Earnings from tobacco, the country’s main export crop, have hit $37.2 million (K65.2 billion), one month after the marketing season opened on April 20 as the market continues progressing slowly compared to the previous season in terms of both revenues and volumes sold.
According to AHL Tobacco Sales Limited data, as of last week, the leaf generated 37.2 million (K65.2 billion) after selling 17.5 million kilogrammes (kg) at an average price of $2.12 (K3 712) per kg.
During the corresponding period last year, the market earned $57.9 million (K101.3 billion) after selling 24.8 million kg at an average price of $2.33 (K4 079) per kg.
The $2.12 average price is 10 percent lower than $2.33 recorded during the same period last year while the sold volumes and values are, 30 percent and 35 percent, respectively lower than the corresponding period.
Meanwhile, at an average of 65 percent, the current rejection rate is higher than last year’s overall rejection rate of about 26 percent, according to Tobacco Commission (TC) records.
In an interview yesterday, Tama Farmers Trust president Abiel Kalima Banda attributed the slow progress to high rejection rate.
He said: “The prices remain very low, considering the cost of production that farmers incurred. The situation is worse on auction market compared to contract market.
“After the Minister of Agriculture, Irrigation and Water Development Roza Mbilizi engaged buyers earlier in third week, the rejection rate dropped from over 90 percent to around 70 percent in some markets, but we have of late observed that the rate resumed rising.”
TC spokesperson Telephorus Chigwenembe said the rejection rate has dropped since the engagement with buyers although it remains relatively high.
He said: “Generally, the market is progressing well. In terms of rejections, we are finding comfort in the positive trend.
“In the first two weeks we saw daily rejection rates falling within the range of 90 to 100 percent but from third week we saw the rates coming down to 65 percent on some days in different markets.”
TC is on record as having warned farmers that due to overproduction observed both locally and globally this year, quality and better grading will play a critical role on tobacco pricing, stressing that low grade leaf will result in high rejection and low prices.
Malawi is expected to produce 197 million kg of tobacco this year, an increase of 14 percent on the current buyers’ demand of 170 million kg, according to the Second Round Tobacco Production Estimates Survey.
This season, the number of buying companies has dropped to eight from 11 last season, a situation analysts feared would dampen demand and affect prices as supply was already projected to be high.
The eight buying companies this season are JTI Leaf (Malawi) Limited, Alliance One Malawi, Limbe Leaf Tobacco Company, Hail and Cotton (Malawi) Limited, Premium Tobacco Limited, Associated Central African Limited, African Tobacco Services and Nyasa Manufacturing Company.
Last season, TC licensed farmers to grow 174.4 million kg, but ended up growing 221 million kg against 213 million kg demanded by the buyers.
The leaf was sold at $2.46 (about K4 307) per kg, raising $540 million (about K944.66 billion) in earnings.
