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Tobacco revenue likely to go down

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Kaisi Sadala

About two weeks before close of the 2019/20 tobacco selling season, revenue from the crop, Malawi’s major forex earner, is projected to be lower than what the country earned last season.

Recent figures from market operator, AHL Holdings, show that by end of week 17 of tobacco sales, the country raked in $168 million, about $36.3 million shy of the $204.3 million realised during the same time last year.

This comes as market regulator, Tobacco Commission (TC), recent also said it expects the country to register a shrink in the final tobacco output for this year.

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Malawi had initially planned to produce 155 million kgs of tobacco against a trade requirement of 161 million kgs.

By end of the seventeenth week of tobacco sales, about 109.7 million kgs of all types of tobacco were traded compared to 138.6 million kgs traded during a similar period last season.

Tobacco revenue dropped by 31.3 percent in the week under review to $7.8 million from $11.4 million realised during in week fifteen.

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The drop in the week on week revenue is attributed to a decrease in volumes inflow in the remaining markets in the Central and Northern Regions as stock is exhausted in the fields.

TC Chief Executive Officer Kaisi Sadala said the dwindling of tobacco inflow is normal but this year it is happening earlier.

He attributed the early drop to an overestimation of tobacco output in the country and across region.

“Tobacco volumes in the fields are coming to an end but this year it is happening earlier and it goes back to what we said earlier that it seems like this year the tobacco volumes are much lower than we thought,” Sadala said.

However, average prices for the commodity, which for long has been touted as green gold, has been on a downward spiral in recent weeks as well.

An average rate of 49 percent of no-sale rejection was recorded in week 17 which is three percent higher than that recorded in week 16 this year.

During the same comparative period last year, a slightly lower average rate of 40 percent was registered.

By far, tobacco remains Malawi’s top foreign exchange earner, although its share has been falling sharply in the past 10 years in response to changes in prices and weather conditions, and most recently, due to the global anti-smoking campaign championed by the World Health Organisation.

In 2014, Malawi realised $361 million from sales of 192 million kgs of all types of tobacco, which declined to $337 million in 2015. But output was static.

As at close of the 2018 marketing season, the country earned about $336 million against $212 million of 2017 after selling 106 million kgs.

In 2019, the country sold 165.6 million kgs of all types of tobacco, raking in $237 million.

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