to offer an extension to farmers who have not as yet delivered to the floors. We expect to conduct a cleanup sale on 29 October, which should see an increase in sales, but it is unlikely to reach the 166 million kgs sold last year," general manager of the Tobacco Industry and Marketing Board, Stanley Mutepfa, told IRIN. He added that the late delivery was partly due to farmers who had decided to split their labour to plant alternative crops. "We have to consider that we are in a transitional phase in the country, and all agricultural production will be affected. Some farmers opted to plant other crops simultaneously and so divided their time between tobacco and these crops. This may account for the late delivery [of tobacco] to the floors. "Also, in the past we have relied on the rains to produce the crop, but the entire country has had to deal with recent drought conditions. This must be taken into consideration when looking for reasons for poor production. We do, however, expect a rebound in the sector," Mutepfa noted. One industry official pegged the poor showing to the ongoing debate over the price of tobacco, arguing that this could have affected the delivery of tobacco to the auction floors. "It's really a question of viability. With the rising production costs, growers have consistently called on the government to review the exchange rate, but to no avail," the Zimbabwe Tobacco Association's marketing information executive, Rodney Ambrose, told IRIN. Ambrose said farmers were unhappy with the exchange rate of Zim $824 to the US dollar and wanted this increased to about Zim $1,600. Moreover, inflation has pushed up production costs and most farmers obtained their inputs on the parallel market at exchange rates of up to Zim $2 500 to the US dollar, he added. Tobacco sales in Zimbabwe are denominated in US dollars but farmers are paid in the local currency equivalent. Ambrose noted that although tobacco sales would continue to bring much-needed foreign currency into the country, the export crop could no longer be relied on to support the ailing economy. "It's all relative. Tobacco will continue to be the country's most important source of foreign currency but, since production in some of the other key export industries has declined, there really isn't any competition," Ambrose said.