Minister takes on tobacco buyers over prices

Minister of Agriculture Lobin Lowe yesterday took a swipe at tobacco buyers, accusing them of offering low prices which have left the farmers destitute.

Speaking at Tobacco Commission ( T C ) headquarters in Lilongwe during the signing ceremony of a memorandum of understanding (MoU) with nine tobacco buyers on the 2021 tobacco minimum prices, he said tobacco farming is “no longer appetising” as most growers have abandoned the crop.

Lowe , who was accompanied by his deputy Agnes Nkusa Nkhoma and Principal Secretary for Agriculture Erica Maganga, said, the country has this year alone experienced a drop in tobacco output as growers are frustrated with low prices being offered on the market.

The first-round of crop estimates shows that the country is this year expected to produce 122 million kilogrammes (kg) of tobacco against buyers’ demand of 132 million kg.

Lowe said such a mismatch is indicative of growing frustrations by growers who are exiting the industry to look for other alternative sources of livelihood such as growing soya beans and maize.

According to the minister, the country produced over 400 million kg of tobacco in 2010 but since then, the volume has been declining due to a combination of factors, including low prices offered on the market.

Said Lowe: “We once witnessed $11 [about K8 470 based on the current ruling exchange rate] per kg in one season. What magic did you use in that season? Why can’t we give our growers say $6 [about K4 620] or $5 [about K3 850] per kg at least half of $11 which you once offered the farmer in the other season previously.”

He said while a farmer is the main actor in the tobacco value chain, on the flip side, lifestyle of tobacco buyers, cigarette manufacturers and other players is far much ahead of a grower who lives in the village.

“It is no longer appetising anymore. I beg you to do better this season so that we motivate our farmers,” said Lowe.

Speaking on behalf of tobacco buyers, Tobacco Pocessors Association of Malawi chairperson Hugh Saunders, who is also managing director of Alliance One Tobacco (Malawi) Limited, said that over the past 40 years, Malawi tobacco industry has been a successful industry.

In reaction to the s t a t ement s by the minister and the buyers’ representative, Tama Farmers Trust chief executive officer Nixon Lita said minimum prices of any tobacco grade are formulated by the Agriculture Research and Extension Trust (Aret) and are based on costs of production each year.

Last year, earnings from tobacco sales plunged by 27 percent to $174 million (about K134 billion) against $237 million (about K182 billion) earned in 2019.

Despite the drop in the revenue, the market saw a marginal increase in the average price to $1.54 (about K1 185) per kg compared to $1.43 (about K1 101) per kg in the 2019 marketing season.

Our Internet search yesterday showed that at $1.54 per kg, Malawi’s average price was low compared to the average price in neighbouring Zambia at $1.80 (K1 386) per kg and Zimbabwe at $2.50 (K1 925) per kg.

The tobacco market dynamics l a s t yea r mirrored the conduct of the market in 2012 when $176.87 million (K135 billion) was realized $293 million (about K222 billion) realized in 2011, a 40 percent drop in revenue.