Industry reforms spur high returns

Malawi’s tobacco revenue hit $355.15 million in week 23, with only Mzuzu auction floors open, according to Auction Holdings Limited statistics.

In the week ending August 16, Mzuzu auction floors added $3.9 million to the national tobacco proceeds, after selling 1.8 million kilogrammes (kg) of the leaf.

“Mzuzu remains the only floor trading, this is in tandem with Malawi’s weather pattern that result in sales starting in the south, centre and finishing in the north. Volumes sold at the Mzuzu floors picked up having dropped in the past two consecutive weeks. “Bale throughput which is bales sold measured against capacity stood at 59 percent at Mzuzu floor which has a weekly capacity of 35 000 bales. At 67 percent of volumes sold, leaf styles dominated the Mzuzu market in the week suggesting a couple of weeks of trading at the floor,” reads part of the statement.

The AHL data indicate that in week ending August 16, 1.7 million kg of burley were sold, raking in about $3.64 million. Flue cured fetched $223 550 from 79 725 kg, dark fired fetched $84 854 from 52 999kg.

The Tobacco Control Commission (TCC) has said the country has also beaten its earlier target on tobacco volume this year as the market draws to its closure.

TCC chief executive officer Bruce Munthali said in an interview in Lilongwe that earlier the commission had projected that the country will sell out a volume of 162 million kg of all types of tobacco this year but said as the close of 23rd week, the market had already sold 165 million kg of tobacco.

“This means that we have surpassed our earlier projection because we had expected that we will close at 162 million kg. But generally the crop has done crop has done well this year as compared to last year,” said Munthali.

Last year, Malawi witnessed one of the worst tobacco market season, with total earning tumbling to $177.8 million from a volume of 79.8 million kg.

In 2011 Malawi’s gross earnings from tobacco at auction floors were estimated at $292 million.

The surpassing of the projection in tobacco volume this year comes amidst delight by tobacco industry experts as the country has also surpassed the set revenue target from tobacco of $300 million based on the outcome of a 2012 tobacco industry seminar at Nkopola Lodge in Mangochi.

Unlike in recent past years, the 2013 tobacco market season has been characterised by a stable market conduct with two minor disruptions a result of disagreements among industry players over the days allocated to the sale of tobacco under IPS and auction systems in a week.

Munthali attributed the improved performance and conduct of tobacco crop this year on the market to improved agricultural practices among many tobacco growers as well as the introduction of reforms in the tobacco sector including adoption of the Integrated Production System (IPS) guiding the growing and marketing of tobacco.

“Generally, what IPS has done this year is to improve the quality and pricing of tobacco to now around $2.15 across all types of tobacco,” he said.

Following the approval of IPS, tobacco farmers started supporting tobacco growers by contracting them to produce good quality leaf in order to attract premium prices on the market.

He recalled that in most cases last year, average prices were averaging below $2 (about K700) per kilogram.

According to the data for the week under review, average prices stood unchanged at $2.13 per kg. However burley prices dropped by $0.05 to $2.11 per kg, and dark fired dropped to $1.6 by $0.08. Flue cured average price shot up by $0.45 to $2.80 per kg.

Up to last week the country has sold a total of 165 million kg raking in over $355 million, according to the AHL data. Burley has so far raked in a substantial $285.8 million from 141.6 million kgs, flue cured has fetched $60.9 million from 19.6 million kgs while 4 million kgs of dark fired were sold bringing in $8.4 million in proceeds.

The current tobacco marketing season which better in terms of revenue and volume than last year’s has been touted for the stability of the kwacha and the bolstering of foreign exchange reserves.

Economic analysts are hopeful that a likely increase in tobacco earnings this year could sustain the current availability of foreign exchange on the market and in the process enable the country meet its import demands of strategic goods and services as the economy enters its lean season.