Types of tobacco contract farming in Zimbabwe
Tobacco is grown under two systems in Zimbabwe which are; tobacco contract farming and free-financed crop. Currently 95% of the national crop is being financed by tobacco merchants under contract farming system and only 5% is self-financed by farmers.
How tobacco contract farming works
Contracted crop is purchased through contract buying system which is administered by TIMB through regulation and more important the booking system which only allows contracted grower to sale his crop at contract floor where he was contracted thus helping in reducing the side marketing activity.
Growth of contract farming in Zimbabwe
The growth of contract farming system has been pushed by farmers failing to access funding from banks due to lack of collateral hence now leveraging on tobacco merchants for funding.
Also, the demand that continued growth has created a run for merchants to sure the crop through contract farming as volumes from self-financed farmers has been declining every year.
Tobacco price matrix
Price matrix which the regulatory board uses to enforce is generated from auction system where a competitive bidding system helps to have an efficient price discovery method. The contract buying system will then purchase tobacco equal to or more than the previous price from the previous day.
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