Tobacco dollars to start trickling in as sales begin

Tobacco dollars will start trickling in two weeks as the sales market for the leaf—Malawi’s major contributor of foreign exchange—rolls into action on March 24, the Tobacco Control Commission (TCC) has confirmed.

The opening of the tobacco sales market this year to start in Lilongwe, comes amid prospects of a good crop and high expectations of good prices for both auction and contract systems.

TCC chief executive officer, Bruce Munthali, said this week though they have delayed a bit to open the market because some growers are still preparing their leaf, they are looking at a good season this year, stressing that the crop in the field looks impressive.

“We have a good crop this year and most of the farmers; particularly those who have been supported by buying companies took care of the crop very well.

“The season started well in terms of distribution of rainfall, but we had some problems in some places because rains delayed a bit. But later, rainfall distribution throughout the country was even,” he said.

TCC submitted its minimum price metrics to government for approval in early February, but it is yet to get a response.

During the last selling season, minimum prices for burley tobacco, grown by a majority of smallholder farmers, ranged from 90 cents (K387, at the current exchange rate) per kilogramme (kg) for the lowest quality leaf to $2.25 (K967) per kilogramme.

The prices picked from a range of 80 cents (K344) per kg to $2.45 (K1 053) per kg in 2012.

For flue cured tobacco, mostly the preserve of large estate commercial farmers, the prices ranged from 35 cents (K150) per kg to $4.20 (K1 806) per kg while price for dark-fired tobacco were maintained at a range of 60 cents (K258) per kg to $3 (K1 290) per kg.

With the minimum prices not yet revealed, growers will have to keep their fingers crossed perhaps up to the day of the opening of the sales, which will commence at Lilongwe Auction Floors.

It usually takes a bit of time to secure government approval as several factors have to be considered to ensure that all the submissions have the right price models since tobacco is the country’s main cash crop.

“As you know, tobacco is one of our major cash crops, so government also has experts who look at those things. But we have a price working model which we are using as an industry which most farmers will have to know,” said Munthali.

Tobacco revenue accounts for more than half of all foreign exchange earnings, contributing 13 percent to gross domestic product (GDP) and employing millions of people directly and indirectly.

Malawi earned $330.9 million from tobacco exports between July and December 2013, according to data compiled by TCC, accounting for 60 percent of all total earnings from tobacco, signifying that the leaf is still the number one export crop.

A tobacco grower, Denis Dias, who is also Tobacco Association of Malawi (Tama) vice-president, said farmers are prepared for the marketing season.

“Most of the growers are looking forward to a good selling season and are anticipating that prices will also be satisfactory,” he said.

TCC preliminary figures show that output of the leaf is expected to increase roughly by about 25 percent over last year in which 168 million kg from just under 80 million kg in 2012.

The jump in output, according to experts, is on the basis of good prices that prevailed last year, particularly for burley tobacco, which compelled more farmers to grow the crop.

During the last growing season, the government adopted the Integrated Production System (IPS)—a system that combines tobacco growing and marketing strategies—in which 80 percent of the leaf was sold through the contract whereas the rest passed through the auction market.