LILONGWE-(MaraviPost)-Over production of tobacco is worsening this year’s sale as volume has exceeded demand by 43.82 million kilogrammes (kgs).
Tobacco Commission (TC) told the news conference on Wednesday in the capital Lilongwe that overproduction of the crop could provide buyers some room to negotiate for lower prices which could affect the growers in the long run.
TC Chief Executive Officer, Kaisi Sadala, said third round of crop estimates has revealed that the country has produced 193.4 million kgs against a demand of 149.56 million kgs.
As at the end of Week 16 of sales, a total of 135 million kgs of tobacco had been traded realising around US$200 million at an average price of US$1.48 per kg.
“The average price attained is lower than the US$1.71 per kg owning to overproduction as buyers have resized the budget to accommodate the excess tobacco thereby negatively affecting prices offered.
“Despite the lower prices, comparatively within the region, Malawi has remained competitive,” Sadala said.
He therefore quickly assured the nation that the new Tobacco Act seeks to address issues of overproduction by restricting production quotas.
“In order to manage crop size, the commission is licensing growers through quota allocations that have been formulated based on the consolidated demand.
“As such, the commission is appealing to all tobacco growers to produce within the allocated quota. Any grower who will overproduce will be subjected to penalties as stipulated in the Tobacco Industry Act,” Sadala said.
Sadala disclosed that this year’s tobacco marketing season is expected to close in September.
The TC chief said with 135 million kgs of the green gold already traded, the tobacco regulator expects to close the market by the end of September 2019.
“Actual dates shall be announced in due course for the various markets,” he said.
Tobacco Association of Malawi (TAMA) Chief Executive Officer, Felix Thole recently complained that farmers might not reap the most of their effort this season due to low prices.
Thole observed that market prices are subdued this season
“Prices have remained stagnant. Reasons for this could basically be two; one the over buying of the crop last season and the envisaged bigger volume than demanded this year,” Thole said.
Tobacco remains Malawi’s top most foreign exchange earner.
The combined revenues of the world’s 6 largest tobacco companies in 2016 was more than USD 346 Billion, 6457% larger than the Gross National Income of Malawi.
The industry is a powerful force that does not fear the actions of nation-states because of their extensive resources and global market power.