Malawi’s tobacco buyers have reduced by 14 percent to 180 million kilogrammes (kg) the leaf they intend to buy next year, a signal that demand for tobacco is fast waning.
Last year, Malawi’s tobacco trade requirement was put at 210 million kg, but tobacco merchants managed to purchase a volume of 192 million kg through both contract and auction systems, according to final tobacco sales statistics we have seen.
Graham Kunimba, chief executive officer of Tobacco Association of Malawi (Tama), the largest tobacco growers’ group with more than 300 000 members, thinks such a drop in trade requirement of Malawi tobacco could be in line with global trends in tobacco business characterised by plummeting demand for the leaf.
“Generally demand for our tobacco by traditional buyers is declining, it will be good for Malawi to produce as per such a demand as prices for our farmers will be good,” he said.
Kunimba warned that if Malawi produces above the said requirement, it would backfire as prices would certainly be lower and, therefore, hurting farmers.
According to Tobacco Control Commission (TCC) statistics, buyers want 157 million kg of burley tobacco, 20 million kg of flue cured and three million kg of dark-fired tobacco.
TCC chief executive officer Bruce Munthali told Business News this week that it was imperative for Malawi to align its production to the global trade requirement “so that prices should not suffer.”
He said sometimes trade requirements change with time and with the coming in of new customers, competition for the leaf tends to pick up.
Munthali also said many potential tobacco customers or producers are sitting on uncommitted stocks, citing China, Brazil, India and Russia.
“The global tobacco industry is at crossroads and facing key challenges such as oversupply of tobacco products, increase in illicit trade, low pricing of tobacco leaf products and reduction in customer base,” he said.
But Minister of agriculture, Irrigation and Water Development Allan Chiyembekeza, speaking separately in a telephone interview, painted a rosy picture on the prospects of tobacco industry next year.
“The information from TCC is correct. Earlier, we had a national tour of various tobacco farmers and their fields and the indication that I got was that of good quality tobacco and the outlook is positive,” he said.
Malawi earned $361.6 million (K185 billion, at the current exchange rate) from tobacco this year, a value similar to what was earned in 2013 as the low tobacco prices led to lower revenues despite the larger production volumes.