Malawi Tobacco Sells 37% Below Government-Set Price

The average price of tobacco in Malawi, the world’s largest producer of the burley variety, dropped 37 percent below the government-set price of $2 per kilogram (2.2 pounds) at a sale, Auction Holdings Ltd. said.

The leaves sold at an average $1.27 per kilogram in the sale for the week through Nov. 12, from $1.32 recorded a week earlier, the Lilongwe-based manager of Malawi’s auction floors said in a statement published in the Daily Times newspaper today. During the week, 3.7 million kilograms of tobacco worth $4.6 million were sold, it said.

Malawi began setting minimum prices for the various grades of tobacco in 2007, after accusing merchants of putting growers out of business by offering them lower prices. Last year, President Bingu wa Mutharika deported four officials at three tobacco-buying companies, accusing them of sabotaging his economic agenda.

Tobacco is Malawi’s biggest foreign-exchange earner, accounting for 60 percent of all revenue earned from abroad. Limbe Leaf Tobacco Company, a unit of Universal Corp., Alliance One Inc. , Africa Leaf Malawi Ltd., Premium Tama Tobacco Ltd., Malawi Leaf Co., RWJ Wallace Ltd. and Japan Tobacco Inc. are among the biggest buyers of tobacco in Malawi. They export the leaves to countries in Europe, Asia and North America.

Since sales began on March 15, 217.4 million kilograms of tobacco has been sold, generating revenue of $413 million. The leaf has sold at an average of $1.90 per kilogram.