Tobacco pricing controversy: What are the options

Farmers eagerly follow proceedings as merchants conduct a sale at Boka Tobacco Sales Floor last week — Picture by Kudakwashe Hunda
Farmers eagerly follow proceedings as merchants conduct a sale at Boka Tobacco Sales Floor last week — Picture by Kudakwashe Hunda

The tobacco marketing season which opened in February is now around day 50 and so far, 116 million kilogrammes have been sold at an average price of US$3,21 per kg. However, growers have complained bitterly over the prices, which are lower than last year’s.

The average price for the 2012/13 season was US$3,72 per kg, slightly above the previous season’s US$3,68. This year’s price is, therefore, almost 11 percent lower than last year’s. It is anticipated, though, that the average price will likely rise as greater volumes of high quality tobacco are brought to the market.

The outcry over low prices has come mainly from small-scale farmers who sell their crop via the auction system. As at day 45 of the selling season, the auction average price was US$2,62 per kg whereas the contract average was US$3,32 per kg.

Small-scale farmers continue to point fingers at buyers, accusing them of collusion. There have also been complaints about an “unannounced” ceiling price of US$4,99 per kg at the auction floors whereas prices of the contract system have shot above that ceiling.

There are also allegations that for one to get good prices for his or her tobacco, one has to pay US$10 per bale to some buyers to hike the price. Queries are also being raised on why tobacco of the same grade fetches different prices at times.

While the Tobacco Industry and Marketing Board (TIMB) is entitled to explain, the allegations and complaints farmers are raising should inspire a step back with a view to mapping the way forward.

It is important to point out that in both the auction and contract systems, TIMB personnel first classify the tobacco before the actual sale. The final price on the contract system is, therefore, determined by that grade.

On the auction system, however, the grade is supposed to guide the starter and the buyers on what price to offer.
The first question to ask then is: do farmers understand this grading system? If farmers have to complain about the poor prices they are getting, it follows that they should point fingers at some of the TIMB graders. The starter and buyers are supposed to be guided by the grade affixed to their tobacco by these graders. Another question arises: should the auction system price not be guided by the grade where buyers compete to purchase the right quality? That way, all tobacco of the same grade will fetch the same price and that will make farmers realise the importance of achieving good grades. The price on the contract system, which is based on grade, is definitely better.

Such a system will eliminate the pockets of corruption and unfairness at the auction floors. It is definitely time the TIMB considered changing the auction system pricing mechanism.

Almost all farmers can easily grow the tobacco crop, but differences arise in the way the crop is grown. An irrigated crop will have a longer growing period and, therefore, the leaves are likely to be longer than those from a dry-land crop.

A crop that receives enough fertilisers is likely to be heavier and longer than one that does not. Weed and disease management also has a bearing on the size and quality of the leaf.

The biggest differences, however, emanate from the curing process.
Two leaves harvested from the same field and subjected to different curing systems will produce completely different qualities.  Curing aims to produce a “golden leaf”, hence the curing process starts with a colouring process where the leaves are left to turn yellow under low temperatures before the wetness is taken out by raising temperatures in the barn.

The way those temperatures are raised has a bearing on the final quality of the leaf. A too sudden rise in temperatures is likely to have a negative impact on the leaf. Once a leaf has been cured, it still needs to be graded before it is baled and sent to the market. Wrong grading can result in the wrong picture being portrayed on the marketing floor as sometimes farmers mix grades, resulting in their bales being classified as mixed.

The layout of the tobacco on the floor is also important as there should be a smooth gradient from best quality to the worst grade, with the best tobacco being placed first and the worst last.

It is not a secret that over 20 000 new farmers are venturing into tobacco growing each year; the question is: Are they all knowledgeable on what needs to be done? This points to the need for training farmers on the different aspects of tobacco growing. Government extension workers are normally short of resources and are, therefore, not in a position to train the farmers regularly.

The Tobacco Research Board (TRB) conducts some one-day training courses on different aspects of tobacco growing at their Kutsaga Research Station. Although a farmer can grasp aspects of seedbed management in a day, one is unlikely to master the art of grading or curing in just a day.

There might be need for some courses at agricultural training centres such as Dozmery Farmer Training Centre in Macheke or youth training centres like Jamaica Inn Training Centre in Melfort.

Farmers would then pay for their upkeep while the TRB or TIMB provide the training personnel.
TIMB normally conducts end-of-season evaluations. However, the question remains: with the current discontent over low prices and alleged corruption, should the TIMB wait until the end of the season to review the pricing mechanism of the auction system?

Peter Gambara is an agricultural economist and a tobacco farmer

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