Low participation of tobacco buying companies and high rejection on the auction market attracted the wrath of Minister of Agriculture Lobin Lowe on Monday when he opened the Limbe auction floors.
It transpired that two out of nine licensed tobacco buying companies participated during the auction sale on the opening day.
In an interview after a tour of the sale, the minister said it was unacceptable for the tobacco buying companies to reject good quality tobacco that was fetching fair prices on the contract market.
He indicated that despite the buying companies’ sabotage behaviour the auction market cannot be abolished.
“What is transpiring on the auction market is very worrisome, for example the rejection rate today is over 72 percent which is very discouraging and when you compare the quality of tobacco rejected on the auction and that bought on the contract it is similar.
“As a nation we cannot do without the auction market, we have 80 percent on contract and 20 percent on auction, this 20 percent encourages new entrants into the market and we cannot do without competition and very soon we will engage the buyers because this is very discouraging,” Lowe said.
President of the Tobacco Association of Malawi (TAMA) Trust Abiel Kalima Banda concurred with Lowe saying that a stakeholder engagement meeting should be convened to address the matter.
“The rejection is always on the auction market, I don’t know what is the problem with the buyers but we must come together and discuss this problem.
“Abolishing the auction market is not an option, the first option is for us to discuss and find a lasting solution because even the buyers cannot accommodate all the tobacco farmers under contract,” Banda said.
Chairperson of the Tobacco Commission Harry Mkandawire said the Commission is aware of the problem.
“This has not started this season, it has been a trend but what they tell us is that they try to comply to traceability issues that arise wherever they sell the tobacco as buyers on the international market want to verify that the tobacco was produced without forced labour or child labour,” Mkandawire said.
However, the stakeholders were impressed with prices that were offered on the market on the opening day which they claim was unusual for Limbe floors.
For example the highest prices offered for dark fired tobacco was $3 per kilogram (kg) while contracted burley tobacco recorded a $2.60 per kg price.
On the auction market the highest price recorded was $1.30.
Tobacco is Malawi’s main export crop and foreign exchange earner.
Last year the country sold 112.89 million kilograms of tobacco, realising $173.5 million (about K130 billion) from the green gold, according to statistics from the Tobacco Commission.
The earnings were 27 percent below the $237 million realised during the 2019 season.