In a rare occurrence, tobacco farmers under contract or Integrated Production System (IPS) on Thursday disrupted sales at Lilongwe Floors because they felt short-changed by one of the major buyers.
Since tobacco markets opened about four weeks ago, growers selling their crop under the traditional auction system have been the ones complaining of high rejection rate and poor prices ranging from 80 cents (K553) per kilogramme (kg) to $1.20 (K830) per kg.
But growers selling their tobacco under IPS—a tobacco growing arrangement that enables buyers to establish direct contractual relationship with growers—with one of the companies had a rude awakening when prices did not match the quality of the leaf they offered.
The buyers threatened to march to the offices of the company but were stopped by security officials who were on standby.
When Business News visited Lilongwe Floors, officials from Tobacco Control Commission (TCC), the buying company
and AHL Group were locked up in a meeting to find a solution to the impasse.
However, after the meeting ended, tension was still high, resulting in the closure of the market.
“They are being unfair to us because other buyers are offering good prices to contract farmers. Even after TCC had classified our tobacco and given it a grade, the buyer is downgrading it and in the end the tobacco is being given a low price,” said one farmer, who said he needed to repay about K1 million loan to the company for the inputs.
His colleague, Zalimbana Phiri, said he brought over six bales to the floors but they were all bought at 80 cents.
“This is outrageous. How can I spend a lot of money and then the company we entered into an agreement with offers me poor prices. If this continues then it is better to take our tobacco to Zambia or Mozambique,” he said.
Cross-border tobacco trade is illegal under the country’s laws.
AHL Group general manager for tobacco sales Moses Yakobe, in an interview, said growers were justified to complain on the prices because they compared what other buyers offered for the similar grade on contract.
“In fact, the whole mood in the tobacco industry is dampened because the volumes bought are 50 percent below last year and the revenue raised is also 50 percent below and there is just no hype,” he said.
Minister of Agriculture, Irrigation and Water Development George Chaponda, in an earlier interview, said government was not satisfied with prices other buyers are offering to growers, adding there is need for thorough discussions to find the root cause of the problem.
At the end of three weeks, $7.98 million (K5.5 billion) has been realised out of 7.75 million kilogrammes (kg) compared to $19.8 million (K13.7 billion) out of 14.7 million kg sold during the same period last year, according to TCC figures. n