Tobacco sales fetch US$26m from 13m kgs sold so far; Best auction prices being offered at US$2/kg

Eight weeks since the opening of this year’s tobacco marketing season on March 31, more than 13 million kilograms had been sold as of Wednesday May 18 in the country’s four floors combined — generating US$26 million.

At a press briefing held today, Friday at Mount Soche Hotel in Blantyre, Tobacco Commission Chief Executive Officer, Dr Joseph Chidanti-Malunga said this year’s tobacco auction season is offering the best prices at an average of US$2/kg.

“We have seen a rise in what buyers are offering at the floors,” he said. “A lot of tobacco that should ordinarily have been bought at the minimum prices is being bought way above the mark.

“For illustration purposes, burley tobacco grade of NG (non-descript) that would ordinarily be bought at the government set minimum price of 95 cents, reflecting on its quality, had been bought at a price as high as $1.76 — which is 85% higher than the set minimum price.

Chidanti-Malunga flanked by Richard Chinthunzi (right) and Dorothy Tembo

“As of 18th May, the average price of the leaf was US$2.04 per kilogram and we anticipate that we can get even better prices but these are positive developments on the market.”

Flanked by Corporate Planning & Development Manager, Richard Chinthunzi and Division Manager-Limbe, Dorothy Tembo; Chidanti-Malunga said they anticipate to sell about 100 million kgs against 161 million trade requirement for this year, saying the volumes are lower this year because of variations in rainfall patterns that started later than usual.

“When we were opening this year’s tobacco marketing season, it was announced that we would have low production this year. In fact, it was mentioned that we would be having around 100 million kilograms this year, based on the results of the crop estimates survey that we conducted.

“This is about 30 million kilograms (23%) short of the year’s trade demand. We indicated that the rainfall pattern this farming season had an adverse impact on tobacco nurseries and fields.

“The low volumes at the floors are, therefore, a result of the volumes of tobacco that growers have this year. However, our indicators show that while there are low volumes at Limbe, Chinkhoma and Mzuzu floors, there will be an increase as the season progresses.

“So, until that time, we will continue trading on selected days of the week at Limbe, Chinkhoma and Mzuzu floors as a way of managing the threshholds.”

On loan recoveries from the growers, which they access from buying companies’ loan schemes, Chidanti-Malunga said previously, the buyers “would send loan claims directly to Auction Holdings Limited (AHL) to facilitate recovery without involving the Commission”.

He said this arrangement “compromised transparency in the loan recovery process” and they started reviewing the loan claims “against growers engaged in funded contract farming”.

“This contrasts with traditional practice in which growers’ loans were being recovered without the Commission’s review. In the new arrangement, however, tobacco buyers are sharing with us details about the loans for our review.

“After the review, the claims are being forwarded to AHL to facilitate recovery during sales,” he said, adding that “all along, the growers’ proceeds would be withheld until the recovery of the loan amount — after which the balance would be deposited into a grower’s bank account”.

“The new practice has also ensured that only loan amounts that growers owe buyers are withheld. From this tobacco marketing season, however, stop orders ensure that a tobacco buying company in a funded contract with a grower only gets the loan amount owed and the rest of the proceeds directly go into the farmer’s account.

“The new loan recovery process is being facilitated by an automated system powered by our newly developed Tobacco Information Management System (TIMS).”

He also shed more light in as far as comparison with previous years’ sales is concerned, saying they have observed various analyses in different media, which have been comparing volumes of tobacco sold and prices within a given week in two succeeding years.

“I understand the temptation to do the same this year. However, we, at the Tobacco Commission, find a comparison of this year’s volumes and prices at given points in time with last year’s as misleading.

“Such comparisons are misleading because this year’s first week and last year’s first week are completely different. Similarly, last year’s and this year’s volumes are also different.

“The early opening of this year’s tobacco marketing season meant that the first week of trading came earlier than the first week of trading in 2021. This year, we had the first week of trading when most tobacco growers were not ready with their leaf, a sharp contrast with the case in the first week of 2021.

“Further to this, in the same first week and second week only Lilongwe market was trading.

“In view of this, it was obvious that tobacco volumes in the first week of the 2022 marketing season would be lower than in last year’s first week. This is why juxtaposing volumes in particular weeks of the two marketing seasons creates a wrong narrative about the tobacco industry in the country this year.”

Going forward, Chidanti-Malunga said in view of the low tobacco volumes produced this year, “the Commission is exploring strategies to improve production in the next farming season” one of which “is to open the grower registration period earlier than has always been the case”.

“We intend to open 2023 grower registration in June this year to allow growers to have ample time to mobilize resources required and pay for their licenses in good time.

“The second strategy is to exercise flexibility in the maximum volumes of tobacco that growers can grow. Instead of restricting production volumes to a rigid figure, the Commission will allow for production plans as indicated by growers, based on the size of the land earmarked for the farming.

“This means that some farmers will be allowed to grow more tobacco than would ordinarily be the case if we were to restrict production quota.”

In his conclusion, the CEO assured the country that despite the challenges with this year’s volumes, they “will remain resolute in promoting production and marketing of the leaf”.

“We will continue doing so realizing the place of tobacco in the national economy. We will also be doing so because the demand for the country’s tobacco on the international market is intact.

“The world will continue looking up to Malawi for her burley tobacco because of its uniqueness. The market for our tobacco is alive and vibrant.”

On May 7, when Minister of Trade & Industry, Mark Katsonga-Phiri visited Illovo Sugar Malawi’s Nchalo Estate following the scarcity and skyrocketing prices of sugar, he had assured that forex would soon normalize at the conclusion of the sale of the tobacco season.

The Minister had said this after he had declared that Illovo Sugar should stop forthwith exporting sugar in order to re-flood the market with the commodity, whose scarcity had been attributed to hoarding by unscrupulous traders as well as illegal exportation to gain forex.

But Illovo Sugar Managing Director, Lekani Katandula had stressed that the company’s priority was on domestic consumption and only exports its surplus, adding that they have plans for the future to increase production so that after meeting the quota for domestic consumption, they should export more in line with the MW2063 agenda — which highlights that Malawi should become self-reliant by being an exporting country than relying on importation.

He said exporting goods brings in the much needed forex for the country’s economic development, which at moment is very scarce — thus some traders opting to illegally export sugar to neighbouring countries such as Mozambique, Zambia and Tanzania where Malawi’s Illovo sugar is cheaper.

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