The Africa challenge
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Zimbabwe’s decline as a tobacco producer could create opportunities for U.S. growers. But other countries are hoping to cash in as well.
Zimbabwe’s political and economic difficulties have taken a toll on that country’s flue-cured tobacco production. As the country’s traditional customers, many of them in Europe, look for alternative sources of flavor tobacco, U.S. growers could benefit. But other countries are eager to pick up the slack as well. In this article, TFQ takes a closer look at the African picture.
Across the top of the Zimbabwe Tobacco Marketing and Industry Board’s Web site, a moving banner declares, “Committed to rebounding tobacco production to above 200 million kg [about 440 million pounds].” At the moment, this looks like a bold target (even given that the reference is to all tobacco types rather than just flue-cured), but then no timing is specified, and having previously grown this level of tobacco, Zimbabwe has, in theory, the potential to do so again. And some observers are predicting between 220 million and 331 million pounds of flue-cured next year, provided certain conditions are met.
This year, however, it is going to produce an estimated 187 million pounds of flue-cured, up from the low point of the previous year, 153.2 million pounds. Still, this leaves a lot to do—though Zimbabwe has produced more than 440 million pounds of flue-cured in the past, since 1990, even with a full complement of commercial growers, it has done so only on six occasions.
In the end, it all comes down to the buyers, and buyers like to see continuity of supply, so perhaps the biggest question mark hanging over Zimbabwe concerns the lack of clarity about the future. Much will depend on the viability of growers’ operations this year, on financing arrangements for next year, and whether there will be any clarity in respect of land tenure, including possible land nationalization.
The current crisis in Zimbabwean tobacco production has its roots in 2000, when white commercial farmers started to be ejected from their land as part of an official policy that lacked any coherent strategy for replacing them. As a consequence, Zimbabwe’s grower base has changed from one with, in 1999, 95 percent large-scale producers, each with an average of 111 acres, to one with 70 percent small-scale producers, each with an average of about 3 to 4 acres.
There is nothing inherently wrong with growing tobacco using mostly small-scale growers, but it is unwise to change from one system to another in a matter of a few years without preparation. According to official statistics, the number of growers has risen from 8,282 in 2001 to 26,100 today.
Even under normal circumstances, it would have been enormously difficult to train the thousands of growers who have joined the ranks of tobacco production since 2001, but with many of the skilled producers having been forced to leave for other countries, it was impossible. One estimate puts the proportion of current growers who have had sufficient training in producing tobacco at only 30-50 percent.
Training is continuing through extension services and training institutions, but the latter remain underutilized, partly because these schemes have been underfunded since the disappearance of foreign donor organizations.
This means that a lot of work needs to be done to emphasize the quest for quality. Zimbabwe’s tobacco research is continuing, though there is some question whether, given the change in the grower profile, the extension advice being offered isn’t too advanced. Some relief for Zimbabwean growers is at hand because 30 percent of the crop is now bought directly by contractors who have a vested interest in overseeing what is done in the fields.
Still, there is only so much that contracting companies can achieve, and one major concern this year is that whereas large-scale growers (30 percent of the total and falling) seem to have produced a reasonable crop, the quality of the tobacco grown by small-scale operators is generally low.
One negative quality factor was the late planting of the 2004/2005 crop, which occurred because arrangements for financing it were made late. Those growers who do not work with one of the contracting companies are dependent for loans on the government or the Reserve Bank of Zimbabwe and are therefore financially less empowered than they once were.
Just how far Zimbabwe bounces back will not be governed just by what Zimbabwe does. A lot of other countries have invested in increasing their production levels, and they are not going to cede their gains without a fight. And merchants and manufacturers, once bitten, may feel happier with a wider supply base, especially since the appeal of Zimbabwe’s leaf, traditionally based on its flavor profile, is not as strong as it used to be.
TANZANIA. Certainly, demand for Tanzanian flue-cured is expected to continue to increase during the next three years, though not at the pace of the past three years, which have seen production of this crop rise from about 66 million pounds in 2003 to an estimated 110 million pounds this year.
While the main boost to Tanzania’s production of flue-cured in recent years was the demise of the Zimbabwean crop, it was also the result of an aggressive program of agronomy aimed at improving quality. So though Tanzania’s crop is still regarded as comprising mainly filler tobacco, steady gains in the consistency of its quality have made it a replacement for many Zimbabwean-style tobaccos. Tanzania’s flue-cured is seen also as having a good quality-to-price ratio.
While Tanzania’s leaf industry has been buoyant recently, it is facing a number of challenges. Merchants currently have problems transporting tobacco from the growing areas to the stemmeries because the main railway is no longer operating efficiently. And the alternative, trucking leaf over poor roads, is adding nonvalue costs to tobacco. Also, high oil prices have meant that the price of fertilizer has risen by at least 50 percent during the past two years. The increased transport costs are making it difficult for merchants to increase farm-gate prices, and growers are predicting a lower return on their crops because of the high nitrogen costs. However, agronomic efforts are currently aimed at improving farmer yields to compensate for this. All of Tanzania’s tobacco is produced by small-scale growers operating under contract, a situation that is unlikely to change, partly because these growers are unable to secure commercial finance, and tobacco merchants have developed integrated financing systems to compensate for this.
MALAWI, meanwhile, is best known for its burley tobacco, but even this country has taken advantage of Zimbabwe’s difficulties to increase its production of flue-cured. Flue-cured production in Malawi this year is estimated at 55 million pounds, more than twice what it was in 2002, when the effects of the Zimbabwean government’s policy of land redistribution started to bite.
In fact, Malawi is at something of a watershed itself when it comes to tobacco production. Its all-types production this year is estimated at just over 315 million pounds, down from just over 397 million pounds during the previous year. Given that this year’s estimates are correct, while the flue-cured harvest is up 6.5 percent, burley production is down about 22 percent to 258 million pounds, Northern Division dark-fired is down 80 percent to 2.2 million pounds, and Southern Division fire-cured is down 64 percent to 440,000 pounds.
While the overall drop in volumes can be put down in part to unhelpful weather conditions, it is also the case that growers have become disillusioned with tobacco as the cost of farm inputs has increased and auction floor prices have failed to reflect this. However, local interests believe that these difficulties will be resolved and Malawi’s export levels will increase in the future.
ZAMBIA. For years, many observers said that Zambia’s soils and climate should allow it to produce flue-cured tobacco that could compete with Zimbabwe’s in its appeal to buyers, and therefore in much greater quantities than had traditionally been the case. But for a number of reasons—some logistical, some political—this potential was not realized, or not until after Zimbabwe’s production level started its rapid descent.
From that moment, Zambia, with the help of growers who had previously had their homes and businesses in Zimbabwe, seized the opportunity. Its flue-cured production, which in 2003 stood at only 15 million pounds, rose to 51 million pounds this year.
Meanwhile, its burley production also has seen a significant rise, going from 26 million pounds in 2003 to 53 million pounds this year.
As observers had previously predicted, Zambia is able to produce flavor styles of flue-cured that potentially substitute for Zimbabwe’s in the eyes of buyers, who increasingly are being drawn to this leaf, partly because of its steady prices.
Phil Rusch, managing director for Zambia Leaf Tobacco (part of Universal Leaf Tobacco), attributes Zambia’s price stability to its sales method, which combines direct contracts with a classification system under which prices are based on a matrix formula and made public before planting.
But as is the case nearly everywhere, prices are under the microscope. The costs of grower inputs, such as fertilizers, fuel and labor, are escalating because of the weakness of the U.S. dollar, and the current sales system is under negotiation.
In the future, Zambia’s leaf production is expected to continue gradually increasing, and since it exports almost all of its tobacco (97 percent of its flue-cured and more than 99 percent of its burley), exports will increase at a similar rate.