While all other agricultural exports are suffering reduced demand owing to the Covid-19 global pandemic, that is not the case for tobacco which has recorded remarkable increase in sales at the beginning of the marketing season.
Reports from Zimbabwe say export of flue-cured tobacco is stable and prices are firm, with tobacco sales having increased more than quadrupled over the cause of the last and the present season. Last season closed with sales of USD232 008 but this season has opened with sales of USD1 598 230 that is a 588 percent increase!
As market season opened at the start of the month, an impressive USD1.6 million was sold. With attractive prices that begun above USD 5 per kilogramme, farmers were more than willing to sell. Only three days after the marketing season opened, farmers had sold almost 700 000 kilogrammes of tobacco.
The country’s Tobacco Industry and Marketing Board (TIMB) reported that the high prices and the related sales were across both auction and contract floors. In fact sales are up 333 percent from 160 080 kilogrammes during the same period last year.
Actually the middle men, auction floors and contract floors, have only one complain, production was somewhat low owing to fear and speculations of the ongoing Covid-19 virus.
There are some 33 licensed contract buyers in the country which are reported to have had an average price of USD 2.33 per kg. However across most contract floors the buying prices went well above USD 5 per every kg.
In comparison there are only three licensed tobacco auction floors that sold at average price of USD 1.74 per kg. The three auction floors, the Boka Tobacco Floor, the Tobacco Sales Floor and the Premier Tobacco Auction Floor also sold at a high of over USD 4 per every kg.
The only other licensed tobacco seller are some 32 A Class buyers who are also reported to have had good prices for tobacco this season.
On the contract floors, some 657 160 Kgs were sold for a grand sum of USD 1 533 369. With such high numbers, contract floor sales of tobacco represented the highest volumes and revenues this season.
Next in line were the auction floors where 37 336 Kgs of tobacco were sold for USD 64 861. While the export destination for the tobacco was not made clear, in general it is anticipated that the total volume of tobacco output will bring into the country considerable amount of foreign currency one exported.
While the quantity of tobacco output was lower than expected, the TIMB says the quality of the crop was very good. Both factors put together may have been the cause of the high prices, that is low supply of high quality product. However on the other hand there is the question of demand, TIMB agrees demand remains high but it fell short of detailing where the demand is coming from.
The sale season started late as the country took precaution to curb spread of the coronavirus, also, the government has encouraged the sell to take place in the contract and auction floors as an effort to decentralize the marketing system and reduce population into the main market area of Harare, the capital city.
Next door in Tanzania, this second largest East African economy is also the second largest African tobacco producer coming second only to Malawi. While this year’s revenue for tobacco output are still not available, Tanzania has record of racking in high amounts from the tobacco industry.
For instance Tanzania is reported to have earned USD 312.7 million from tobacco exports in 2016, in the previous year it earned USD 287.6 million and in 2014 it brought in USD315 million.
The discrepancy in the growth of tobacco is that while international organizations like the World Health Organisation are against growing of the crop, due to the related health issues but that is the problem, tobacco is economically vital for these countries.
So instead, both Tanzania and Zimbabwe are seeking a balance between the health related issues of growing tobacco and the financial gains therein. For example the government of Tanzania has moved to repeal the Tobacco Products (regulation) Act of 2013 in a bid to curb tobacco related diseases in the country.
Once in place, the new act is expected to rescind the Tobacco Products (Regulation) Act, 2003 which in the interim, the Act serves to regulate public smoking; tobacco advertising, promotion and sponsorship; and tobacco packaging and labeling.
On the other side of the coin, in Zimbabwe (where other functions argue is the largest producer of tobacco on the continent, surpassing Malawi) tobacco brings in on average tobacco earns the country over USD 1 billion annually and is considered the sixth largest grower in the world.