Tobacco sales to resume after price dispute

Tobacco sales will resume in Malawi on Thursday after auction floors were closed earlier this week in a dispute over selling prices which growers feel are too low, the country's Tobacco Control Commission (TCC) said. Last year auction floors were closed twice over price disputes. Malawi is considered one of the world's top tobacco growers, with sales providing up to 70 percent of foreign exchange revenue and up to 25 percent of its gross domestic product. Production has been shifting away from large estates to smallholder producers, and tobacco farmers who have weathered two years of droughts and floods are disappointed by this year's prices, which they say will not cover their costs. News reports said farmers had hoped for prices of around US $2 dollars per kg but buyers were offering less than US $1 per kg, with some even going as low as 70 cents. Earlier this year farmers were also concerned about the amount of deductions and fees they had to pay before receiving their money. Dr Godfrey Chapola, general manager of the TCC, told IRIN that buyers disputing low prices had disrupted auction sales on Tuesday, so floors were closed. "Meetings were held with buyers and sellers and sales will resume on Thursday," he said. However, tobacco sales are run by auction, without minimum reserve prices, and buying prices were determined by representatives of the international cigarette companies who seek out Malawi's tobacco at predetermined ranges. One of the reasons for the lower prices could be that Malawi's competitor, Brazil, which is offering the same style of tobacco, could be offering lower prices. "Market forces have driven the prices of high quality tobacco down, but demand and prices of lower quality tobacco is better this year," Chapola explained. Farmers came from a diversity of backgrounds and grew different qualities, and should not expect one fixed price for tobacco. They should also be realistic about the quality of the tobacco they were selling, as there were over 100 grades of leaves sold in the country. He said the growing global anti-tobacco lobby was not affecting prices adversely. "The market is still demanding the same quantities and there is no reduction in buying intention." The government would continue to explore diversifying from tobacco, which employs about one million people directly or in allied industries, because "as the president said, 'you can't put all your eggs in one basket'," Chapola added.