Farmers and contractors are getting ready for the next tobacco season with more farmers already registered with the Tobacco Industry Marketing Board and a target of 210 million kg set to combine the growing number of farmers and the expected good weather conditions.
The last harvest was good. By mid-July it was well over the 200 million kg target at 209,5 million kg, but more importantly the average price was US$2,80, up on the US$2,50 in the previous season.
Prices can vary quite dramatically across grades, but generally the higher average price came from a general upwards rise in quality.
This year we should be able to do even better, which is crucial both for the farmers and for the country.
Several factors came up in the last season, which threatened to mar what had been a major achievement by the entire industry over two decades following land reform of moving from a production system based on around 2 000 large estates to a system based very largely on more than 50 000 small-scale and medium-scale producers.
This shift required a move from self-financed crops, usually with the large-scale farmers borrowing at least something from their bank each season, to contract farming, that is the merchants sitting on top of a system whereby farmers were supplied inputs on credit and given advice in return for selling their crop to the merchant.
Prices, however, were still set at the three large open auction floors and then complex formulas were used to see what the contract farmer was paid.
Often a contract farmer might be selling the highest-value tobacco and gaining the record price, but generally speaking the prices were not that much different across the system for each grade and variety.
One problem that has arisen is that only around six percent of tobacco is now sold on open auction. This percentage is on the low side when it comes for setting prices for the overwhelming bulk of the crop and there are many who think it is so low that distortions creep in.
So this year there are efforts to increase the number of farmers growing on their own account and selling at auction. These will be generally the medium scale farmers.
The second problem, and this can effect pricing as well, is the fact that the bulk of the finance to plant, cure and buy the crop is foreign money, raised offshore.
The system works because almost all tobacco is exported, so the lenders can be repaid, but it does mean another slice of the value of our tobacco also goes offshore.
This year the Government is priming the pump with an initial injection of US$60 million into the Tobacco Production Localisation Revolving Fund.
It will go out into the system as the crop is planted but come back when the crop is sold. The point being that any charges raised in this process stay in Zimbabwe.
A moderate amount for value is already added to tobacco before export.
The major merchants not only have to finance much of the crop and ensure that the contracting system works well, and they take their cut for this, but they also do a degree of the initial processing, getting the moisture levels in the leaf just so, and if necessary stripping out the stalk, and then putting together the quantities of each type and quality of leaf to make up each order from their external customers.
But localisation implies not just sorting out a lot more of the financing through local sources, but also adding a lot more value.
The obvious starting point is building up exports of cigarettes rather than exports ofa leaf. But this is going to be more complicated and difficult than many non-smoking economists might think.
One problem is that most countries now have their own domestic manufacturing industry. Cigarettes are made in most countries using imported tobacco, including a good slice of Zimbabwean leaf.
Even major international brands will be made in a fair number of countries following the same basic “recipe” of leaf mix.
The second factor is that the bulk of the Zimbabwean crop is flue-cured Virginia tobacco, and this is so dominant that other types hardly cause a blip on the production and sales charts.
But if we are to create a local manufacturing industry for export markets we are going to need a wider range of tobaccos for the blends.
We have in fact grown a lot more in the past. Besides flue-cured tobacco there is air-cured tobacco and sun-cured tobaccos, using different varieties from the “Virginia” types. And then you get smoke-cured and fire cured.
When a significant percentage of the local market, which has never been very large, was made up of pipe-smokers quantities of these other types were grown.
There used to be, for example, three specialist tobacconists in central Harare making up pipe-tobacco blends with contacts with the specialist farmers, as well as pipe-tobacco brands sold by the cigarette makers.
You could even have your own private blend made up if you wanted. Now pipe smokers have to puff away with imported tobacco, which sounds weird.
Some of that expertise we had built up and then lost might now be required, because if we are going to break into export markets we need a blend that is different from the general run of world brands, where manufacture is already set.
The air-cured “burley” tobaccos can be grown readily in Zimbabwe, and in fact form a reasonable percentage of the Malawian crop where the climate is similar. You see these in specialist pipe blends and roll-your-own blends with the label “Kentucky”, as that is where the bulk of the US burley crop is grown.
Sun-cured tobaccos, these days called “Oriental” in the trade provide a lot of the desired flavours in many global brands. They for historical reasons are labelled as “Turkish” on the packets, although when they acquired that label some were grown in what is now Turkey, but a lot more in the Balkan and Syrian provinces of the Ottoman Empire.
They have been grown in Zimbabwe, although originating in warm countries with winter rainfall. But our winters tend to be dry and sunny so sun curing after harvest works.
What all this means is that our value-added programme is not just building cigarette factories. Those will be needed.
But it is carefully studying markets and seeing where we can break in against near monopolies by domestic producers using imported leaf, and that might require us pushing research into specialist tobacco varieties to build the flavour range and rebuilding that critical block of skilled blenders who can find something unique that can be used to compete against the giants.