Malawi Government Raises Minimum Burley Tobacco Price by 46%

March 10 (Bloomberg) -- Malawi, Africa's biggest producer of burley tobacco, raised the minimum price of the crop by 46 percent after production costs increased.

Merchants must pay at least $1.61 a kilogram (2.2 pounds) for the crop, compared with $1.10 last year, Frank Mwenefumbo, the nation's deputy agriculture minister, said in an interview today from the capital, Lilongwe. The government also introduced a minimum price of $2.20 a kilogram for its flue-cured tobacco.

``Factors like the cost of production and fertilizer have been taken into account, as has a reasonable margin of profit for farmers,'' Mwenefumbo said.

Malawi introduced minimum prices for its tobacco last year after growers boycotted auctions in 2006 and President Bingu wa Mutharika accused merchants of paying too little for the crop. Richmond, Virginia-based Universal Corp. and Morrisville, North Carolina-based Alliance One International Inc. are traditionally the biggest buyers of Malawi's tobacco.

Tobacco farmers are ``pleased'' with the new price, Felix Mkumba, general manager of the Tobacco Association of Malawi, said in an interview today.

``The new prices should ensure growers remain committed to the crop,'' he said.

The Tobacco Exporters Association of Malawi's spokesman Patrick Chishala wasn't immediately available for comment. The association represents merchants in the southern African nation.

The minimum price of corn, which is mainly bought by the state-owned Agricultural Development and Marketing Corp., will rise to 20 kwacha (14 U.S. cents) a kilogram, from 17 kwacha last year, Mwenefumbo said.

Malawi last month began rationing corn after stocks ran low even after the biggest harvest in 10 years of 3.4 million metric tons. The country accepted orders for 400,000 metric tons of corn from Zimbabwe and 45,000 tons from Swaziland last year.

The price of cotton will increase to 65 kwacha a kilogram, from 45 kwacha last year, Mwenefumbo said.