Paprika and coffee are also less labour intensive than tobacco and so may be easier to manage for households with a shortage of active workers. On the other hand, these enterprises still require more labour than other traditional smallholder crops including cotton and the need for most households to hire workers if cultivating a large area may discourage some producers. Table 27 compares estimated net profits for non-traditional smallholder crops. As with the results for LSC farmers, these data clearly show that other crops offer a potential for comparable and sometimes higher profits than tobacco. Since these crops also cost less to produce than tobacco, paprika and coffee appear to be excellent alternatives for smallholder growers. As noted, successful development of these crops depends on many things including major investment in support services and infrastructure.Coffee was first introduced in the 1960s on LSC farms in Natural Region I near Chipinge in the Eastern Highlands. Until the mid-1990s, very little coffee was grown outside this area and the Eastern Highlands still account for more 70% of all exports. This situation is now set for great change in that LSC farmers in tobacco growing areas of Natural Region II have been planting large areas to coffee in an effort to diversify their income base. Of the total 9 900 hectares now under coffee in Zimbabwe,vertical growing systems some 5 500 hectares are immature 1-2 year old trees grown on tobacco farms.
When these plantations come into full production over the next 3 years, total annual exports are expected to increase from around 7 000 metric tons of green coffee at present to over 20 000 metric tons. Current export values are in the range of USD 8.1 million; once the trees already planted are fully mature, this could easily increase to over USD 43.5 million, equal to about 7.5% of the gross foreign income from tobacco.15 Zimbabwe grows high quality Arabica coffee that normally attracts a 10% to 20% premium in the world market.Coffee is now one of the fastest growing agricultural sectors in Zimbabwe and is being financed mainly by individual LSC farmers with income from tobacco. As a tree-crop, coffee takes around three years to mature until the first major harvest and few banks are willing to lend for this type of long-term project, especially in the current economic climate.In addition to the trees themselves, other establishment costs include pulping machines, fermentation tanks, drying racks and, ideally, drip line irrigation. These costs can easily add to more than ZWD 10.6 million for a 60 hectare project until the trees are fully mature.Government does not control the coffee industry and individual LSC farmers are free to market their crop directly in US dollars. Coffee prices are based on the New York Futures Market and most growers are able to fix prices up to 12 months in advance. An important advantage of this system is that sales against a forward contract can be used to obtain credit and help smooth individual cash flow requirements. Currently, however, New York coffee markets are suffering from a large oversupply and are at their lowest point for 25 years equal to an average fob export price of only USD 1 360 per metric ton from the Mutare Coffee Mill. Analysts predict the situation will improve over the next 12 months and export prices around USD 2 000 per ton fob Mutare are more indicative of the long-run average.
Therefore the quantitative analysis is carried out using three price scenarios: the current low price , a long-run average price and a middle price.Large-scale commercial farmers. Quantitative results from the analysis of LSC coffee grown in Natural Region II are summarised in Table 28 for a mature, four year old crop.Because coffee is grown to a more or less uniform standard, only two management levels are considered for this enterprise. In this case, the medium input level is based on a conservative yield of 2.0 metric tons per hectare used for most farm budgeting exercises in Zimbabwe. Compared with large commercial farmers in southern Zambia, however, where growing conditions are more or less similar, this is a fairly low yield and it is not unrealistic to expect at least 2.5 tons per hectare for a mature crop with good management. The high input level is based on this expectation.Key results from the quantitative analysis have already been compared with the data for flue-cured tobacco in the overview section above. Without repeating this discussion, it is useful to note that farmer profits improve by proportionately more with higher crop prices than the price increase itself. Furthermore, even though crop profits are very low with current prices , coffee still returns a gross profit and therefore contributes to the viability of a mixed LSC farm system. In other words, even under very difficult market conditions, coffee is still an attractive enterprise with great potential for increased profits as prices improve. In terms of the two management levels, the data suggest there is further potential for even higher profits through better management and increased yields. It may not always be possible to achieve 2.5 tons per hectare because of local agro-climatic conditions, but the potential for significantly greater profits no doubt means that some farmers already target this level.Smallholder farmers.
There are around 2 000 registered smallholder coffee growers in Zimbabwe located exclusively in the Eastern Highlands. Most growers are organised into co-operatives that manage the pulping and milling of smallholder coffee and oversee international marketing, which is handled on commission by the Mutare Coffee Mill. Smallholder farmers currently produce about 30 metric tons of green bean coffee annually equal to about 1.5% of the national total from an area of just over 100 hectares. Although smallholder coffee has not been promoted in the northern flue-cured areas, the quantitative analysis helps to assess the overall viability of this enterprise. As described, the major challenge with promoting smallholder coffee in these locations would be that pulping and processing facilities have to be developed. Simple irrigation facilities, including water furrows and treadle pumps, may also be needed for high yields depending on local conditions. Smallholder coffee, therefore,outdoor vertical plant stands is more likely to substitute for burley tobacco grown in eastern Zimbabwe where there is better access to existing pulping and processing equipment.The quantitative results for smallholder coffee are summarised in Table 29 below. These models assume farmers have access to pulping and processing facilities and no account has been taken of the cost for Zimbabwe to develop these services. Although more through analysis is needed to assess the viability of introducing coffee to a new location, the results here suggest this may be a very attractive proposition. Most encouragingly, the results are especially favourable with low input management where coffee costs less than almost every other enterprise analysed and provides relatively high profits similar to cotton.On this basis, the rates of return are outstanding and indicate that coffee can be a very good low risk investment for smallholder farmers. With more intensive management and/or improved world prices, the returns from coffee rival tobacco. Although somewhat labour intensive because of the time spent picking, crop profits improve significantly with more intensive management and the returns to family labour at these higher levels are similar to the very good daily returns from tobacco. Paprika was first introduced to Zimbabwe in the early 1990s by private investors who sought to promote the crop mainly among large-scale commercial farmers. One advantage of paprika is that the soil types and skills required are very similar to those needed for tobacco so that farmers are already well positioned for success. Compared with tobacco, however, world markets for paprika are relatively small with a total demand of only about 120 000 metric tons per year. Production in Zimbabwe has ranged from 8 500 to 15 000 metric tons annually and, in the years when production peaked, this had a noticeable impact on world prices which discouraged many LSC farmers from continuing to grow the crop. Until recently, paprika buyers typically offered LSC farmers production contracts with a guaranteed minimum price fixed in USD at the start of the season. Deteriorating economic conditions, however, mean this is no longer feasible for most export companies.About 70% of world paprika is used as a condiment in powder form with the balance sent for hexane extraction to derive a colour lipid for industrial food processing. Until now all paprika grown in Zimbabwe has been dried, de-seeded and exported in baled form for processing outside the country. This situation is about to change, however, in that one local firm has nearly completed a new solvent extraction plant with the capacity to process 1 000 to 1 500 metric tons of paprika annually. Once operational, this facility will help add value locally and save on high overland transportation costs for bulk paprika.
Although there has been much private investment in Zimbabwe to promote paprika among LSC farmers , relatively little attention has been given to smallholder growers for the past 2-3 years. Neighbouring countries including Zambia and Malawi have enjoyed some measure of success with smallholder paprika, but buyers in Zimbabwe prefer to work with LSC farmers who are a more reliable source of supply and able to produce higher quality crop that is easier to market internationally. Buyers in Zimbabwe also consider that paprika is a risky enterprise for smallholder farmers because of problems with crop disease and potential for yield loss from localised flooding and other conditions these growers cannot control.Large-scale commercial farmers. The results for LSC paprika are summarised in Table 30. For this analysis, two management levels are considered including a late-season, low-cost crop planted with the rains and a long-season crop aiming for very high yields.As discussed in the overview section above, these results compare very favourably with those for flue-cured tobacco. Although limited world demand means that paprika could never substitute entirely for tobacco, the crop clearly has the potential to provide high farmer profits and so can play important role in a mixed farm system. In terms of employment creation, paprika demands an estimated 70 to 80 days of casual labour per hectare and is among the most labour intensive crops analysed. The rates of return and sensitivity indicators for both short- and long-season paprika are excellent and show this is a robust activity that remains profitable even with a significant reduction in price. Smallholder farmers. Despite limited interest by most private buyers in paprika as a smallholder crop, some promotion and training work was carried out a few years ago in tobacco areas and there are now several thousand smallholder farmers who cultivate the crop each year. Around 75% of smallholder paprika is grown in Natural Region II on very small plots of just 0.1 to 0.2 hectares on most farms. In 1999, a total of 12 500 smallholder households planted paprika over an area of 1 600 hectares for all natural regions; there were 9 800 growers in Natural Region II cultivating a total of around 1 200 hectares. Paprika is priced according to colour and smallholders generally produce a lower-value crop than LSC farmers. Contamination with foreign matters including dirt, stones and even rat hairs because of poor on-farm storage also lead to lower crop value and restricted export opportunities.Results from the quantitative analysis of smallholder paprika are summarised in Table 31. Although production and marketing risks cannot be overlooked, the data for smallholder paprika compare very well with those for smallholder tobacco. Not only are the estimated profits comparable to those from burley and even flue-cured tobacco, but paprika also costs less to grow at each corresponding management level. These are attractive characteristics for smallholder farmers for whom the ability to afford purchased inputs can be a major constraint. Compared with tobacco and all other crops analysed, the data show that paprika offers outstanding rates of return to both cash and total production costs. Furthermore, despite the perception among many buyers that paprika is a risky crop ill-suited to smallholder production, the sensitivity data show that the very good financial results for this crop are extremely robust and suggest that smallholder farmers may be well positioned to compete in the world market even with lower prices.