Tobacco earnings, volumes fail to impress
Malawi has generated $961 786 (about K789 million) from about 647 000 kilogrammes (kg) of tobacco, AHL Group figures have shown.
During the same period last year, the country generated $14.2 million (about K11.6 billion) from the sale of 8.5 million kg of tobacco.
In an interview on Thursday, AHL Group sales general manager Graham Kunimba said attributed the huge disparity in figures to low volumes sold on the market which was opened early this year.
He said: “The main reason in the drop of revenue is that we are not receiving much tobacco. The market is currently characterised by low bottom leaf quality.
“Last year, within the same two-week period, we received more volumes of tobacco of high quality compared to now when we have low volumes from low leaf quality. We are, however, optimistic that in the coming days or weeks, the market should improve.”
Kunimba said the rejection rate has since improved to 16 percent, from the 80 percent recorded the same period last year.
In terms of average prices, he said this year at two weeks, all types of tobacco fetched $1.43 (K1 180) per kg from the $1.49(K1 230) per kg recorded the same period last year.
The news comes amid growing concerns that the tobacco market has started on a wrong footing this year because authorities rushed to open the market despite the growing season starting late due to late onset of rains.
But Tobacco Commission (TC) chief executive officer Joseph Chidanti Malunga earlier watered down fears of the poor start of the tobacco marketing season saying it was normal because the market was opened early when majority of the growers were still preparing their leaf.
He said: “The market is not yet at peak so we want to stagger so that we match the flow of volumes on the market. You know managing the market involves a lot of workers, so to have them involved it’s a big cost which we want to manage.
“We believe that in a week or so, we should have more volumes and return to normal daily trading.”
Malunga said TC licensed over 160 million kg for growers to produce against buyer demand of 154 million kg. But due to weather shocks, production is estimated at 103 million kg.
Economist Milward Tobias, who is also Centre for Research and Consultancy executive director, said the low revenue could affect the country’s forex reserves as there was hope for an early build-up of the reserves from tobacco.
He said: “We hope that the dollars that are trickling in may have a knock-on effect on the exchange rate by improving foreign exchange reserves.”
While Tobias was optimistic about better prices owing to low supply compared to buyer demand, Tobias said experience has shown that in Malawi, there is less competition on the tobacco market.
He advised authorities to take current weather shocks on tobacco as a learning experience and consider scaling up crop insurance to cushion growers from the shocks.
In the 2021 marketing season, cumulatively the country earned $197.1 million (about K160 billion) from tobacco sales, which is lower than $250 million that the country requires for its monthly import cover. During the same year, the country sold 123.7 million kg of tobacco with the seasonal average price of all tobacco types at $1.59 (about K1 295) per kg, compared to $1.53 (about K1 247) per kg recorded during the same period in 2020.
