Malawi tobacco sales open with better prices

LILONGWE (Reuters) - Malawi's tobacco auction floors opened this week with prices supported by a smaller-than-normal crop, officials said on Thursday.

The biggest auction floors, which opened in the capital Lilongwe on Wednesday, saw farmers sell their crop between $1.70 and $1.60 per kg compared to last year when the leaf at the opening sold at about $1 per kg.

"With such prices, I am assured of making a profit and continuing tobacco farming," said Samuel Mbewe, a small tobacco farmer.

Official figures indicate that a farmer in Malawi spends about a dollar to produce a kilogram (2.2 lb) of tobacco.

"So far, so good, we have started so well considering that this is the first crop," Godfrey Chapola, general manager for Tobacco Control Commission (TCC) told Reuters.

Limbe Leaf Tobacco, majority owned by the Swiss-registered Continental Tobacco Company, and U.S.-based Alliance One Tobacco, are the active buyers who were last year ordered by Wa Mutharika to leave the country or offer better prices.

Wa Mutharika imposed a minimum price of 110 U.S. cents per kg and 170 cents for higher grade leaf. But buyers boycotted, raising fears the standoff could hit Malawi's forex earnings.

For many years tobacco prices have hovered around 70-90 U.S. cents per kg.

Wa Mutharika, who also farms tobacco, accused buyers of running a cartel to fix prices. The companies have denied the allegations

This year, the government registered another international buyer, U.S.-based based Premiere Leaf, in a bid to break the alleged cartel.

Tobacco accounts for over 70 percent of Malawi's exports and 15 percent of its gross domestic product, but for the last two years low prices have led to cuts in production.

Industry regulator Tobacco Control Commission (TCC) last week said this year's low production of 141,000 tonnes from 158,000 tonnes last year would result in better prices at auction.

Malawi's tobacco auctions run to mid-September.

Around 2 million of Malawi's 12 million people depend on tobacco and related industries for their livelihood.