Amid continuing low tobacco prices prevailing on the country’s floors, tobacco stakeholders are meeting in Lilongwe to find a lasting solution to the problem, Business News has learnt.
Tama Farmers Trust president Abiel Kalima Banda and Tobacco Commission spokesperson Telephorus Chigwenembe confirmed in separate interviews yesterday about the meeting, which started on Monday and proceeded to yesterday due to the complexity of the topic.
The meeting, which was requested by Tama Farmers Trust, comes after persistent low prices buyers are offering this season, ranging from 90 cents (about K1 575) per kilogramme (kg) to about $3.30 (K5 778) per kg, which prompted farmers to seek TC’s intervention.
Kalima Banda said the meeting on Monday did not resolve the issue with delegates continuing discussions yesterday as farmers believe the prices are below the cost of production in view of the rising input prices.
He said: “The meeting is still going on. As of now, I cannot say the discussions have resolved anything because delegates are still negotiating.
“Our position remains that the prices are low and there is need for intervention because the cost of production is high.”
On his part, Chigwenembe said the nature of the discussions needs time as the issue of tobacco pricing involves many stakeholders.
“I cannot divulge much of the discussions, such engagements need time, but I can confirm that the meeting is ongoing,” he said.
TC data shows that tobacco has this far raked in $80.8 million (K141.4 billion) at an average price of $2.36 (K4 132) per kilogramme (kg) from $108.5 million (K189.9 billion) at $2.74 (K4 797) per kg during the same period last year.
Mwapata Institute research fellow Christone Nyondo said in an interview yesterday that if low prices persist, they could harm the country’s foreign exchange reserves and trade balance.
He said this means that the Reserve Bank of Malawi may find it challenging to stabilse the kwacha, leading to increased import prices for essentials such as fuel, fertiliser and medical drugs.
“The market structure is dominated by an oligopoly. Buyers can collude to maintain low prices while farmers, especially smallholders, have little bargaining power,” said Nyondo.
Agriculture policy development expert Tamani Nkhono-Mvula warned that if such pricing patterns persist, the country’s fragile macroeconomic position could worsen.
“The government should strengthen farmer cooperatives and create transparent price-setting mechanisms. Otherwise, farmers remain at the mercy of market forces beyond their control,” he said.
The prevailing low prices risk Malawi losing more tobacco through smuggling as vendors and some farmers are frustrated with local prices and are tempted to sell their tobacco to neighbouring countries such as Zambia.
TC confirmed in a statement on Tuesday that through a joint operation with the Malawi Police Service, they confiscated 7 900 kg or 79 bales of tobacco eyeing cross-border trading.
Last season, Malawi earned $396 million (about K693 billion) from tobacco.
