Minister of Agriculture, Irrigation and Water Development Joseph Mwanamvekha has expressed optimism over this year’s tobacco prices, which he said are promising and is five percent higher than last year’s minimum prices.
Speaking during the official opening of Limbe Auction Floors in Blantyre yesterday, Mwanamvekha said government is banking on the low supply and the improved economic fundamentals for the better prices.
The Minister said: “I expect this year to have much better prices for three reasons: this year we have low supply which should increase demand. The second reason is that normally the pricing of tobacco takes into account the cost of production and this year the minimum wage has increased and the price should increase. Lastly, inflation rate has also eased to about eight percent.
“These are the reasons we are saying we should have better prices this year. Initially, buyers wanted minimum prices maintained from last
year but we negotiated and we agreed on a 5 percent above last year and so far nobody has paid below that minimum.”
About 2 000 bales of tobacco were sold during the opening with auction tobacco fetching a minimum of $0.80 per kilogramme (kg) while high quality leaf fetched $1.70 per kg. Contract tobacco, on the other hand, fetched a minimum of $1.10 per kg while high quality leaf fetched $2.45 per kg.
As compared to Lilongwe Floors and Chinkhoma in Kasungu which opened last week, top quality leaf fetched $2.40 per kg while low-quality tobacco fetched $0.80 per kg.
Wrapped tobacco on the other hand fetched a minimum of $2.20 per kg and a maximum of $4 per kg.
“As we speak today, we have started with a lower leaf which relates to the pricing. As a country, we also need to focus more on wrapped tobacco, but I understand it is being tried now,” said Mwanamvekha.
Some contract farmers, however, expressed concern over the minimum prices being offered, which they said could hamper their returns.
Tobacco Association of Malawi (Tama) chief executive officer Mathews Zulu said the prices were not encouraging yesterday, but hoped buyers would consider offering better prices while urging farmers to look into the issue of quality ,especially presentation.
As a remedy, Mwanamvekha said going forward; government will be publishing buying statistics for the tobacco buyers, so that farmers are able to make informed decisions when entering into contract agreements.
After one week of sales in the 2018 tobacco marketing season, 4 397 197 kilograms of tobacco have been sold bringing in forex amounting to $5 728 313 (K4.2 billion) at an average price of $1.30 per kg. Compared to last year, the country sold 1 349 317 kg raking in $1 821 387(K1.3 billion) at an average price of $1.35 per kg, according to figures from AHL Group.
“If we examine the statics critically, we will notice that although more kilograms and revenue have been sold and generated in week one this year, the prices offered last year in the first week appear to be a little better than those offered in week one this year,” said Mark Ndipita, AHL Group corporate affairs manager.