The Tobacco Control Commission (TCC) has abolished the minimum prices for tobacco at a time when the crop is failing to rake in enough foreign exchange to prop up Malawi’s ailing economy.
TCC has confirmed the development as part of reforms to its marketing system to speed up tobacco sales that had stagnated in recent months.
This year’s tobacco market has been billed as one of the worst in history with rejection rates continuing to worsen 31 weeks after the market opened in April. Traditionally, the tobacco market runs for 25 weeks.
TCC Deputy Chief Executive Officer David Luka confirmed that buyers are now allowed to compete but at a price not less than 60 cents per kilogramme.
During this year’s marketing season, the government had set the minimum price of 80 cents for the lowest grade tobacco.
“Since we removed the minimum prices and set the 60 cents closing price, we have seen the market revamping and progressing with speed.
“The move has also enhanced competition among the tobacco buyers and this gives us confidence that all unsold tobacco will be sold,” Luka said.
He further said rejection rates have also gone down to almost zero, with the tobacco that is being returned from the normal sales being sold on merit at a price of 40 cents per kilogramme.
Luka said currently the three auction floors that are running are selling on average 16,000 bales per day as compared to less than 5,000 bales that were being sold before the changes were effected.
“The buyers have accepted the new prices and this will ensure that all tobacco is sold. As TCC, we will, however, continue monitoring the market trends and this will determine when this year’s tobacco marketing season will come to an end.
“Limbe already closed on November 15 and with the current trends, we expect Lilongwe, Chinkhoma and Mzuzu to close by mid-December,” he said.
However, TCC sales statistics for week 33, indicate that the green gold has raked in $258.6 million against last year’s $337 million, representing a 23 percent drop.
So far, 178 million kilogrammes of tobacco has been sold, representing an eight percent drop from last year’s 192.6 million kilogrammes.
Burley tobacco for auction has earned $37 million against $44 million in 2015, while for contract, $171 million has been earned down by 28 percent from $236 million.
Flue cured auction has earned $402 million representing 88 percent increase from $3.3 million while contract has earned $44.4 million from $50.8 million.