Low volumes hit tobacco

Faced with low volumes of tobacco supplied on the market, the Tobacco Commission (TC) says the auction floors will now be open thrice a week until the situation improves.

Economic analysts have since expressed fear the low volumes will negatively impact on the generation of foreign exchange. Tobacco is the country’s major export crop.

In a communication to stakeholders which we have seen, TC chief executive officer Joseph Chidanti Malunga said that from yesterday, tobacco sales at the Lilongwe Auction Floors will be conducted on Mondays, Wednesdays and Fridays until further notice.

He said the decision follows the current low tobacco inflows at the market.

But in a telephone interview last evening, Malunga allayed fears that the development reflected a poor start to the 2022 Tobacco Marketing Season President Lazarus Chakwera launched on Friday.

He said the situation was expected because the market opened early when most growers were still preparing their leaf.

Malunga said: “The market is not yet at its peak so we want to stagger so that we match the flow of volumes on the market. You know managing the market involves a lot of workers, so to have them involved it’s a big cost which we want to manage.

“We believe that in a week or so, we should have more volumes and return to normal daily trading. This is not a challenge by the way, you always start with low turnout and then pick up. There’s no cause for alarm.”

He said TC licensed over 160 million kilogrammes (kg) for growers to produce to meet the current buyer volume demand of 154 million kilogrammes, but weather shocks worsened by late onset of rains have affected production, currently estimated at 103 million kg.

But in a separate interview, economist Milward Tobias said the development will affect the country’s forex reserves as there was hope for an early build-up of the reserves from tobacco.

He said: “The good thing is that the market has opened and three days is reasonable than a complete closure of the market.

“We hope the dollars that are trickling in may have a knock-on effect on the exchange rate through improving the forex reserves which the imported inflation may be intercepted to some extent.”

While expressing optimism about better prices owing to low supply compared to buyer demand, Tobias, who is executive director of the Centre for Research and Consultancy, said experience has shown that there is less competition tobacco in Malawi.

He said in an ideal situation, Malawi could get more revenue from tobacco despite low volumes as buyers would scramble to secure volumes.

Tobias advised authorities to take current weather shocks on tobacco as a learning experience and consider scaling up of crop insurance to cushion growers from the shocks.

On his part, AHL Tobacco Sales general manager Graham Kunimba in an interview yesterday admitted that while the market was progressing well with an early opening, there are low volumes being supplied on the market.

He said this was because the crop is not ready following the late onset of rain which led to delayed transplanting from nursery to the fields.

Kunimba said: “The start has been better this year compared to last season more especially on the auction market there is remarkable price improvement. Rejection rate is around 16 percent while last year it was well over 80 percent, this is very encouraging.”

He said they did not open the Lilongwe market on Friday after the official opening on Thursday. He said yesterday there were 907 bales for sale against the capacity of 10 000 sales a day.

On the first day, the market had 1 057 bales offered for sale.

During a visit to the Lilongwe market yesterday, The Nation observed that there was price stability on the market as buyers maintained the prices.

Like on the first day, yesterday’s flue cured tobacco fetched $2.85 (about K2 337) per kg as the highest price while burley raked in $2.30 (about K1 886) per kg as highest price on the contract market.

On the auction market, the highest price offer for burley tobacco was $1.75 (about K1 435) per kg while the minimum price was $0.95 (about K779) per kg on both markets.

Last year, the highest tobacco price on the auction floors was $1.50 while the lowest was $0.90. On the contract side, the highest price was $2.40 per kg.