ZIMBABWE TOBACCO SALES UPDATE, FOURTH SALES WEEK

1. AFTER 18 TRADING DAYS, ZIMBABWE'S THREE TOBACCO AUCTION
FLOORS HAVE COLLECTIVELY SOLD A TOTAL OF 3,665,457 KILOGRAMS
(KG) OF THE CROP (837,031 KG IS BURLEY TOBACCO), AT AN AVERAGE
PRICE OF US $1.69 PER KG.



2. THIS VOLUME COMPARES WITH 6,848,511 KG FOR THE SAME PERIOD
LAST SEASON, REPRESENTING A DROP 0F -46.5 PERCENT. THE AVERAGE
PRICE PER KILOGRAM OF US $1.69 REPRESENTS AN INCREASE OF 54.3
PERCENT, COMPARED TO US $1.09 DURING THE SAME PERIOD LAST
SEASON.



3. TOBACCO SALES HAVE SO FAR GENERATED US$6,179,730, COMPARED
TO US$7,481,937.18 LAST SEASON, A REDUCTION OF 17.5 PERCENT.
THE REVENUE REDUCTION, DESPITE THE HEFTY PRICE INCREASES IS
ATTRIBUTABLE TO THE LOW VOLUME OF TOBACCO BEING DELIVERED TO
THE AUCTION FLOORS BY COMMERCIAL AND SMALL-SCALE FARMERS ALIKE.



4. FARMERS ARE WITHHOLDING THEIR CROP BECAUSE THEY DESIRE AND
DEEM NECESSARY A DEVALUATION (TO COVER THEIR INCREASED
PRODUCTION COSTS DUE TO HIGH DOMESTIC INFLATION, AND THE
SUBSTANTIAL DEVALUATION OF THE LOCAL CURRENCY ON THE PARALLEL
MARKET), BUT GOVERNMENT SEEMS ADAMANT THAT A DEVALUATION IS NOT
JUSTIFIABLE GIVEN THE POOR PERFORMANCE OF THE EXPORT SECTOR.

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5. COMMENT: TO DATE, HIGHER PRICES HAVE OFFSET A SUBSTANTIAL
DROP IN THE NUMBER OF BALES DELIVERED TO THE AUCTION FLOORS.
HOWEVER, WITH THE COUNTRY DESPERATELY SHORT OF FOREIGN CURRENCY
ANY HOLDBACK IS DAMAGING TO THE ECONOMY. WITH THE GOVERNMENT
HAVING RECENTLY THROWN THE GOLD MINERS THE LIFE RING OF A
SELECTIVE DEVALUATION (GOLD PRODUCERS ARE NOW REIMBURSED FOR
THEIR EXPORT SALES AT ZWD $68 EQUALS USD 1, VERSUS ONLY THE
OFFICIAL RATE OF $55 BEING GIVEN TO THE TOBACCO FARMERS), WE
UNDERSTAND AND SYMPATHIZE WITH THE ACTIONS OF THE COUNTRY'S
LARGEST EXPORT SEGMENT; THE MORE SO IN LIGHT OF THE TRAVAILS
INFLICTED UPON ZIMBABWE'S COMMERCIAL FARMING SECTOR SINCE EARLY
LAST YEAR. END COMMENT.

IRVING

UNCLASSIFIED

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