This year’s Malawi tobacco selling season is expected to open on March 17, with the Lilongwe Auction Floors being the first to open the trading floor to buyers and growers.
Secretary for Agriculture and Food Security Patrick Kabambe said in an interview on Tuesday that the new prices have already been agreed with buyers and other players in the tobacco industry.
"The minimum price set for the good quality leaf this year is US$2.20 per kilogramme which is more than last year’s minimum price of US$1.85 last year," he said.
This year’s prices are 45 percent higher compared to last year’s price.
For many years, proceeds from tobacco—which accounts for about 60 percent of the country’s foreign exchange earnings and 15 percent of the Gross Domestic Product—have been described as not matching production costs, a development that forced many smallholder growers and some estates to abandon production of the crop for other cash crops as a means of survival.
Then, tobacco prices hovered around US$0.70 and US$0.90 per kilogramme which was lower than the US$1 mark which experts claims is a cost to produce one kilogrammes the leaf.
But things took a turn-around last year when prices improved and farmers sold their crop at between US$1.60 and US$1.70 per kilogramme for the first time in several years. This was after President Bingu wa Mutharika intervened and ordered buyers to offer better prices or leave the country.
About two million of the country’s estimated 13 million people depend on tobacco and its related industries for their livelihood.
Another sweet song for farmers is that there is a fall in tobacco production this year from the projected figure of 150 million kilogrammes.
This year, although plentiful rains have been essential for tobacco cultivation, the unrelenting rains in Malawi in recent weeks have triggered floods that have washed away crops and left others waterlogged and prone to disease thereby cutting down tobacco production by three percent.
Tobacco Control Commission operations and technical manager Henderson Chimoyo said Malawi expected to produce 145 million kilogrammes of burley and flue-cured tobacco this year, against a projected demand of 150 million kgs from buyers.
The previous forecast, last updated in January this year before torrential rains engulfed the country, was for 150 million kgs. Total production for 2007 was 140 million kgs.
Malawi is the world’s biggest producer of burley tobacco which is used primarily in the production of cigarettes.
"This is all because of too much rain the country has been experiencing and, of course, the challenges in the distribution of fertilisers to tobacco farmers have compounded the problem," said Chimoyo.
Reacting to the news of improved minimum prices, farmers like Dennis Dias and Fradson Banda of Mangochi and Kasungu, respectively, said their hopes for a better income have been raised following reports that production has dropped because of heavy rains.
"At the beginning of the season our fear was that over-production of the crop could push the prices down. But now, if the supply is going to be low it means better prices will prevail again at the market," said Banda. He prayed that buyers would stick to minimum prices set for this year.
Commenting on the development, an economist with one of the commercial banks in Blantyre said the onset of tobacco selling gives the banking industry a huge relief after going through a tough time in terms of meeting demand for forex.
Meanwhile, with the start of the tobacco selling- season just three weeks away, no new tobacco buyers have registered with the Tobacco Control Commission (TTC) despite earlier indications from government that Chinese companies are interested to buy the leaf from Malawi.
Currently, Limbe Leaf Tobacco Company Limited, Alliance One Tobacco, Africa Leaf, Premium Tama, Malawi Leaf and RWJC Wallace are the only companies licenced by TCC.
But Secretary for Agriculture Patrick Kabambe pointed out that new buyers can come in even when the season is in progress.
In another interview, TCC general manager said he is not aware of any new buyer coming in and stressed that no-one can buy tobacco if not licensed by TCC. He, however, said as a regulatory body they do not bar new players from joining the market.
Chapola could not give the quantity the buyers are ready to buy the coming season, saying the information is confidential.
Tobacco sales are tentatively scheduled to start on March 17 this year depending on the quantity delivered at the floors. By Tuesday this week 28 trucks had delivered tobacco at the Lilongwe Auction Floors.
