In recent years, there has been a systematic shift in tobacco farming to the world’s lower-Human Development Index (HDI) countries that tend to struggle economically and where governance is often weak. With little or no evidence, the tobacco industry pushes a loud narrative that tobacco control (e.g., tobacco taxation, smoke-free places, packaging/labeling provisions, marketing bans, etc.) in these countries would destroy the livelihoods of smallholder tobacco farmers, an argument often supported by the governments and agribusinesses in these countries. Too often, there is paucity of empirical evidence to counter this claim and call the industry’s bluff.
Kenya has experienced growth in smallholder tobacco farming since 2007. A recent study led by Mr. Peter Magati from the International Institute for Legislative Affairs in Kenya, and Dr. Jeffrey Drope and Ms. Qing Li from the American Cancer Society, published in Tobacco Control assesses how much money households earn from selling tobacco, the costs they incur to produce the crop, including labor inputs. Because many farmers choose to contract with leaf-buying companies, the study also examines farmers’ decision to operate under contract. The findings demonstrate unequivocally that tobacco farming is not lucrative in Kenya.
The results are based on a household-level economic survey of a national representative sample of tobacco farming households in the 2014/15 agricultural season spread over the three largest tobacco growing regions in the country (N=585), and supplemented by focus group discussions in order to contextualize and enhance the findings. To account for production costs more comprehensively, the study incorporates a monetized value of family labor, where labor hours dedicated to tobacco farming by all household members were summed up into person-days and multiplied by the minimum daily agricultural wage dictated by the Ministry of Labor. Profit that considers family labor is referred to as “actual” profit, while the profit computation that only considers input costs excluding family labor is referred to as “perceived” profit. Results are presented in the figure and demonstrate that both contract and independent farmers experience small profit margins per acre, with contract farmers operating at a loss when you consider even this conservative estimate of the value of household labor. Even when family labor is excluded, income levels remain low: perceived profit for contract farmers are US$254/acre and US$394/acre for independent farmers. The actual profits drop precipitously once labor is included: a US$13/acre net loss for contract farmers and a decrease in profit for independent farmers to US$43/acre.
Results from regressions examining farmers’ decisions to contract farm suggest that those married monogamously, with larger households, legally entitled to their lands and/or needing credit are more likely to engage in contract farming.
The results provide incontrovertible empirical evidence that tobacco farming households in Kenya struggle economically. Farmers indicated entering into contracts with tobacco companies because they have a “guaranteed” buyer for their leaf and receive the necessary agricultural inputs (fertilizer, seeds, herbicides, etc.) without needing to pay cash up-front. This is desirable because credit is reported to be scarce in rural Kenya. Findings also illustrate an important labor dynamic because it shows that tobacco companies are exploiting what amounts to “free” (to the companies) or at least unaccounted for— by the farmers—labor in smallholder tobacco growing.