The Ministry of Agriculture, Irrigation and Water Development says from the next tobacco growing season, no contract agreement between tobacco farmers and buyers shall be accepted unless it has outright prices attached.
The ministry’s principal secretary Grey Nyandule Phiri made the remarks on Tuesday in Lilongwe, at a Tobacco Industry Conference held under the theme Maintaining the Relevance of Malawi’s Tobacco on the Global Market and Harnessing the Gains.
Previously, buyers have based their prices on the minimum prices set by government, which takes into consideration the costs of all inputs and a small markup for the farmer to benefit.
The common practice has, however, been for the buyers to purchase the leaf at the minimum price.
But Phiri said the law demands that farmers know the prices in advance before they make the decision to grow the leaf.
He said: “The IPS [Integrated Production System] was introduced a few years ago, but what has been happening is that the prices have been based on the minimum prices.
“The law demands that before the farmer signs, he should know what you are going to pay him. That is the basis for the farmer to decide to grow the crop or not. Other contracts in farming, for example seed multiplication, include the prices”.
In his remarks, Tobacco Control Commission (TCC) board chairperson Inkosi ya Makosi M’mbelwa V said as the regulatory body, they will ensure that the demands of the contracts are adhered to.
“This is the right direction because in all fairness, contracts should have prices attached to them. The term contract means that people have agreed on the outcome. As TCC, we will ensure that this happens,” he said.
During the last marketing season, 106.54 million kilogrammes (kgs) of tobacco was sold which was 45 percent lower than 195.12 million kgs sold in 2016.
The total value of $212.5 million (K156 billion) realised in 2017 was also 23 percent lower than $277 million (K203 billion) fetched in 2016.
However, in the last growing season, farmers benefitted in real terms as the average price of $1.99 (K1 460) was 40 percent higher than the previous season.
This year, more farmers are expected to grow the leaf as the prices rebounded in the last season.
More farmers are also expected to grow the crop following the underperformance of other cash crops, including soya and pigeon peas on both the local and the international markets.
Tobacco is main driver of the economy, and until recently, was contributing the over half of the country’s foreign exchange.