Tama Farmers Trust says the rising farm inputs coupled with the continued pressure on the local unit is threatening farmers’ prospects for next season.
In an interview on Tuesday, the trust’s president, who also doubles as International Tobacco Growers Association of Malawi president Abiel Masache Kalima Banda said despite the good prices being offered this season, farmers are spending most of their earnings on livelihood amid rising prices.
He said: “Farm inputs have become expensive, so too the cost of living. The money being generated now from the tobacco sales is being used for consumption.
“It will be difficult to secure inputs when the time comes because most of them have become expensive and we always buy them when the kwacha has appreciated. A lot of farmers are now relying on merchant and farm input loans.”
After 19 weeks of sales, earnings from the country’s major export crop, tobacco, reached $194.9 million (K159 billion) from the sale of 121.7 million kg, surpassing 2020’s earnings recorded at $174.5 million (K143 billion) from the sale of 113.8 million kg.
Prices have also remained elevated at $1.6 (K1 312) per kg from the previous season’s $1.53 (K1 255) while the rejection rate has improved to 25 percent during the week under review from 35 percent.
Meanwhile, the kwacha continues to atypically depreciate against major trading currencies despite ongoing sales of tobacco, shedding off 0.86 percent against the US dollar to K812.51 in July 2021 from K805.59 the previous month.
To signify a prevailing excess demand for foreign currency amid low supply, the central bank also revised upwards the country’s foreign exchange monthly requirement by 20 percent to $250 million.
On the other hand, pressure on prices continues to rise with RBM projecting an elevated path for inflation, projected to average 8.8 percent in 2021, representing a 0.4 percent upward adjustment from an earlier projection of 8.4 percent.
Rising prices of key imports and depreciation of the Kwacha will likely cause higher inflation rates which will raise the cost of living.
AHL tobacco sales spokesperson Tereza Ndanga observed on Tuesday that with the slightly higher average price now, the projection could slightly be higher next season.
She said: “The higher average price in the season means good returns for the grower. As a market operator, we note that production within licenced volumes, good care for the leaf, good presentation on the market and a transparent operation of the market has all helped to attract good prices and the success of the 2021 season.”
Tobacco Commission chief executive officer Joseph Chidanti Malunga was not readily available for comment.
However, in an earlier interview, he said the tobacco regulator is working on reducing production costs in the industry to ensure that the grower benefit.