Malawi Tobacco Sales Boycotted on Minimum Price

Source from:  Tue Mar 28, 2006 5:31 PM GMT BLANTYRE (Reuters) 03/29/2006

International tobacco buyers boycotted auction floors in Malawi on Tuesday in protest against President Bingu wa Mutharika's imposition of minimum prices for the commodity, which is the country's economic mainstay. Tobacco Control Commission (TCC), the industry's regulatory body, said that the buyers had decided not to purchase tobacco when the auction season began this week, and asked for more talks on the price. "They want the issue to go back to the President because they believe the prices have to be dictated by demand and supply," TCC General Manager Godfrey Chaponda told Reuters. Representatives of buyers could not be reached for comment as they were locked up in meeting with top government officials to resolve the deadlock, after wa Mutharika imposed a minimum price of 110 cents per kg, with 170 cents for higher grade leaf. Over the last three to four years minimum prices have typically been around 70 to 90 cents per kg for lower grade tobacco while the higher grade went for around 120 cents last year. Farmers maintain there is a cartel of buyers who conspire to fix prices on auction floors, an allegation the buyers deny. Buyers active in Malawi are Limbe Leaf, majority owned by the Swiss-registered Continental Tobacco Company, and U.S.-based DIMON. Wa Mutharika said it was important to protect the price of Malawi's strategic product, much of which is grown by peasant farmers. Official figures show that a Malawian farmer spends on average a dollar to produce one kg of tobacco. The commodity accounts for more than 70 percent of the country's exports and 15 percent of gross domestic product, with around 2 million of the country's 12 million people depending on the crop and related industries for their livelihood. Last season Malawi's official tobacco sales reached 170,000 tonnes, about 10,000 tonnes up on the previous season. Enditem