Tobacco market to extend to 2017

Post was last updated: November 8, 2016

This year’s tobacco market may extend for a further 11 weeks spilling over to 2017 as rejection rates continue to worsen 31 weeks into the tobacco market.

Traditionally, the tobacco market runs for 25 weeks and the development is likely to have spillover effects and puts into question the future of Malawi’s major foreign exchange earner.

AHL Group has confirmed that unless there are improvements in the rejection rates, the market will require 11 more weeks to exhaust the leaf at the floors.

On Monday, the Lilongwe Auction Floors was indefinitely suspended after rejection rate hit 90.8 percent, the highest since the market was opened in April.

Both the Tobacco Control Commission (TCC) and AHL Group confirmed the suspension and indicated that buyers and farmers were in talks to find a solution to the problem.

About 20 million kilogrammes of tobacco is yet to be sold and Tobacco Association of Malawi (Tama) President, Reuben Maigwa, has indicated that growers have lost confidences in the system.

Statistics from AHL Group show that after 30 weeks of tobacco marketing, the country had sold 163 million kilogrammes of all types of tobacco at an average price of $ 1.50 per kilogramme, earning the country $244.1 million.

AHL Group Corporate Affairs Manager, Mark Ndipita, said considering the current weekly sales, volume of about 2 million kilogrammes, the market will require 11 more weeks of sales to exhaust the leaf at the floors but on condition that the rejection rate improves.

“However, it is still very tricky to pin down the exact date or week as to when the season will close because the performance of tobacco market this season is very unpredictable,” Ndipita said in an emailed response.

He said the development has a negative implication to many players in the tobacco industry including the farmers who are put at an “awkward position as regards to preparations for the next season.”

He also said AHL Group as a market operator has also been negatively affected because of huge expenses.

“To run the tobacco markets for more than six months means we are incurring more expenses, more especially when tobacco keeps being rejected because we need to bring back those rejected bales on the market and that is a cost,” he said.

In a separate interview, TCC Chief Executive Officer, Changaya, said stakeholders are discussing the possibility of adopting an open market for the remaining tobacco.

Changaya faulted the high rejection rate on over production of the leaf this year.

“We have written the government to sale the rest of tobacco at open market. It’s a modified merit where we are to still put a ceiling on the minimum price,” he said.

If the open market system is adopted, Changaya said the market may close in the next four weeks.

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