Malawi Tobacco Traded 19% Below the Government Price

Sept. 14 (Bloomberg) -- Tobacco in Malawi, Africa’s largest producer of the burley variety, traded 19 percent below the minimum price sought by the government last week.

The leaf sold for an average of $1.74 per kilogram (2.2 pounds) during the week to Sept. 11, compared with a government price of $2.15, Auction Holdings said in a weekly sales report published in the Daily Times newspaper today. Auction Holdings manages the country’s auction floors.

The southern African nation started setting minimum prices for the various grades of tobacco two years ago after it accused merchants of putting farmers out of business. This season Malawi set a price of $2.15 a kilogram (2.2 pounds) for burley tobacco and $3.09 a kilogram for flue-cured tobacco.

Bruce Munthali, Chief Executive Officer of the Tobacco Control Commission, the industry regulator, reported on Sept. 4 that buyers are ignoring these prices, according to President Bingu wa Mutharika.

Malawi on Sept. 10 deported four tobacco buyers, accusing them of sabotaging the country’s economic agenda by offering farmers poor prices. “They have been defying my orders to pay better prices and I have decided to chase them,” Wa Mutharika said at the time.

Malawi relies on sales of the leaf for 60 percent of its export earnings. The country’s tobacco marketing season ends on Sept. 18, according to the Tobacco Control Commission.

Malawi earned $14 million from selling 7.9 million kilograms of the leaf last week, Auction Holdings added.