Country Report Zimbabwe September 2010

Economic performance: Tobacco production increases substantially

The 2010 tobacco sales season is scheduled to end on September 3rd, with production having doubled to 118m kg, from 59m kg in 2009-the largest crop since 2003 but well below the record of more than 230m kg in 2000. The crop will be worth some US$350m-double the US$175m earned last year-but average prices are marginally lower, at US$2.91/kg compared with US$2.98/kg in 2009. There is a significant gap between the prices paid for contract tobacco (US$3.06/kg) and leaf sold on the auction floors (US$2.65/kg). Historically, all of Zimbabwe's tobacco was sold through the auction floors, but this has changed in recent years, with almost two-thirds being sold to contractors at significantly higher prices. Most of the larger-scale growers who produce the better-quality leaf do so under contract. Following the excellent season production is set to increase again in 2010, but industry sources warn that, although prices have been good, costs have risen dramatically, with the result that many farmers are operating with relatively narrow profit margins.

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