Malawi sets new tobacco prices for buyers

Malawian tobacco farmers are expected to be paid a minimum of $2.70 per kg this year for their crop, up from last year's $1.85 per kg, a senior government official said on Thursday.

Tobacco is the southern African nation's mainstay, accounting 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.

Principal Secretary in the Ministry of Agriculture Patrick Kabambe said that the new prices have been agreed upon with buyers and other stakeholders in the industry.

"The minimum price set for the leaf is $2.20 cents which is more than last year minimum price of $1.85 cents last year," Kabambe told Reuters.

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

But from last year prices improved and farmers sold 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.

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. Two undisclosed Chinese companies are expected to buy the crop this year.

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