Zimbabwe’s tobacco industry regulator says it will maintain the current dual marketing system, despite an uproar over wide price disparities between contract prices and auction sales that have been hit by lack of funding.
Official figures show that contract farming accounted for nearly 80 percent of the cash crop was sold last year.
The Tobacco Industry Marketing Board introduced the dual marketing system as a stop gap measure to boost output when production dropped in the aftermath the oft-chaotic land redistribution which government undertook at the turn of the millennium.
The current system has in recent years led to protests by small-scale farmers over the huge price gap between the tobacco sold through the auction system and that for contract farmers.
TIMB chief executive officer Andrew Matibiri said that Zimbabwe would maintain the current marketing system due to funding constraints.
“There are only three companies that are not participating at the auction floors. Those three are Northern Tobacco, Tribac and Chidziva Tobacco. The reason they have given for that is they have increased their contract sales such that they can get all the tobacco they need,” Matibiri said.
“Last year 77 percent of the crop was sold through the contract system which means obviously that the auction system is now small. The reason for that is the issue of funding. If banks could finance production directly to the individual farmer, we would see the auction system growing even dominating because I don’t think many farmers want to be contracted.”
Last year, contract farmers were paid up to $6.15 per kg for similar quality crop that fetched $4.99 at the auction floors.
Pricing of tobacco for contract farmers is currently based on a grade-price index using the Tobacco Industry and Marketing Board classification system which prices should cover production costs and include a profit margin for the grower.
In the event that the agreed price is lower than the price paid for the same crop at the auction floors, the grower shall be paid the higher price prevailing at the auction floors at the time.
“There is strong competition on the auction floor in our view. The two systems need each other because contract prices are determined by the auction,” he said.
“If we see that the competition is unhealthy, then something will have to be done. We will have to sit down as an industry together with government to come up with a new policy but for now the policy is that the two systems will continue as they are until the policy has been reviewed thoroughly.”
This year Zimbabwe projects lower output at around 195 million kg from 216 million kg last year, which earned $684 million.- The Source
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