Tobacco buying companies have indicated that they are willing to buy 154.3 million kilogrammes (kgs) next year, three percent higher than the aggregate demand of 149.6 million kgs this year, the Tobacco Commission (TC) has confirmed.
TC has also revealed that the third and final tobacco production estimates show that Malawi has produced 193.4 million this year, which is lower than the 206 million kgs recorded in the second round of the production estimates.
TC chief executive officer Kayisi Sadala said this during a meeting with the media on Wednesday organised to update the media on the progress of the 2018/19 tobacco marketing season, which has now entered week 17.
“The demand for tobacco in the 2019/20 is 154.3 million, which is slightly higher than 149.56 million kg in 2019. However, the commission is negotiating for an increased volume,” sadala said.
Breaking down such a demand, Sadala said of the 128.5 million kg burley tobacco projected demand, buyers are willing to buy 35.3 million kg through auction against 93.2 million kg under contract.
Overall, the TC boss explained that of the 154.3 million kg projected demand, tobacco buyers are willing to buy 38.2 million kg through contract system as well as 116.1 million kg through contract arrangement.
“The 2019/2020 production must, therefore, be within the stated demand levels or trade requirement. This will help to attract good prices,” Sadala said.
He warned that those growers that would overproduce the leaf risk losing out heavily as the new Tobacco Industry Act stipulates that such growers would only get 25 percent from the excess tobacco while 75 percent would go to TC.
He, however, said in order to manage crop size, Sadala said the commission is licensing growers through quota allocations that have been formulated based on the consolidated demand.
TC said it is confident that the 35 percent excess tobacco produced this year will be bought following ongoing discussions with buyers.
In the ongoing marketing season, buyers initially indicated they would buy 152 million kg but growers produced 205 million kg of tobacco, representing 35 percent over production.
Tobacco Association of Malawi (Tama) chief executive officer Felix Thole said in an earlier interview that excess tobacco will not be in favour of growers as buyers may not offer competitive prices. Meanwhile, tobacco market statistics show that so far the market has realised $200 million (about K148 billion) from 135 million kg at an average of $1.48 (about K 1 095) per kg.