ZIMBABWE’S annual tobacco auctions kicked off on Tuesday with a serious tug-of-war between farmers and buyers over prices resulting in a record withdrawal of the crop from the floors.
Although officials on the three auction floors reported that prices were firm considering that it was the first day of the annual sales, and slightly higher than last year’s, farmers who brought in their crop wanted the price to be reviewed upwards.
“Prices are below expected levels considering the fact that the exchange rate at the auction has been deliberately held down,” David Chiguvare, one of the farmers, said.
“Most established farmers who had brought their tobacco hoping to get a good return had to cancel their tobacco from being sold following news that the auction rate had plummeted from around $5 000 to an average $4 200 to the US dollar.
“We feel this was a deliberate ploy to underpay the farmers and for this reason an estimated 60% of the tobacco sold at Tobacco Sales Floor (TSF) had to be withdrawn. As farmers we are demanding the auction rate to be at least $4 500 so that we can manage to get back to the fields next season,” he said.
Thomas Nherera of the Zimbabwe Commercial Farmers Union this week said his organisation has already started lobbying government to review prices upwards.
“The prices being offered cannot cushion the farmers against the economic hardships and later on allow the farmer to increase production,” Nherera said.
“Government has to review the prices upwards so that farmers will be encouraged to grow more tobacco next season. We have started forwarding proposals of what we think would be realistic prices for farmers to break even.”
Prices at the three auction floors ranged from US$1,74 to US$2,50 with TSF offering the lowest average of US$1,75. Zitac offered the highest prices.
Tobacco farmers receive 75% of their earning at the auction rate and 25% of the money at the official rate which is US$1:$824.
Over the years Zimbabwean tobacco was being sold through the auction system with TSF, Zimbabwe Tobacco Auction Centre (Zitac), and Burley Marketing Zimbabwe (BMZ) being the three auction floors.
This year government has introduced a dual marketing system. Tobacco is being sold through the auction system alongside the contract system.
Under the new system nine contractors and the three traditional auction floors are buying the crop.
Tobacco was Zimbabwe’s main foreign currency earner, but this year it will bring in less than 25% of what it earned five years ago before the inception of the land reform programme.