Malawi tobacco output expected to rise in 2008

Tobacco production in Malawi is expected to rise to 150 million kg this season, encouraged by higher prices and good rains, the Tobacco Association of Malawi (TAMA) said on Monday.

TAMA president Charles Mwamsambo told Reuters more farmers had signed up to grow tobacco this season because of a number of factors, key among them an anticipated spike in prices that is likely to encourage tobacco growers to lift production.

The expected increase in prices follows a slump in production last year, when growers only managed production of only 140 million kg, down from 158 million the previous season.

"There are several factors like the motivation that farmers have from last year's good prices: more buyers on the market and good rains that will result in high production of about 150 million kg this growing season," he said.

Mwamsambo said TAMA had registered 27,000 new farmers this season compared to only 10,000 new growers signed up last year.

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.

About 2 million of the country's 13 million people depend on tobacco and related industries for their livelihood.

The biggest auction floors last year saw farmers sell their crop between $1.70 and $1.60 per kg for the first time in several years, after President Bingu wa Mutharika ordered buyers to offer better prices or leave the country.

For many years tobacco prices had hovered around 70-90 U.S. cents per kg, far lower than the $1 that TAMA says it costs to produce one kg of the golden leaf.

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 ordered to peg the prices at a minimum price of $1.1 per kg and $1.7 for higher grade leaf.

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

Last year, the government registered another international buyer, U.S.-based based Premiere Leaf, in a bid to get better prices. According to TAMA, two undisclosed Chinese companies will be coming into the country to buy the crop this year.