By Kingsley Jassi:
Tobacco buyers in the country will need 20 million kilogrammes less tobacco than they demanded last year, figures from the Tobacco Commission (TC) indicate, raising concerns over potential oversupply and price erosion.
The consolidated volumes required by buyers stand at 170 million kilogrammes, lower than the 190 million kilogrammes they expressed an intention to buy last season. This is against the licensed production volume of 242.5 million kilogrammes.
In an interview, TC spokesperson Telephorus Chigwenembe said the commission had received combined trade requirements from eight companies.
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“So far, we have received a combined trade requirement of 170 million kilogrammes from eight companies. To respect confidentiality, we do not share the requirements received from each company,” Chigwenembe said.
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The commission previously indicated that over 55,500 licences were issued to growers this season, compared with 74,104 licences last season.
These licences have a combined production capacity of 242.5 million kilogrammes, significantly lower than the 321.4 million kilogrammes of licensed output last year.
However, the commission observed that some of last year’s licensed farmers were not regular growers but were attracted by good prices in the 2024 season and intended to engage in illegal on-farm purchases of tobacco and sell at auction floors using the licences.
Tobacco Association of Malawi (Tama) Trust president Abiel Kalima Banda echoed the commission’s concerns about illegal tobacco buyers obtaining production licences last season.
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“This year we have the real growers of tobacco because we did not have very good prices last year and that has driven away the vendors who pretended to be growers,” Banda said.
Economist Marvin Banda warned that the projected demand of 170 million kilogrammes against registered quotas of over 242 million kilogrammes implies a potential surplus exceeding 40 percent.
He said that with such supply expectations, prices usually adjust downward unless adverse effects occur that could push prices up, including weather-related effects on leaf quality and dynamic demand.
He added that next season the risk is not unsold leaf but value erosion, particularly for low-grade burley. Production must be disciplined and demand-led rather than quota-driven.
“Malawi has already experienced years where higher sales volumes delivered weaker earnings because average prices fell between 2013 and 2017, irrespective of tobacco contributing more than a third of total export receipts.
“The current market practice has led to the emergence and prevalence of illicit tobacco trading, meaning that overproduction is to be expected given that market leakage is projected to continue hampering official revenues,” Banda said.
He added that short-term responses should prioritise tighter quota management, strict quality enforcement, and a cautious approach to contract farming in efforts to stabilise prices.
On the progress of the production season, the commission disclosed that it would conduct the first crop inspection this month.
About 214 million kilogrammes of tobacco were sold on the domestic market last year at a total value of $532 million, a record amount in recent times.
