At least 29.3 million kilograms of tobacco worth about 51.1 million U.S. dollars have been sold so far at auction and contract floors as the marketing season is moving slowly due to pricing concerns by farmers.
The marketing season opened on March 20. In a trading update on Friday, the Tobacco Industry and Marketing Board (TIMB) said sales had declined by 66 percent from about 151.1 million dollars recorded during the same period last year.
The volumes dropped by 45.6 percent from 53.9 million kg during the comparable period last year.
The average price for auction and contract sales stood at 1.75 dollars per kg which is 37.6 percent lower than the 2.80 dollars for the same period last year.
According to the TIMB, tobacco prices have remained subdued as merchants are not happy with the arrangement the Reserve Bank of Zimbabwe (RBZ) has put in place regarding the recovery of loans advanced to farmers.
The RBZ directed tobacco farmers to pay 70 percent of the loan amounts they sourced from merchants in United States dollars, while the balance would be settled in RTGS dollars.
The move came after tobacco farmers had complained to the central bank and the agriculture ministry that merchants were demanding that farmers repay their RTGS dollar loans in hard currency.
TIMB chairperson Monica Chinamasa said recently that the issue of prices was stemming from unresolved matters with merchants.
“The finance minister has to sit down with the merchants and agree what is good or fair to both,” Chinamasa said.
Farmers are also crying foul over a litany of problems, including the low prices being offered at the auction floors, amid revelations that tobacco merchants were not keen to buy due to disgruntlement over the recovery of loans.
The tobacco farmers have also expressed frustration with the payment system for the crop at the auction floors, currently denominated in RTGS dollars saying the local currency gets wiped out by ever increasing cost of inputs.
Zimbabwe’s tobacco output in 2019 is expected to decline from last year due to harsh weather conditions that were marked by late rains and prolonged dry spells.
Last year, the country produced an all-time high of 252 million kilograms of tobacco, earning about a billion dollars in revenue.