Tobacco output could drop further—NBM
Tobacco total output this year could be less than earlier projected, with the National Bank of Malawi (NBM) putting the figure at less 100 million kilogrammes (kgs).
The crop’s output, according to the second round crop estimate, was put was 151 million kgs, a 35 percent drop from a record 232 million kgs last year, largely attributed to the introduction of quotas and the dry spell that hit some tobacco growing districts.
But NBM, in its economic newsletter for July 2012, observed output could turn out to be less than previous estimated due to a number of factors.
“There is ample evidence that a significant part of the crop was smuggled to neighboring countries in the early part of the season. This is the cost of delayed decision-making by the authorities to adjust the exchange rate,†said the Malawi Stock Exchange (MSE)-listed bank.
Tobacco sales opened first on March 26 at Lilongwe Auction Floors, but the prevailing exchange rate then was at K165 against one US dollar.
The Reserve Bank of Malawi (RBM) devalued the kwacha by 49 percent against the US dollar to K250 and subsequently floated it.
Since the devaluation, the farmers have been smiling all the way to the bank because the kwacha equivalent of their earnings is higher than when the dollar was pegged at an old rate.
Before the devaluation, a number of farmers were reluctant to bring their leaf to the auction floors, a development that affected the inflow of the leaf in all the country’s auction floors.
But since the devaluation on May 7, the auction floors have been overwhelmed with the inflow of tobacco. Farmers have been delighted with the earnings from the sales.
The Tobacco Control Commission (TCC) public relations officer Juliana Chidumu said on Monday that they are yet to conduct a final assessment of output to determine how much was produced this year.
In February, the Tobacco Association of Malawi (Tama) raised an alarm that this year Malawi would fail to meet even half of the demand from leaf buyers.
Tama attributed this to failure by some farmers to grow the crop discouraged by poor prices and the leaf’s high rejection rate, which, at one time, peaked at as high as 90 percent.
Buyers this year indicated they would buy 160 million kgs of burley, 15 million kgs of flue cured and four million kgs of dark fired leaf.
According to sales statistics from Auction Holdings Limited (AHL), about 56.3 million kgs of the leaf have been sold as of June 22 2012.
The Farmers Union of Malawi (FUM) has projected a 36 percent drop to $186 million (K46.5 billion) in this year’s earnings largely on account of lower than expected output.
Tobacco earnings have for the past years been dropping. Last year, the earnings dropped to $292 million from $410 million, the year before.
