Tobacco earnings down 8%

Malawi has earned $337.3 million (K189 billion) this year from tobacco, an eight percent drop from last year’s $366.3 million (K205 billion).

The drop has been blamed on poor prices and high rejection rates.

The drop in earnings is despite volumes at 192.6 million kilogrammes (kg) being 7.9 percent higher than last year’s 189.8 million kg, according to figures from AHL Group.

As at 26 weeks of sales, the average price was recorded at $1.75 (K980) per kg, down from last year’s $1.93 (K1 080) per kg.

AHL Group corporate affairs manager Mark Ndipita said the 7.9 percent drop in earnings can be attributed to low prices that were offered to tobacco farmers, especially those selling through auction system compared to those selling under contract system, also called Integrated Production System (IPS).

He said the average price for tobacco on auction system was $1.47 (K823) per kg this year as compared to $1.72 (K963) per kg in 2014.

Tobacco Association of Malawi (Tama) vice-president Albert Jere described this year’s sales season as tough for farmers due to poor prices.

He said it would seem that farmers are working for tobacco buying companies.

Said Jere: “Those companies buying leaf on contract have recovered their loans while we, as farmers, are suffering.”

Growers selling their crop under the auction system were the most hit than their counterparts selling the crop under IPS.

A farmer from Mzimba, Martin Dodo, who sold his crop under the auction system, said apart from the high rejection rates, the leaf was also offered at lower prices.

“Most of my leaf was fetching between $0.70 [K392] per kg and $0.80 [K448] per keg while my fellow farmersunder IPS were selling the same quality leaf at $1.50 [K840] per kg,” he said.

Ndipita said despite evidence that the quality of the leaf between auction and IPS this year was almost the same, the leaf sold under auction was bought at lower prices.

“It appears some tobacco buyers were deliberately offering low prices and rejecting more tobacco on auction as compared to contract to frustrate auction farmers and convince them to sale on contract in the next tobacco seasons,” he claimed.

This year’s marketing season was characterised by high rejection rate which peaked at as high as 90 percent at one point due to over production.