Tobacco rakes in K226 billion amid low prices

Three weeks before the closure of the 2018 tobacco marketing season, Malawi has earned $310.1 (about K226 billion) from the sale of 180.8 million kilograms (kg) of tobacco.

According to Tobacco Control Commission (TCC) burley is the top-selling leaf and with, so far, 150.8 million kg sold at an average price of $1.60 (about K1 168) per kg for the country to earn $240.7 million (about K175 billion).

Flue-cured tobacco bales at Limbe Floors bought on contract

While 24.9 million kg of flue-cured has been sold at an average price of $2.46 (about K1 795) per kg to rake in $61.4 million (about K46.7 billion) and 5 million kgs of dark-fired leaf has so far been sold at an average price of $1.60 (about K1 168) per kg to earn the country $8 million (about K5.8 billion).

The TCC figures show that country has sold more tobacco this year when compared to the same period last year when the country sold about 107 million kg of tobacco at an average price of $1.99 per kg to realise $203 million.

But the average price this year is lower at $1.72 (about K1 255) per kg compared to the $1.99 (about K1 452) average at the same period last year.

The auction managers, AHL Group earlier in the week linked a shift in demand from high value leaf styles of tobacco to low value thin styles as contributing to lower cumulative average prices for 2018 marketing season.

However, in an interview on Wednesday, TCC chief executive officer Kaisi Sadala said although prices seem lower this year, farmers and the country should be assured of better returns as more volumes of the crop have been sold this year compared to last year.

He said: “Overall the season has been successful with no disruptions leading to no closures. Prices though lower than last year are generally satisfactory.

AHL Group corporate communications manager Thom Khanje was also equally impressed with this year’s tobacco marketing season although he said there have been minor ‘up and downs’.

“We are generally satisfied with how the season has progressed so far. There has been no interruption on sales to date and rejections have been within reasonable rates for the most of the season,” he said.

Khanje also said both volumes and revenues at 178.9 million kgs and $307.6 million, respectively, are better than last year adding that the challenge so far is the unsold contract tobacco.

“There are also problems on contract sales where some bales remain unsold for weeks and lying abandoned in our warehouses. It is our expectation that these issues will be addressed by appropriate authorities so that the season ends on a positive note,” he says.

Commenting on unsold contract tobacco, the Tobacco Association of Malawi (Tama) acting chief executive officer last week told Business News that leaf could not be bought because some buyers have exhausted their quota.

The tobacco marketing season is expected to close in three weeks time.

According to Sadala, Chinkhoma Auction Floors in Kasungu was scheduled to close last week but the floor still has a lot of tobacco bales which were delivered on the closing day.

“Due to limited space we could not lay out all tobacco for sale by Friday 17 August,” he said.

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