Malawi tobacco growers complain about falling prices, govt apathy

Citing falling prices and government apathy, Malawi’s tobacco growers feel they are stuck between a rock and a hard place.

“I will stop growing the crop if the status quo is maintained,” Mishek Chikulumeni, the 46-year-old owner of Chikondi Estate, a tobacco farm located some 12km from the central town of Kasungu, told Anadolu Agency.

“Buyers are not giving us a fair deal,” he complained. “They are taking away the produce at the price of their own choosing.”

“The future is bleak for me,” said a worried Chikulumeni.

Malawi’s tobacco market usually runs from March to October, in line with supply and demand.

It is sold through the auction system, where all buyers go on a said date and compete for tobacco grown by growers – individuals or farms – registered by the Tobacco Control Commission.

The tobacco goes to the highest bidder.

Some growers suspect that a cartel fixes prices for the crop and that buyers have agreed among themselves not to overprice the commodity.

This, according to growers, means the price is controlled by the buyers, while farmers have no say in the pricing as they have no alternative market.

“This year my crop was being bought at an average of $0.80 per kilogram,” Thomas Banda, a grower from the Dowa district in central Malawi, told AA.

“I sold about eight bales of tobacco. The money that was realized cannot even repay all the loans I got for agricultural inputs,” he lamented.

“We, growers, are caught in a fish net,” complained Banda, dismissing assertions that prices were low because of an ongoing World Health Organization anti-smoking campaign.

What is more worrying for Banda is that the rejection rate on the auction floors is very high, which can send prices nose-diving.

“The only way out is to stop growing the crop,” Banda asserted.

Tobacco in Malawi is of strategic importance, as it accounts for up to 60 percent of the country’s foreign exchange earnings, according to the National Statistical Office.

Around 15 percent of the population is employed by the tobacco production sector.

-Faulting IPS-

Chikulumeni and Banda are not alone in this predicament.

Some 5,000 tobacco growers across the country have recently voiced their outrage over poor prices.

They argue that, since the introduction of the integrated production system (IPS), the fate of the grower has been in the hands of the buyer.

Some growers suspect a cartel fixes prices for the crop.

“Buyers have more power than the seller in this country,” fumed Chikulumeni.

“In IPS case, no prices are agreed. They just force you to sign that you will sell them the crop. We want this to change,” he insisted.

IPS, approved by former president Joyce Banda in 2012, runs side by side with the auction system.

Under the system, tobacco growers and buyers sign contractual agreements in advance.

However, buyers are accused of abusing the system because they are offering prices that they want. Growers, meanwhile, have no say at buying time, as they might have agreed to sell to the buyer at the start of the growing season.

Anger on the part of growers forced tobacco industry players to discuss the issue at the 2014 tobacco industry conference, held from September 28 to 30 in capital Lilongwe.

They slammed the secrecy surrounding agreements between tobacco merchants and growers under the IPS.

The participants, who included tobacco buyers, growers, transporters and other service providers, noted that indicative minimum buying prices were not included in contract documents at the point of signing.

They also complained that the terms and conditions for loan procurement and repayment appeared to be secretive.

Growers and industry experts agreed to call for transparency in the IPS, which is slowly swallowing up the open auction system.

According to industry figures, around 22.67 percent of the total volume of tobacco sold during 2014 was sold via the auction system, leaving 77.33 percent to IPS – a little higher than the 72.62 percent seen a year earlier.

Farmers complain about the absence of an effective legal structure to govern the IPS model for tobacco production and trading.

They are asking authorities to set up mechanisms to ensure compliance with agreed contractual obligations.

Growers also want the Ministry of Agriculture, Irrigation and Water Development to lobby for a Tobacco Bill that has long been gathering dust in parliament.

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