Category: Leaf

Zimbabwe Debates Price Mechanism

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Stakeholders are debating whether minimum auction prices should continue to determine the pricing of contract tobacco in Zimbabwe, reports The Zimbabwe Mail.
Zimbabwe has a dual marketing system where tobacco is sold through both auction and contract. Over the years, prices have been determined by the minimum price paid on the auction market.
At the time this policy was put in place, tobacco sold through the auction accounted for nearly half the total output. Over the years, however, the share of auction sales has declined sharply because most farmers are unable to self-finance their operations due to lack of collateral. Last year, the Tobacco Industry and Marketing Board (TIMB) registered about 146,000 growers, of which 95 percent were funded by contractors.
Industry players and analysts said it would be absurd to continue applying the policy as the tobacco farming landscape has completely changed.
“Pricing of contract tobacco—95 percent of national production—cannot continue to be based on the minimum of tobacco prices paid on the auction floors,” said Rodney Ambrose, CEO of the Zimbabwe Tobacco Association (ZTA).
We can’t just throw away this important tool of price discovery.
Paul Zakariya, executive director, Zimbabwe Farmers’ Union

TIMB CEO Andrew Matibiri also believes it is “unfair” for a small crop size of lower quality to determine the minimum grade price of tobacco.
“It is a very valid issue, and the board has agreed that something needs to be done,” said Matibiri, who is scheduled to step down from his position later this year.
However, Zimbabwe Farmers’ Union executive director Paul Zakariya fears that abandoning the dual marketing system would leave farmers exposed to price manipulation by contractors.
“We can’t just throw away this important tool of price discovery,” he told The Sunday Mail Business. “The competition at the auction is quite important.”
There would be some sort of minimum guaranteed price for every grade so that farmers can be protected from price manipulation.
Andrew Matibiri, CEO, TIMB

Matibiri said the TIMB would ensure that farmers are protected from rigged prices.
“There would be some sort of minimum guaranteed price for every grade so that farmers can be protected from price manipulation,” he said.
The tobacco selling season is scheduled to start on April 7, with the trade anticipating lower volumes but higher quality than last year. The ZTA expects output to reach at least 180 million kg, down from 184 million kg in the previous growing season.
“Though yields will be down, the quality of this season’s crop is better than 2020,” the ZTA wrote in its monthly tobacco report for March.
Firm prices are also expected during this marketing season, which opens on April 7. Merchants are expected to bring in above US$500 million to the market.
Tobacco Reporter covered the Zimbabwean tobacco market in depth in 2018.
March 22, 2021
Buyers Commit to Paying Above Minimum

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The Malawi government has signed an agreement with tobacco leaf buyers that commits the buyers to purchase all leaf above the agreed minimum price that has been set for this year’s tobacco marketing season.
The minimum leaf price has not yet been for the 2021 growing season. Agriculture Minister Lobin Lowe said that the government expects higher prices this year because production is well below the anticipated level, reports the Nyasa Times.
Leaf buyers are looking to purchase about 132 million kg of leaf in Malawi this season, but estimates indicate that only 122 million kg have been produced.
March 19, 2021
Cambodian Leaf Tobacco Exports Down

Image: Gordon Johnson from Pixabay
Cambodia exported more than 5.8 million kg of leaf tobacco worth more than $17 million to nine countries last year, reports The Phnom Penh Post, citing figures provided by the ministry of agriculture. The numbers were down 14 percent and 28 percent, respectively, over 2019.
Buyers of Cambodian leaf included Vietnam, Indonesia, Hungary, the United Arab Emirates, Belgium, South Africa, Greece, Singapore and Germany.
In 2016, Cambodia and Vietnam agreed on preferential duties for agriculture products crossing their shared border. The Kingdom was allowed to export 3,000 tons of dried tobacco to Vietnam duty-free each year starting in 2016 under the agreement, which was renewed thrice for 2017–2019.
The average wholesale price for high-quality tobacco now ranges from KHR8,500 ($2.10) to KHR10,000 per kg.
Last year, the area under tobacco cultivation in Cambodia was 5,175 ha, of which 4,875 ha was harvested, representing a 1 percent drop from 2019, ministry statistics show.
March 18, 2021
Zimbabwe Crop Value Estimated at $0.5 billion

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Tobacco merchants are preparing to pay around US$500 million for Zimbabwe’s tobacco crop this year—significantly more than the US$440 million they shelled out last year, according to an article in The Herald, citing local industry officials.
Auction floors are scheduled to open April 7 for the self-financed growers while the contract sales begin the following day.
“We are well prepared for the marketing season,” said Tobacco Industry and Marketing Board Chairman Pat Devenish. “We are expecting a crop of 200 million kg and at an average price of US$2.50 per kg. We expect an estimate of around US$500 million.”
This season, tobacco growers will get 60 percent of their earnings in foreign currency while the remaining 40 percent will be paid in local currency using the auction rate.
One potential problem is looming in areas where cash-rich middlemen are trying to buy harvests at low prices for ready cash, which will present any contract farmer with legal problems when they come to deliver.
To discourage such fly-by-night players, merchants must submit copies of legally binding contracts by Sept. 30 of every year and proof of inputs distributed either paid up invoices or payment plans with suppliers.
Devenish said most merchants had met the requirements.
Assembly member Ngoni Masenda warned farmers against selling to fly-by-night merchants as they stand to lose in the long run.
March 17, 2021
Zimbabwean Selling Season to Start in April

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Zimbabwe’s tobacco marketing season kicks off April 7, reports Daily News, citing the Tobacco Industry Marketing Board (TIMB). The auction floors will officially open on that day, but contract tobacco sales will begin April 8.
Normally, the tobacco marketing season opens in February, but the coronavirus crisis could have affected the dates for this year.
Three auction floors, Boka Tobacco Floors, Premier Tobacco Auction Floors and Tobacco Sales Floor, have been licensed for 2021. The three firms would all operate from Harare only, and there will be no decentralization of auction sales. As was the case last year, some of the contracting companies would operate out-of-Harare sales points.
Tobacco growers are anticipating a bumper harvest after good rains and adequate supplies of inputs. The potential national tobacco output is currently being assessed by Agritex and TIMB with the results set to be released by the parent Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement.
According to the TIMB, 180.8 million kg valued at $452.3 million were delivered to the country’s contract and auction floors last year. Last year’s average price was $2.50 per kg.
Zimbabwe exports its tobacco mostly to China and the European Union.
Following a policy change by the Reserve Bank of Zimbabwe, tobacco farmers are set to receive 60 percent of payment in foreign currency and the remainder in local currency. Last year, farmers were paid 50 percent of their proceeds in U.S. dollars with the other 50 percent being in Zimbabwe dollars.
The tobacco Farmers Union of Zimbabwe has warned that the retention levels still fall short of growers’ production cost.
March 15, 2021
Growers Welcome Increased Forex Cap

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The Tobacco Farmers Union of Zimbabwe (TOFUZ) has praised the government for increasing the nation’s foreign currency retention cap from 50 percent to 60 percent ahead of the 2021 tobacco selling season, reports All Africa.
Growers are now able to purchase and/or supplement their foreign exchange requirements from the auction system. The union had called for a 70 percent retention cap but noted that 60 percent was still a positive level for tobacco leaf growers.
“Though we would have wanted 70 percent forex retention for farmers, we applaud the RBZ [Reserve Bank of Zimbabwe] and the Ministry of Agriculture for the policy review, which is set to benefit farmers,” a TOFUZ spokesperson said.
This will certainly see an increase in tobacco production.
TOFUZ
“This will certainly see an increase in tobacco production as farmers will increase hectare capacity. Our concern as a union is to see totally empowered tobacco farmers who can independently make decisions without conditions as the case with contract farming. Given that tobacco is the country’s largest single foreign currency earner after gold and it contributes much to our economic growth as a nation, tobacco farming should be promoted through supportive input loan facilities.”
March 12, 2021
Hungarian Tobacco Down by a Quarter

Illustration: Gordon Johnson from Pixabay
Hungarian tobacco farmers harvested 4.33 million kg last year, down 23 percent from 2019, reports the Budapest Business Journal citing Illas Benyei, chairman of professional association Madosz.
The average yield dropped to 1,325 kg per hectare, the lowest level in 30 years. Benyei said bad weather had affected the crop while the pandemic had made the labor-intensive work of cropping leaves more difficult.
The harvest included 3,354 tons of Virginia tobacco and 759 tons of burley.
Universal Leaf Tobacco Magyarorszag, the biggest leaf merchant in Hungary, said the quality of the crop it bought from local farmers was average or a little under average.
March 2, 2021
Blueprint for Exit

Photo: Tobacco Reporter archive
Following the exit of two leading cigarette manufacturers, Colombian tobacco farmers had to find alternative livelihoods overnight. Their experience offers lessons for growers elsewhere.
By Stefanie Rossel
From smallholder tobacco farming to organized large-scale tobacco cultivation to alternative crops in a short time—Colombia’s leaf tobacco sector has experienced a remarkable development in the past 16 years. Its most recent change toward farmer livelihoods independent of tobacco might become a blueprint for other leaf origins facing declining demand for tobacco.
The takeover of Colombia’s domestic tobacco industry by multinationals was a turning point for the country’s leaf sector. Philip Morris International (PMI) acquired Coltabaco in 2005, and British American Tobacco (BAT) bought Protabaco in 2011.
“The technological package that had been implemented by the national companies before was very different from the one brought by the multinationals, and this meant radical adaptations for growers,” explains Heliodoro Campos Castillo, founder and general secretary of the National Tobacco Fund in Colombia (Fedetabaco).
“To give some examples, tobacco farming in Colombia, like almost everywhere in the world, has always been a family business, with everyone from granddads to youngsters participating actively. With multinationals’ child labor policies, this was ended and translated into a reduction in areas cultivated. Other measures that brought about a hard adaptation for growers were the security procedures that did not exist before. Growers accepted them as part of the evolution needed in the sector to improve agricultural practices and did their best to adapt to them. However, these were abrupt changes with very little time for implementation, and the sector suffered with them.”
Years before the multinationals entered the market, Fedetabaco initiated an investment package of $64 million in Colombia’s tobacco sector, which was co-financed by municipalities, the tobacco industry and institutions and stretched over almost 25 years.
“Fedetabaco understood the challenges ahead and went beyond the improvements in production to better growers’ livelihoods through different sustainable programs, such as rainfall water collection and reservoirs, housing projects, improvement of curing methods through modernization and, most importantly, promoting sustainability through diversification to grant growers food security and endow them with resources to cover their basic consumption needs,” says Campos Castillo.
“The improvement of the production system as a whole was an important factor to contribute to this self-sufficient strategy. We are working with the International Tobacco Growers’ Association (ITGA) to make sure the example of Colombia will help growers in other parts of the world.”

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Local crop alternatives
Tobacco cultivation in Colombia dates to the 18th century, but the plant plays a minor role in the country’s agriculture. According to the World Health Organization, only 0.03 percent of Colombia’s agricultural land was devoted to tobacco cultivation in 2014. The area used for tobacco cultivation has decreased drastically in the past decade, from 9,589 ha in 2011 to 3,550 ha in 2019, notes Fedetabaco. In line with global trends, annual cigarette consumption in the country declined from 18.4 billion units a year in 2010 to 12.2 billion pieces in 2019, according to USDA estimates. With a market share of 51.4 percent in 2019, PMI contract-purchased about half of the domestic leaf tobacco crop, which corresponded to a planted area of 1,850 ha per year, from 2,300 farmers. BAT, which held the remaining 48.6 percent of the market in 2019, bought tobacco grown on 1,300 ha.
However, PMI closed its manufacturing operations in Colombia in 2019, citing a rise in contraband and a global trend away from tobacco products. One year later, BAT followed suit.

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The two companies’ sudden withdrawal left farmers with little time to find viable alternative crops. It directly affected around 2,000 families and 9,000 people whose main source of income was tobacco, says Campos Castillo.
“Fedetabaco immediately took action to try to mitigate this negative impact in these people’s livelihoods,” he says. “Working closely with the ministry of agriculture and all the sector’s national organizations and institutions, we were able to build up a strategic reconversion program based on a thorough analysis of the situation.
“As the priority line of action, we took into account the experience and expertise of the farmers and the important contribution their knowledge could bring to the program as well as the ecological and agricultural characteristics to make sure we will act on the right location with the right crop with minimum waste.
“This program includes maize, yuca and other crops well known by farmers. The investment will cover 3,500 hectares, and its estimated cost is around $10 million. So far, as a shock plan, we have been able to advance, in coordination with the ministry of agriculture, $900,000 to provide seeds and $400,000 to plant maize, but we reached out to ITGA because this will only cover a very small part of the problem.”

Colombia continues to cultivate limited amounts of cigar tobacco for domestic consumption and exports.
Cannabis pilot
To help their farmers find alternative crops after their exit, PMI and BAT commissioned studies from two national nongovernmental organizations (NGOs). While Proterritorio finished its study last year, the Fundes research will be concluded this May. “We hope [the results] will add value to solve the problem,” says Campos Castillo. “Nevertheless, growers feel confident in the program developed by Fedetabaco with the ministry of agriculture, mainly because it has identified viable crops well known by them, such as yuca, Tahiti lemon and maize. We tend to think that there is a similar line of strategy between what we are proposing from Fedetabaco and the ministry of agriculture and the NGOs hired by the companies, but we will have to wait and see when the figures are out.”
Of the 18 departments that historically grew tobacco, only two will continue. One of them, in Colombia’s north, produces a dark cigar tobacco exclusively for export. The other, in Santander, cultivates Criollo, a tobacco used primarily for domestic cigars.
Cannabis, too, could become an alternative for tobacco growers. Colombia legalized the growth, sale and smoking of medicinal cannabis in 2015. After Coltobaco’s closure, Fedetabaco immediately started exploring the potential of cannabis for medicinal, nonpsychoactive purposes. “We are carefully handling this pilot project and expect to have the result of the analysis in terms of cost of production, productivity and quality by the end of 2021.” It is an exciting project because cannabis is cultivated in small areas of around 1,000 square meters to 2,000 square meters—a scale that is familiar to smallholder tobacco farmers. What’s more, the soil and weather conditions in the target regions appear to be suitable for cannabis cultivation.
Campos Castillo insists that his organization has not stopped working with the government trying to find solutions for tobacco farmers since the departure of PMI and BAT. “The government of Colombia cannot commit to granting the total amount of the funding. Tobacco is a small agriculture share in Colombia, and investment is needed in other rural commodities. Fedetabaco is experienced and has been developing programs for more than 30 years in rural areas in Colombia, so a holistic approach would be to gather all the resources available from companies, [the] government, institutions and our global platform, ITGA, all working together with a single purpose to safeguard the livelihood of these 2,000 families. We remain hopeful that this will happen in the near future.”
The author would like to thank Mercedes Vazquez for her assistance with this article.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

March 1, 2021
Tobacco Cultivation up in Africa, Down Globally

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Even as tobacco cultivation declined globally, it increased in Africa, reports Down to Earth, citing a study by the World Health Organization (WHO).
Worldwide, the area under tobacco cultivation decreased by 15.66 percent between 2012 and 2018—but in Africa, it increased 3.40 percent during the same period. Leaf production decreased globally by 13.9 percent between 2012 and 2018; in Africa, however, it increased by 10.6 percent. In 2018, global tobacco leaf production was 6.3 million tons; in Africa, it was 722,187 tons, representing 11.4 percent of global production.
In 1995, there were only two major tobacco leaf growing countries in Africa—Malawi and Zimbabwe. Over the past two decades, other African nations have substantially increased their production of tobacco leaves.
Today, the main tobacco leaf growing countries in Africa are Zimbabwe (25.9 percent of Africa’s output), Zambia (16.4 percent), Tanzania (14.4 percent), Malawi (13.3 percent) and Mozambique (12.9 percent).
Many African governments view tobacco farming as a tool to alleviate poverty. From 2012 to 2018, the value of tobacco leaf exports from Africa increased by 10.51 percent to $2.08 billion.
African countries thus showed a favorable trade balance of approximately $1.26 billion in 2018. Two main tobacco leaf exporters in Africa in 2018 were Zimbabwe (40.61 percent) and Malawi (25.27 percent).
The WHO maintains that tobacco farming has many negative consequences on the health and well-being of farmers as well as for the environment and the long-term well-being of the countries concerned. The health body believes domestic leaf cultivation also boosts local cigarette consumption.
The number of tobacco users in the WHO African Region increased to 73 million in 2018 from 64 million adult users in 2000. This increase contrasted with a decline in the number of tobacco users globally to 1.34 billion from 1.4 billion over the same period.
February 19, 2021
Union Urges Equal Treatment of Growers

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The Tobacco Farmers Union (TFU) has urged the government of Zimbabwe to make contracting companies treat small-scale farmers as equal partners in the production process, reports Newsday.
The union said farmers’ interest in growing tobacco had decreased because contractors were claiming the lion’s share of earnings realized from the sale of the crop.
Zimbabwe is one of the world’s biggest tobacco exporters, having produced 190 million kg last year, earning farmers about $748 million.
But official statistics indicate that farmers paid back $400 million to contracting companies, leaving them with only $350 million.
“Tobacco contract farming in Zimbabwe does not benefit the ordinary farmer,” the TFU said in a statement ahead of the start of this year’s marketing season.
The season is expected to kick off next month if regulators are convinced that World Health Organization protocols on controlling Covid-19 are adhered to, according to Tobacco Industry Marketing Board CEO Andrew Matibiri.
February 18, 2021