Home » Business » Tobacco-Gate Saga Exposed… Low Prices to Push All Farmers Into Contract Farming L Land Reform Under Threat

THE prevailing tobacco prices at auction floors have sent tongues wagging as to whether these are justified or are a deliberate ploy by certain cartels whose aim is to completely destroy self-funding growing of the golden leaf as everyone is likely heading towards contract growing where sustainable prices are being offered.

It is not a secret that when a farmer takes a decision to grow a certain crop, he or she would have set objectives that need fulfilment after disposal of the produce.

Chief among these objectives is to pay back loans accessed from financial institutions in financing the crop or to input suppliers if one is contracted and profit realisation at the end of the day.

While last season kicked off with an average price of US$3 per kilogramme and closed at US$5,99, this season’s opening prices, which were as low as US$0,20 and 80cents a kg, have sent chills among growers as to whether they would be able to meet those set goals.

A lot has been said about farmers not paying back loans accessed from financial institutions as if it is from their own making, without looking at the major question as to how much the farmers are earning at the end of the selling season.

It is also on record that financial institutions give out loans only after pegging an anticipated price of the produce to be financed.

The same applies to those contractors giving out inputs towards the crop they would be contracting.

While both parties agree on the anticipated price of the crop to be financed, it has since turned out that the two have become more of a cat and mouse at the end of the selling season after market prices fail to reach the anticipated targets.

Surprisingly, the farmer receives a lashing from left, right and centre for having failed to honour the set objectives while at the same time forgetting that farmers, besides the desire to settle their debts, also expect to improve their standards of living and those of their family members after realising profits.

It is from those profits that the farmer expects to improve the lives of his family members as well as to invest in other areas to develop himherself, among other things.

But when prices are as low as the current scenario which has seen deliveries going down, how are farmers expected to raise the funds to settle the debts as well as meet the set goals? Surely it cannot be from the moon.

The million dollar question at auction floors is: Who exactly is behind the suffocation of prices which has seen even the country earning less compared to what was earned during the first two months of the opening of floors last season?

Farmers are so depressed to the extent of withholding their crop for now until the intervention of stakeholders.

There are many schools of thought that have come about over this issue although some have been dispelled by those being implicated in the saga.

One such school of thought is that tobacco merchants, who are mostly companies, are conniving not to bid high prices so that when they export the golden leaf, they make a killing on a crop they would have purchased for peanuts.

“I gly believe there is a well-calculated desire by the merchants not to compete in order to buy the tobacco cheaply which they in turn sell at much higher prices,

leaving the farmer poorer and poorer every year,” said an independent investigator in the system, Mr Langton Mvundura.

Mr Mvundura, who has been monitoring the trends at both auction and contract floors for more than five years, said it was quite disturbing that the same merchants who buy the crop at auction floors at such deplorable prices offer much higher prices for a contracted crop.

“This leaves us in no doubt that the move is being orchestrated so that everyone goes for contract farming.

“Once that is done, the same people will now be in a position to control tobacco production as well as setting prices.

“Auction floors will therefore become white elephants as no deliveries will be made,” he said.

He said the precedence being set is dangerous in that in the very near future tobacco will be controlled by the few who have the money to contract out-growers.

As such, contracted growers who would have failed to pay up towards the inputs supplied were likely to lose their farms to the contracting companies as they would take over farming operations to recover their debts.

He said this has already happened in some areas in Karoi where contracted farmers have been forced to surrender their farms to the companies which are now carrying out farming activities until the debts are fully settled.

“Perhaps there is need to do further investigations as to what relationship is there between merchants and contract companies.

“It might not be a surprise to see that they are the same people imploring all tactics to control the golden leaf after realising that the land reform programme created more growers who can finance their own crop or by Government through subsidised inputs,” he said.

Mr Mvundura said the merchants could also be taking aantage of the fact that the independent growers have no alternatives, even when prices are not acceptable.

This is where Government intervention is required to protect the farmers, who are left with no option but to lose their properties to financial institutions that would have financed them.

“That is exactly what these cartels want to see happening where an indigenous farmer, especially the small-scale farmers, remain poor.

“This will justify the claims of those against the parcelling out of land to the majority that such a move has created more poverty than anticipated,” he said.

While small-scale growers have no option but to sell at auction floors, large-scale and commercial farmers as well as some influential people deal directly with the contract companies by growing the crop under contract where the price is agreed upon before the start of the selling season.

At one point in Malawi, the late former president Bingu wa Mutharika threatened to expel some of the big merchants for offering low prices at auction floors.

“Poor smallholder farmers in Malawi have remained poor because they are cheated by an international cartel that connives to buy our tobacco at exploitative prices and yet they sell the same tobacco at huge profits,” the late wa Mutharika was quoted as saying.

With auction floor operators arguing that the crop being delivered was sub-standard, this argument was quickly dismissed by the Zimbabwe Commercial Farmers Union president Mr Wonder Chabikwa.

“It cannot be true because for one to venture into tobacco growing you will be having all the know-how. After all, one is referred to as a new grower on the basis of him or her getting a grower’s number for the first time when in actual fact the same person has been into tobacco growing for quite some time and perhaps selling on his or parents’ grower’s number.

“Some have even been working elsewhere on a tobacco farm.”

“So the question of saying we have 20 000 new growers is neither here nor there as these people can only be said to have acquired grower’s numbers for the first time and not necessarily being first time growers of tobacco,” said Mr Chabikwa.

He argued that Government should intervene when buyers offer prices that are well below production costs.

“It cost between US$7 000 and US$10 000 to produce a hectare of tobacco due to price increases of inputs as well as labour.

“How then is a farmer expected to earn a living from US$0,20 cents a kg let alone settle debts? This is ridiculous,” said Mr Chabikwa.

He also believes that there were cartels fixing prices in corporate boardrooms and later pretended to be competing on the auction floors.

Mr Chabikwa said as long as the controversy surrounding the lack of transparency in tobacco pricing remains unattended, there would soon be a huge shift from self-financing growing to contract farming, which again is an unhealthy scenario.

Already 15 registered contracting companies are gaining ground as they have funded 70 000 hectares, representing a 72 percent of the total planted area for the 201314 season, more than the 68 percent of last season.

Again the Tobacco Industry and Marketing Board has registered 20 Class A buyers.

Mr Chabikwa said while farmers were the most affected by the low prices, the country would also soon feel the heat as results have started showing that tobacco earnings have gone down this year during the first two months compared to the same period last season.

While auction floors make more money from more deliveries, there is also a g belief that they could be part and parcel of the price-fixing cartel as the merchants would return to the floors with the same crop under different grower numbers, thereby increasing deliveries at the same time giving opportunities to the floor operators to earn more money.

It is believed it is a vicious circle where the same crop is finding its way back to the floors more than three or four times.

“Floor operators earn their money on commission.

“The more tobacco is delivered to the floors the more money they earn. So again connivance cannot be ruled out,” he said.

Although Timb chief executive officer Dr Andrew Matibiri was given an opportunity to respond to the above, he had not done so by the time of going to press as he was expected to take the readers through the whole process from delivering up to the auctioning of the golden leaf.

Boka Auction Floors chief executive officer Ms Rudo Boka dispelled rumours that floor operators work in cahoots with buyers to offer low prices.

“We cannot do that because we also want to see more deliveries at the floors so that we earn more as we get our money on a commission basis,” Ms Boka said, without disclosing the percentage.

Emilia Zindi Agriculture Editor

Source : The Herald