Golden expectations for tobacco sector

13 Sep, 2020 - 00:09 0 Views
Golden expectations for tobacco sector

The Sunday Mail

Business Reporter
By Monday last week, tobacco farmers had delivered 180,7 million kilogrammes of tobacco and pocketed more than US$452 million in a season that was largely plagued by drought, the coronavirus and a volatile exchange rate.

Although crop volumes were 24,7 percent lower compared to the 238 million kg that had been delivered in the same period last year, the decline was tempered by better prices for the lucrative cash crop, which is sometimes referred to as the “golden leaf” or “yellow leaf”.

By this time last year, farmers had earned US$472 million, which is comparable to this year’s revenues.

Average prices at auction and contract floors were US$2,50 per kilogramme, which is 26,1 percent higher than the US$1,98 for the 2019 marketing season.

The highest price stood at US$6,60 per kg, while the lowest was US$0,10, raising expectations that farmers might be able to return to the field again.

Last year, the country realised a record crop at 259 million kg, which represents the most tobacco produced in the country since organised production began in the late 17th century.

There are signs that the positive trend might continue.

Tobacco Association of Zimbabwe president Mr George Seremwe said the quantities of tobacco seed that has been purchased so far, ahead of this year’s cropping season, has been significant, which might mean increased output next year.

This is notwithstanding challenges that were experienced this year.

“Last season, we expected 230 million kg; we had to adjust the figure downwards twice and still we failed to reach the target,” he said.

“There are challenges on issues of profitability to the farmers considering what happened last season . . . Contractors should desist from giving shady contracts to farmers. We need a win-win situation to both parties.”

Government has since stabilised the exchange rate and commodity prices, which is giving farmers hope of soundly planning for the forthcoming season and expectations of lucrative returns in the medium to long term.

The global anti-tobacco drive, which seeks to scale back the consumption of tobacco, presents a real threat to the industry going forward.

Mr Seremwe said:

“We still have some way to go, we have potential to generate foreign currency for the country, but we might be affected (by the global anti-tobacco lobby) in the coming years.”

Lobbyists and health authorities, especially the World Health Organisation (WHO), have been pushing for the crop to be replaced with alternative cash crops owing to the health risks of smoking tobacco.

The World No-Tobacco Day — celebrated on May 31 every year — has become a common fixture.

Major producers such as Zimbabwe — which is the largest producer of leaf tobacco on the continent and the fourth-largest producer of flue-cured tobacco in the world after China, Brazil and the United States — have been increasingly conflicted by the need to fight non-communicable disease caused by smoking and keeping the lucrative industry going.

In 2000, the Zimbabwe Tobacco Association (ZTA), a lobby group that represents the interests of local producers, wrote a letter objecting to some of the proposals of the WHO’s Framework Convention on Tobacco Control.

“We are concerned at the wide and far-reaching prescriptive nature of the proposed Framework Convention on Tobacco Control.

“This, we contend, may be designed to satisfy an earlier stated objective of the Working Group to put an end to tobacco use in any form. The WHO must respect the legal rights of tobacco growers to produce tobacco, which is not an illicit drug,” it said then.

Science could be providing the answer.

On July 7, 2020, US-based global industrial behemoth Philip Morris International (PMI)’s new product, the IQOS, which has an electronically heated tobacco system, was authorised for marketing as a modified risk tobacco product (MRTP) by the United States Food and Drug Administration (FDA).

After a 43-month rigorous examination, the FDA concluded that the IQOS system — which “heats tobacco but does not burn it” — “significantly reduces the production of harmful and potentially harmful chemicals that are emitted from smoke when tobacco is actually burned”.

Essentially, the system operates on the heat-not-burn technology that provides smokers with the nicotine whilst markedly reducing the health risks that are associated with the combustion of cigarettes.

Reduced-risk products (RRPs) are products that have the potential to reduce the risk of smoking-related diseases when compared to cigarettes.

The same conclusion has been reached in countries such as the United Kingdom, Germany and The Netherlands.

It is these harm-reduction technologies that could help make tobacco farming sustainable for farmers in Zimbabwe in the medium to long term.

What has been most encouraging is the increased uptake of the technology.

In a second quarter report for the May to August period this year, PMI said there was “a strong performance by its product IQOS”, with an increase of 24 percent of the volume when compared to the same quarter last year.

“The report estimates that 15,4 million people are using IQOS. Also, the authorisation of the US FDA to market IQOS as a Modified Risk Tobacco Product (MRTP), presents a historical milestone, since the product is the first electronic
nicotine device to be authorised in this category. The product represents a better alternative for adults who continue smoking,” said the report.

The company indicated that it was also likely to have adequate inventories of the product despite the disruptions caused by the coronavirus.

“Even with the good results presented the uncertainty remains due to the volatility and risk of virus resurge and economic fallout even though PMI has undertaken a number of business continuity measures, manufacturing facilities globally are currently operational, based on sale trends there are adequate inventories of PMI finished goods and the company ample liquidity through cash on hand, the ongoing cash generation of its business, and its access to the commercial paper and debt markets,” PMI added.

Just as technology helped prove wrong UK economist Thomas Robert Malthus’ bold declaration in 1798 on food production, it could rescue an industry that is critically important to the local economy.

Share This: