Tobacco earnings beat USD350 million target

TAONGA SABOLA

It doesn’t get sweeter than this. With about
25 million kilogrammes yet to pass through the auction floors, the
country’s number one foreign exchange earner tobacco has already
fetched $353 million (about K49.42 billion) surpassing the $350 million
(about K49 billion) set by the authorities, the Tobacco Control
Commission (TCC) said on Thursday.

This year’s revenue is 80 percent higher than the K27 billion, the
green gold generated at the close of the tobacco selling season last
year.

TCC general manager Godfrey Chapola told The Nation that improved
prices on the auction floors have been the major driver of the
skyrocketing earnings.

The country has seen probably the best tobacco prices in years,
partly attributed to increased competition on the market coupled with
rising demand for the commodity emanating from a slow down in
production in some of the major tobacco producing nations.

Chapola said as at Thursday, a total of 145 million kgs of the crop
had been sold. Primary crop estimates had indicated that the country
would produce a total of 150.8 million kgs.

As at Thursday average prices for burley hovered between $2.50 and $2.60.

"Final and June estimates peg total tobacco production this year at
169.7 million kg. Previous estimates (March) had indicated a total
output of 150.8 million kg. We think the increase is due to tobacco
that is ordinarily smuggled across the borders but this year that
tobacco has been sold locally because of favourable prices.

"There are unsubstantiated rumours that some tobacco may have been
smuggled into Malawi from neighbouring countries. This, however,
remains a rumour," said Chapola.

In its April 2008 Economic Newsletter, National Bank of Malawi (NBM)
had predicted this year’s tobacco earnings to hit $452.7 million with
sales averaging $3 dollars per kilogramme. But the price of the green
gold lost some salt in following weeks to settle at around $2.50 as
buyers came back to their senses from a first day ‘mistake’ which saw a
kilogramme of tobacco selling above $9 dollars.

Economic commentators say they expect the increased gross tobacco
revenue to strengthen the local currency in the short to medium term.

In its March 2000 economic bulletin financial securities firm
Continental Discount House (CDH) advised monetary authorities to take
advantage of massive smoking dollar inflows to collect anomalies in the
country’s exchange rate regime.

"With the tobacco marketing season in progress it is expected that
the kwacha will exhibit its tendency of being firm against major
trading currencies reflecting the increased holding of foreign currency
reserves in the country," said CDH.