Malawi: Tobacco rakes in $39.4 million

The revenue is 4.5 percent higher than the $37.7 million the green gold fetched during the same period last year.

The surge in earnings is attributed to slight improvement of prices, which averaged $1.53 as at end of last week.

However, total volume of all types of tobacco traded at the auction floors is reported to have gone down by 7.2 percent to 25.8 million kilogrammes (kgs) by end of week five this season from 27.8 million kgs sold during the same period last year.

“The decline in tobacco sales has been exacerbated by the high rate of no-sale rejection, owing to the new system of selling tobacco on the auction market in 2020 season compared to 2019,” indicates AHL in its weekly tobacco market update.

It says an average rate of 54 percent of no-sale rejection was recorded in week five, which is 16 percent higher from 38 percent registered during the same time last year.

Tobacco farmers say this year, the tobacco marking season has been a mixed bag.

Chief Executive Officer for Tobacco Association of Malawi, an umbrella body of tobacco farmers, Felix Thole, said in an interview Monday that the tobacco industry has been faced with numerous challenges this year which could affect farmers’ profitability.

Thole said the auction sales have not been impressive compared to contract market as evidenced by rising rejection rate.

“The biggest worry on the auction market has been rejection which led to farmers withholding their tobacco. But last week, we had a meeting through the Tobacco Commission and we have seen an improvement in the rate of rejection and prices,” Thole said.

By far, tobacco remains Malawi’s top export crop.

Head of Applied Economics at the Lilongwe University of Agriculture and Natural Resources, Kennedy Machira, said the sales and earnings may reach equilibrium as the market continues.

Machira said continued improvement in prices the leaf is fetching will depend on market variables of supply and demand during the remaining weeks of the season.

“If the volume will be low, we should expect the law of demand and supply to take effect and the prices may continue to be better. But if the volumes will be high, the prices may drop,” Machira said.

This season, tobacco output is estimated at is 154.6 million kgs which is about 6.6 percent shy to last year’s 165.6 million kgs.

Last year the country realised $237 million from the 165.6 million kgs of all types of tobacco sold at an average price of $1.43.

Tobacco remains the country’s major foreign exchange earner.