Tobacco rejection rate has gone down to 27 percent from 70 percent in the first three weeks of this year’s Tobacco Marketing Season, a development that has excited growers.
Tobacco Association of Malawi (Tama) chief executive officer Felix Thole in an interview yesterday said the 70 percent was weighing heavily on grower expectations as they could not sell to get their return on investment.
He said: “We have been complaining about the high rejection rate for the past three weeks, especially on the tobacco sold on the auction system. We were relieved last week as the rejection rate hovered around 27 to 30 percent the lowest since we started the season.
“This development signifies that we are relatively better compared to when we started, and if this can continue, farmers would not complain much because what they want is their tobacco to be sold to get returns on their investments.”
Thole attributed the low rejection rate to improvements in the grading and quality of the leaf that is being brought on the market.
Tobacco Commission corporate planning and development manager Hellings Nasoni said rejection rate is attributed to market fundamentals prevailing at a particular time.
He said most concerns about the rejection rate is on the auction market compared to the contract market.
“The main driving factors that we have seen is that of market dynamics. On the first days, it was about the quality issue where presentation by farmers was not per the buyer standards in relation to competitive prices.
“So, overtime we have seen improved quality of the leaf brought on the market. However, due to the market dynamics at the global level, we have seen that there is less uptake through the auction system compared to the contract system,” said Nasoni.
He said the other factor is that the reoffered tobacco has an impact on the pricing levels, adding that sometimes the quality is affected.
Nasoni said since companies currently seem to be driven by market dynamics, there has been high rejection rate at Limbe Floors compared to other markets where more volumes are offered on contract and less on auction
TC figures show that in five weeks, tobacco has raked in $37.79 million (about K27 billion) compared to $39.83 million (about K28 billion) generated last year, which is 30 percent lower.
The revenue is from 37.7 million kilogrammes (kg) sold this year compared to 62 million kg sold during the same period last year, which represents 39 percent drop.