Of first day tobacco auction, ‘curse’ of price ceilings
THE 2018 tobacco marketing season got underway on 21 March 2018. And the highest price fetched on the day was $4, 90 per kilogramme. Not bad for first deliveries.
Of course many farmers will be delivering primings and most of the early harvested leaves on the first day, which does not necessarily reflect the quality of the crop in its entirety. The best quality usually finds its way to the floors sometime in the course of the season.
Superior quality and superior acceptance usually go hand-in-hand. The highest quality golden leaf must obviously fetch the highest prices of the season and must logically be higher than the $4, 90 recorded on the first day. That’s the most commonsensical thinking expected from all progressive Zimbabweans yet the sad reality on the ground seems to suggest that as the quality gets better, the prices either take a tumble or hit a ceiling, not just an ordinary ceiling but one probably made of steel or granite.
This price ceiling has in the recent past been the farmers’ biggest undoing. It has driven most farmers to think twice about producing the crop but have been unable to make the firm decision of dumping it since it is essentially the most rewarding crop to farmers of most categories at the moment.
They have had to swallow the bitter pill of disappointment and go back to the field year-in, year-out but the miracle for a better price still hasn’t come. The farmers are always driven by the hope that the time for cartels may be nigh so they can’t afford to miss out when this eventually happens. Quite a gamble! On the ground the odds have always remained stacked heavily against them.
To date, prices at the auction floors have not surpassed the $4, 90 offered on the first day of the season yet the contract floors have already recorded a high of $6, 25.
Payments for this season have improved fairly well with farmers getting $300 for every sale, US$150 and the other in bond notes. That’s better than last season.
The illiquid economy of the previous seasons has seen most farmers only producing enough to pay for services rendered during the production process or even failing to do so completely.
This sad development has brought with it some stagnation in the growth of the farmers economically yet when it was first introduced many farmers were left celebrating – they literally changed their lifestyles, which attracted those that had been standing on the sidelines watching. But things changed the moment they stepped into the ring and for some strange reason buyers seem to have started colluding to milk the farmers dry yet they make a killing when they sell the product on the international markets eventually.
Farmers have in some instances done some soul searching and unanimously resolved to stage protests or withhold their crop but, like always, creditors and service providers will be waiting for what belongs to the proverbial ‘Caesar’ to be given unto them.
If only the country was doing value addition to the golden leaf, maybe things would be better for the farmer but with almost 98 percent of the tobacco being exported, it leaves the farmers vulnerable to price distortions from the ‘so-called’ international markets that have also sucked dry the zeal of our cotton farmers.
The country’s new political dispensation had given our farmers lots of hope especially with the Reserve Bank of Zimbabwe (RBZ) upping the export incentive for tobacco farmers from 5 percent to 12.5 percent. The central bank also said that the farmers will get $300 a day when they sell their tobacco and receive the balance through their bank accounts or mobile money.
To boost production levels, the RBZ governor Dr John Mangudya raised the $28 million tobacco fund introduced this year to produce about 44 million kilogrammes to $70 million, a move likely to ignite small scale farmers’ production to over 100 million kilogrammes in 2019.
All these positive developments may count for nought if prices at the floors do not also show some positivity.
The trend is worrying to say the least. In 2012, the opening day price was $4, 45, then, it was $4, 89 for 2013, $4, 85 in 2014 with 2015 recording a significant dip to $3, 50 before it shot back to $4, 50 in 2016. Last season it was $4, 60 and this season $4, 90.
The big question therefore is: ‘Will the price ever break the $5 per kilogramme mark in any season on the opening day and have the farmers not been learning tricks enough to see them improving on their quality with each new season?’
Tobacco selling under way at Rusape sales floors