Tobacco farmers without contracts with buyers felt shortchanged yesterday as their leaf fetched lower prices than what their contracted counterparts were offered at the Limbe Auction Floors.
When Deputy Minister of Agriculture Madalitso Kambauwa Wirima officially opened the 2022 Tobacco Marketing Season at the Limbe tobacco market yesterday amid low volumes, the leaf on the contract platform went at $2.70 (about K2 195.10) per kilogramme (kg).
But the story was different on the auction market where growers not affiliated to buying companies were only offered $1.70 (about K1 832.10) per kg as the highest price.
The prices at the market in Limbe were, however, higher than last year’s when the contract market fetched $2.30 (about K1 869.90) per kg while the auction platform fetched $1.60 (about K1 300.80) per kg.
Irate non-contract farmer, Chipiliro Chimenya from Phalombe, bemoaned the prices saying buyers do not consider what farmers put in to produce the major Malawi foreign exchange earner.
“To have a bale, I had to put in K100 000, but here they are buying the leaf at K75 000. What is that? They better suspend the market. They are even rejecting tobacco that should have been fetching higher prices,” he said.
Another farmer Alfred Mwape from Thondwe in Zomba, agreed with Chimenya, saying: “The price of inputs is high. The cost of living is unbearable. My parents sent me to school with proceeds from tobacco but today, I can’t do that with my children. We don’t know where to go.”
But for contract farmer, Harriet Chomboto, from the Zaone Extension Planning Area in Zomba, the prices were fair.
“I am happy. I am only worried that I have about eight bales from a field where I produce between 10 and 12 bales,” she said, having sold her leaf at $2.10 (about K1 707.30) per kg.
Wirima decried the low prices on the auction market, but attributed the situation to poor grading and low quality tobacco.
She said: “The minimum rate for non-grade tobacco [the lowest quality leaf] was 90 cents. All of it was rejected. This is a wake-up call for non-contract farmers as those on contract have an advantage since they get inputs on loan and extension services, which help improve quality. They are assured of a good market. Where the quality is poor, the prices are low.”
As farmers on the auction market called for its suspension due to low prices, Wirima said there was need for arbitration between the farmers, buyers and the Tobacco Commission (TC) on the issue.
But she expressed optimism that with the coming of a 10th buyer this year, the leaf would fetch better prices due to increased competition and low volumes resulting from unfavourable weather conditions during this year’s growing season. In March, TC unveiled a Malawian buyer, Protrade Group Limited.
The opening day in Limbe also saw low volumes of the green gold, a phenomenon since President Lazarus Chakwera opened the Lilongwe Auction Floors in on March 31.
The low volumes prompted TC to order opening of the market three times a week.
The market was once suspended due to the low volumes.
But Wirima was hopeful the volumes would pick up since the market has opened earlier this year than it did last year when it opened in May.
Tobacco Association of Malawi (Tama) Farmers Trust president Abiel Kalima Banda said the prices were satisfactory, but hoped they should have been higher.
He said: “The prices are fair but the buyers were only getting the leaf at the minimum rate. They were not going more than that. With the low volumes this year, and with more buyers on the market, one would expect the prices to be higher.”
On the persistent discrepancy between the prices on the auction and contract markets, Banda encouraged farmers to enter into contracts by registering with the trust to get connected to buyers.
AHL Group board chairperson Rhyno Chiphiko the market had 431 bales against a holding capacity of 5 000 bales in a day.
“We have been facing a lot of problems in the past, but we hope for a brighter future. Our members of staff were going for four months without pay, but with a K7 billion bail-out from the government things are getting better,” he said.
So far, two markets, Chinkhoma in Kasungu and the Mzuzu Auction Floors are yet to open for this year’s marketing season.
Tobacco contributes about 11 percent to the country’s gross domestic product and accounts for about 60 percent of the country’s foreign exchange earnings.
The sector employs over 20 000 permanent and seasonal workers.