US embassy cable - 05HARARE559

C O N F I D E N T I A L HARARE 000559 
 
SIPDIS 
 
AF/EX 
AF/S FOR BNEULING 
EB/IFD FOR FCHISHOLM 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
TREASURY FOR OREN WYCHE-SHAW, STATE PASS USAID FOR MARJORIE 
COPSON 
ALL AFRICAN DIPLOMATIC POSTS 
 
E.O. 12958: DECL: 12/31/2009 
TAGS: EAGR, ECON, ETRD, PGOV, ZI, EINV, Agriculture 
SUBJECT: LOWER QUALITY ZIMBABWEAN TOBACCO HITTING MARKET 
 
Classified By: Ambassador Christopher Dell for reasons 1.4 b/d 
 
1. (C) Summary:  Mashonaland Tobacco Company Marketing 
Director Graham Dupree told Econoff on April 8 his company 
was paying about half as much per kilogram of tobacco this 
year as last.  Dupree attributed the steep fall in price to 
both an increasing global supply and a poorer quality 
Zimbabwean crop.  End Summary. 
 
2. (C) A division of U.S. tobacco giant Dimon, Mashonaland 
Tobacco is currently Zimbabwe's largest tobacco merchant 
(i.e., middleman between growers and cigarette producers). 
Marketing Director Dupree said his company believed this 
year's worldwide supply of tobacco was particularly large, 
with Brazil producing a record 700 million kgs and still 
possessing a large 2004 carryover crop.   Although 
higher-grade tobacco was still scarce and would fetch 
US$2.60-2.80/kg this year - almost identical to last year,s 
rates - Dupree told Econoff that the quality of Zimbabwe,s 
crop had fallen significantly since 2004.   He said most 
Zimbabwean tobacco now occupied the bottom-end of the quality 
spectrum and Mashonaland Tobacco had been paying less than 
US$1/kg in the first week of sales. 
 
3. (C) Comment: Fast-track land reform has decimated 
Zimbabwean tobacco output, which once accounted for one-third 
of its foreign exchange earnings.   Last year,s crop of 65 
million kgs was the lowest since 1972, down from a record 238 
million kgs in 2000 and well below the GOZ's official, 
optimistic targets.  Even a Z$2,000/kg support bonus does 
little to offset the decline or to help producers make ends 
meet.  Moreover,  the first week of the 2005 selling season 
suggests new farmers are also producing lower grade tobacco, 
which will further depress this year's forex inflows. 
Dell