At a time tobacco growers on the auction system are being affected by high rejection rates and poor prices, some contract or Integrated Production System (IPS) growers, are being offloaded to the former.
Eighteen weeks into the tobacco marketing season, high rejection rates and poor prices continue to be the order of the day, a development market players say will likely prolong this year’s marketing season.
Figures from AHL Group, formerly Auction Holdings Limited, indicate that Chinkhoma Floors in Kasungu last week registered the highest rejection rate at 95 percent while Mzuzu Floors was at 89.6 percent.
AHL Group corporate affairs manager Mark Ndipita said in an interview yesterday despite their quotas being exhausted by some merchants, contract growers are being offloaded to sale on auction system.
He said: “We are still experiencing high rejection rates particularly on the auction system which means some farmers are still keeping their tobacco in their homes.
“Again, the other challenge is that some contract farmers are being offloaded to sale on auction system despite their quotas being exhausted by some merchants yet the auction system is experiencing the challenge of high no sales.”
Ndipita said if the situation does not improve in the coming weeks, these developments may delay the season thereby affecting farmers’ planning for the next growing season.
“Farmers are already feeling the shocks of high rejection rates, and if the season prolongs, growers will obviously be hit hard by lack of money and this may likely affect their planning for the next tobacco season as most of the growers will be looking for inputs,” he said.
But in a separate interview yesterday, Tobacco Control Commission (TCC) chief executive officer Albert Changaya said the offloading of contract growers to auction system could be due to technicalities in the system which originated from the registration period.
He said: “It may not be a true reflection of what is happening on the ground because one thing you also have to appreciate is that a farmer can come to register with us, say 10 000 kilogrammes [kg], but a company may contract only 5 000 kg. So, it means the other 5 000 kg has to go through the auction system.
“This creates an impression that the companies are offloading the farmers when in actual sense the farmer had overproduced.”
Changaya said as a result of high rejection rates and late opening of the markets, this year’s selling season may be extended to end of October.
As of Friday, the country had sold 118 million kg of tobacco of all types and realised $185.7 million (about K136 billion).
This year, demand for tobacco was put at 132 million kg, but growers produced in excess of 175 kg, according to TCC figures.
Apart from being the main foreign exchange earner, available figures show that tobacco contributes about 13 percent to gross domestic product (GDP) and 25 percent to the tax revenue.