Malawi tobacco market opens amid high prospects

This year’s tobacco marketing season is expected to open today at Lilongwe Auction Floors amid high expectations from industry players over good prices and increased competition for the leaf.

Malawi President Peter Mutharika is expected to open the tobacco marketing season, according to Tobacco Control Commission (TCC).

Expectations are also high over the opening of the season as it will boost the country’s foreign exchange reserves, a situation likely to strengthen further the local currency against major convertibles.

The opening of the season also comes at a time the country is bound to yield lower than expected volume of tobacco on the backdrop of ravaging floods that damaged and washed away crops, including Malawi’s major foreign exchange earner, tobacco.

TCC is projecting that the country will yield 181.6 million kilogrammes (kg) of all tobacco varieties, namely burley, flue-cured and dark-fired.

Malawi’s biggest tobacco grower representative body, the Tobacco Association of Malawi (Tama) chief executive officer Graham Kunimba on Tuesday shared his sentiments on the prospects for this year’s sales season.

He said projections are that Malawi will realise 154 million kg of burley tobacco, grown by the majority of smallholder farmers.

Said Kunimba: “It is estimated that demand for burley tobacco will be 160 million kilogrammes slightly exceeding the expected output of 154 million kilogrammes. In addition, the coming in of new buyers on the market is also good news to us and so we expect to get higher prices going forward.”

TCC chief executive officer Bruce Munthali said the organisation has licensed three new tobacco buyers, including Chinese firm Sino-Ma, which will also set up a cigarette processing factory in the country.

“We have licensed three new buyers this year and one of them a Chinese company named Sino-Ma, which is ready to spend around $30 million (about K13 billion) to purchase tobacco and set up a plant for processing secondary tobacco products like smokeless cigarettes,” he said.

Central Region Tobacco Growers Association (CRTGA) president Ernest Chadzunda said their members would want to see the value of the kwacha stabilise and not appreciate further during the season.

He said the association also wants government to continue embracing the Integrated Production System (IPS) of growing tobacco or tobacco contract farming.

The three-year-old system, in which buyers offer farmers necessary inputs, extension services and loans, ensures that 80 percent of tobacco is sold through IPS with the remaining 20 percent sold under the traditional auction system.

This year, according to the Tobacco Control Commission (TCC), burley tobacco price will range from 85 cents to $4.50 per kg against last year’s price of $1.76 per kg.

The buying price for flue-cured tobacco, mostly grown in large estates, will range from 25 cents to $4 per kg compared to last year’s $2.65 per kg.

And dark-fired tobacco variety will be bought at between $1 and $3.40 per kg as compared to last year’s price of $2.10 per kg.

Munthali said all necessary arrangements have been completed and all is set for the opening of the tobacco sales season.

Last year, Malawi earned $362 million from 168 million kg of tobacco at auction floors level, a similar value it earned in 2013.

In 2012, the country realised $177 million, which was lower than the $292 million revenue it earned in 2011.