The no-sale rejection rate for flue-cured tobacco has gone down on auction market from 33 percent last week to 16 percent this week, a development that has excited stakeholders in the sector.
The rejection rates were as high as at 60 percent in July, an issue that angered both government and growers.
It took the intervention of Minister of Agriculture, Irrigation and Water Development Allan Chiyembekeza and Tobacco Control Commission (TCC) chief executive officer Bruce Munthali who warned buyers that the rejection rates were much higher than the ‘tolerable’ level of 20 percent.
In an interview on Tuesday, Munthali said the rejection rates for flue-cured tobacco has finally gone down because some buying companies have confirmed new orders for the leaf from overseas customers.
Munthali also attributed the low rejection rate to increased competition on the market due to low tobacco inflows of flue-cured leaf as the marketing season nears conclusion.
Said Munthali: “Some buying companies have exceeded their quota on contract market and have, therefore, transferred the excess crop to auction market, while some have reduced their intake.”
However, growers selling burley tobacco will still have to endure high rejection rates on auction as the rate has increased from 35 percent to 47 percent.
Munthali attributed the higher rejection rates for burley tobacco to increased supply on the auction market as growers are trying to clear the tobacco they have in stock.
Rejection rates have been a key feature of this year’s tobacco marketing season.
TCC indicates that the high rejection rates are generally a result of low competition due to low demand for tobacco on the global market.
Munthali said so far the country has sold 184.5 million kilogrammes (kg), representing a two percent drop from 188 million kg sold during the same period last year.
Tobacco Association of Malawi (Tama) vice-president Albert Jere said the sales of flue-cured tobacco have faced hurdles this marketing season because the buyers are preferring leaf on contract, a development experts believe is aimed at ‘locking growers into contract system of buying tobacco’.
He said: “It seems they are now interested in flue-cured tobacco on contract. Hence, if they say we should all go on contract farming, we will sign the contracts with the buyers and see how it will go next marketing season.”
Jere said claimed that while burley tobacco growers have not exceeded the trade requirements, the buyers have shown no interest in the crop.
So far, data sourced from TCC show that tobacco earnings are down eight percent, from $356 million (about K213 billion) realised during same period last year to $326 million (K195 billion).
While weekly cumulative average prices as at the end of week 23 stood at $1.77 (about K1 062) lower than last year’s $1.89 (about K1 134).
The market closes on September 25 and TCC is in a race to sell five million kg of tobacco still in farmers’ hands.
This year’s tobacco marketing season started on April 8 with the opening of Lilongwe Auction Floors.