Tobacco Commission (TC) first round production estimates project the leaf’s output at 214 million kilogrammes (kg), 20.5 percent above the initial demand forecast of 170 million kg, raising concerns about the regulator’s enforcement of production quotas.
The overproduction also raised broader concerns about market stability and oversight in the country’s most lucrative export crop.
TC has, however, downplayed fears of overproduction, stating that these are preliminary figures and that the realistic picture will be known when the second round production estimates survey and final buyer demand figures are released.
TC spokesperson Telephorus Chigwenembe said these are preliminary figures and will get a better picture when the regulatory analyses data from the second round, which is underway.
“Preparations are on track. For example, we are also engaging the Malawi Police Service on the enforcement of tobacco-related laws not just this season but even after. All this is going on well,” he said.
On the number of buyers and their demand, Chigwenembe, who in January indicated that TC licensed eight companies from 11 last year with 170 million kg preliminary demand, said there has not been any addition so far.
He said: “As of now, we have not licensed new buying companies. However, we have received a number of inquiries from companies showing interest to buy our tobacco this year.
“On trade demand, we will share the figures as we near the opening of the season because that is when we shall have fully consolidated the volumes from each buying company.”
TC board chairperson the Reverend Timothy Nyasulu, in an interview on Thursday, insisted that this year’s production is going to be below last year’s 221 million kg, but said the regulator is concerned with cases of overproduction.
He said TC will strengthen its oversight by ensuring that farmers adhere to production quotas by holding tobacco annual stakeholders conference before field works start to enlighten farmers before going to field.
“TC will continue to strengthen regulatory oversight to ensure that all contracted volumes are responsibly managed and that contractual commitments are respected,” said Nyasulu.
In an interview on Thursday, agricultural extension services expert Leonard Chimwaza expressed fears that the falling demand could dampen prices as supply will likely be high.
He said: “This is unfortunate. The tricky part is when demand decreases prices may fall and that is not good for the industry.
“Weaker prices result in increasing cases of smuggling. Let’s hope the other companies will come on board to strengthen competition.”
Tama Farmers Trust president Abiel Kalima Banda said in an interview on Thursday that the good rains this season have enabled growers to produce quality tobacco although risks remain.
“If farmers produce low quality leaf, they will face challenges on the market. But I am convinced that most farmers will produce quality tobacco because of the sensitisation campaigns that we conducted,” he said.
Last season, TC licensed farmers to grow 174.4 million kg and ended up growing 221 million kg out of 213 million kg demand by the buyers. The leaf was sold at $2.46 (about K4 307) per kg, raising $539.4 million (about K944.66 billion) in earnings.
In the State of the Nation Address, President Peter Mutharika announced that almost all the 3.5 million kg of leftover tobacco was sold, raking in $8.6 million (about K15 billion).
Tobacco remains Malawi’s main foreign exchange earner and contributes more than 50 percent to the country’s foreign exchange earnings and 13 percent to the economy.
