Agriculture Minister Lobin Lowe has said weak tobacco prices in the last decade have forced many growers to stop growing the crop, resulting in the country producing few amounts of the green gold year-in-year-out.
Lowe was speaking in Lilongwe when the government signed Grade Minimum Price agreements with nine of the country’s tobacco-buying companies. The agreements commit the buying companies not to offer prices below the minimum set prices.
Lowe said, in 2010, Malawi produced around 400 million kilogrammes (kg) of the green gold but the production has been plummeting over the years and is expected to hit 122 million kg this year.
Lowe said Capital Hill expects better prices this year as the anticipated production of 122 million kg is far below the 132 million kg trade requirement by international buyers.
“The law of supply states that when the quantity supplied is lower than the demand, the price should go up as there will be a scramble for the commodity.
“We, therefore, expect no excuses for lower tobacco prices this time around,” Lowe said.
He added that there was a time Malawi tobacco hit above $10 per kg, saying buyers could do better by offering improved prices even around $5 per kg.
“We have been asking ourselves as to what happened that year. We would like to see tobacco prices that would encourage growers to grow more,” Lowe said.
He could, however, not indicate the minimum prices that the government has agreed with the buyers, saying they await to be gazzetted first before being made public.
Alliance One Managing Director Hugh Saunders urged the authorities to manage the expectations of growers ahead of the forthcoming tobacco selling-season, saying demand could be lower than indicated by the government.
According to Saunders, there is a need for the Tobacco Commission to relook at the demand figures, saying the real demand figures are lower than the ones presented.
“Tobacco is getting under more and more pressure from health organisations, Covid issues and from competing e-cigarettes,” Saunders said.
Tobacco remains Malawi’s single top foreign exchange earner.
Last year, Malawi produced 112.89 million kg of tobacco and earned $173.5 million (about K130 billion) which was 27 percent below the $237 million realised in 2019.