Harare — REGAL Insurance might pay out an estimated US$720 000 to compensate farmers whose tobacco crop was destroyed by hailstorms in Mashonaland West Province.

About 50 farmers in the Hurungwe area had more than 150 hectares of the golden leaf ravaged by hailstorms this year while 30 farmers were marginally affected.

High-grade tobacco sold for between US$3,50 and US$4 at the auction floors when the 2010 selling season opened last month and going by these rates, the insurer might need US$630 000 to US$720 000 to compensate the farmers.

A preliminary assessment done by the insurance firm established that the damaged tobacco was a write-off and the affected farmers would be reimbursed.

Regal Insurance is, however, awaiting a determination of the average selling price from the Tobacco Industry and Marketing Board to establish the value of the lost crop.

The company's managing director Mr Janhi Sahi confirmed the development, saying the company's technical specialists had completed investigations.

"We sent our (Regal Insurance) technical guys to assess the crop and a report was submitted. More than 50 farmers had a complete write-off on their crop while about 30 had partial losses," said Mr Sahi.

He said the affected farmers would be compensated to ensure that they remain in business and have financial resources to go back to the fields this year.

"Most of the farmers had borrowed funds from various institutions for inputs. We are going to compensate all of them. Even those who had a poor crop would benefit," he said.

The Regal Insurance boss hailed the introduction of the multiple currency system, saying it enabled most farmers to take insurance cover for their crops.

"Farmers need to insure their entire crop so that they have full cover," he said.

Regal Insurance has about 11 600 clients countrywide, making it one of the biggest agricultural insurance companies in the country, especially in terms of tobacco.

Ensuring continuity in the production of tobacco is critical to Zimbabwe considering the golden leaf is one of the country's single biggest foreign exchange earners.

Tobacco output had been declining in the last few years due to the difficult economic conditions of the last decade, but has started to recover.

After the economy stabilised last year, more farmers took to the fields and output is expected to increase from 58,6 million kg sold last year to about 77 million kg this year with prices improving from last year's average of US$2,91 per kg.

So far 2,09 million kg of tobacco valued at US$7,2 million has gone under the hammer since the selling season opened last month with prices averaging US$3,46 per kg.