Tobacco growers face ruin

The majority of Malawi’s estimated 86,000 tobacco growers face financial ruin if the buyers of the crop continue offering low prices at this year’s main auction floors in the capital, Lilongwe and in Blantyre, industry sources said. Alex Kavinya, an official of the growers body, the Tobacco Association of Malawi, told IRIN on Thursday that the growers owe the association an estimated US $5.3 million in unserviced loans from two years ago. He said the buyers have been offering between US 90 cents and US $1.03 per kg for this year’s crop since the auction floors opened on 17 April. “These prices are the lowest in 10 years. The growers need to sell the leaves for at least US $1.50 per kg just to break even,” said Kavinya. He added that the main worry is that should the buyers not improve on their offer, many of the growers will go under. “The growers will not get returns for their input costs to produce the tobacco. This could mean that many of the growers won’t have money to plant in October, and they won’t return to the auction floors next year,” Kavinya said. Malawi has this year produced about 140 million kg of tobacco, which earns the country an estimated 70 percent of its foreign currency, according to Godfrey Chapola, general manager of the Tobacco Control Commission. Chapola said during the annual 23-week auction, an estimated 85 kg of tobacco leaves are sold per day. “The low auction prices being offered by the buyers are disappointing. The tobacco growing industry cannot sustain these low prices,” Chapola said. He said the main concern is the effect that these prices will have on the well-being of Malawians whose livelihoods depend directly and indirectly on tobacco revenues. Kavinya said of the nine million Malawians, around 60 percent of the population depend on the tobacco industry. “The effects of growers going out of business will be felt across the whole of Malawi’s economy,” said Kavinya. He said jobs could be lost in the tobacco processing plants, the transport and distribution companies as well as on the farms. Kavinya said the litigation costs against tobacco companies in the US and Western Europe are being passed on to the producers by the exporters and retail companies. “The anti-smoking campaigns in the West are putting a strain on the resources of tobacco companies and exporters in litigation costs, who in turn want to recoup these by offering low prices to growers,” he said. Chapola added that buyers also argue there is an oversupply of the crop on world markets, but his commission is engaging both the buyers and growers in negotiations to break the price deadlock. He said, however, that the commission cannot intervene on either of the sides, arguing the market forces must be allowed to prevail at the auction floors.