Some major tobacco industry stakeholders are worried about global tobacco oversupply which they say could negatively impact Malawi.
Speaking exclusively to Business News on Tuesday, both the Tobacco Association of Malawi (Tama) and the Tobacco Control Commission (TCC) said they are bothered by burley tobacco overproduction in Brazil and flue-cured tobacco over-production in China and Zimbabwe.
TCC chief executive officer Bruce Munthali said Malawi cannot rule out the negative impact that global tobacco oversupply could have on Malawi, especially through low prices at auction level.
“It is true that Brazil has over-produced tobacco this year and China is also sitting on last year’s stocks. But Brazil is not really a competitor to Malawi because it produces for its own consumption and some American tobacco companies but it is an issue that we cannot discount,” said Munthali.
He said burley tobacco has not been affected by the global tobacco oversupply but admitted that flue-cured auction tobacco sales has been affected as opposed to contract flue-cured sales which he said are running smoothly.
Munthali explained that at the moment there is nothing that Malawi can do to intervene on the global tobacco situation.
He said burley tobacco production in 2014-estimated at 169 million kilogrammes based on the second assessment-is still in line with the global trade requirement.
The second tobacco crop assessment indicated that Malawi will produce 193 million kilograms of both burley, flue-cured and dark-fired variety in 2014.
In a separate interview on Friday, Tama head of marketing and business development Felix Thole agreed with Munthali on the global tobacco situation saying the situation has depressed tobacco prices, especially on flue-cured tobacco variety.
“I understand there is overproduction of flue-cured tobacco, more especially in Brazill which has produced about 900 million kilogrammes of flue and the same has happened with Zimbabwe. With Malawi not recognised as a core market for flue, I think that it is a problem,” said Thole.
Commenting on the market conduct, Thole said Tama is pleased to see progressive increase in the prices of burley tobacco since the market opened in March but noted that there is a 40 cents gap between flue cured prices this year and last year.
Last year, Malawi sold 168.6 million kg of tobacco as compared to 80 million kg in 2012, which represents a 111 percent increase.
Tobacco continues to contribute about 60 percent of Malawi’s total export earnings, and where government derives 25 percent of total tax base, directly employing 12 percent of Malawi population and also contributing 13 percent of Malawi gross domestic product (GDP).