Malawi President Sets Higher Tobacco Prices

Source from:  Reuters 03/17/2009

Malawi President Bingu wa Mutharika announced higher minimum tobacco prices for the new auction season on Monday despite industry fears that the global economic slowdown could lower demand and prices for the leaf. "The minimum price for burley tobacco this year will now be US$2.15 per kg and US$3.09 per kg for Flu cured and I want all tobacco farmers not to allow anything below this," Mutharika said in a speech to open the 2009 tobacco selling season. Last year Mutharika, who also farms tobacco and has accused buyers of running a cartel to fix prices, pegged the price for burley at a minimum of $1.85 and $2.70 for flue cured tobacco. Tobacco is the southern African nation's mainstay, accounting for more than 70 percent of Malawi's exports and 15 percent of its gross domestic product. For the last two years low prices have led to cuts in production. Industry regulator the Tobacco Control Commission said last week the global economic crisis could affect prices and demand for the golden leaf. The Monetary Policy Committee of the central bank also said on Monday it feared the impact of the global meltdown may affect commodity prices, especially for tobacco, in the southern African nation this year. Malawi's tobacco growers boycotted auctions last year after leading western buyers protested against Mutharika's move to fix prices and offered them low prices. For many years tobacco prices had hovered around 70-90 U.S. cents per kg, lower than the $1 the industry says it costs to produce one kg of the golden leaf. "For a long time our farmers have been struggling to acquire even a bicycle and other small necessities. That is why in 2006 I declared that I don't agree with the prices that were offered by the buyers," said Mutharika. Limbe Leaf Tobacco, majority owned by the Swiss-registered Continental Tobacco Company, and U.S.-based Alliance One Tobacco, are the country's biggest buyers. Enditem