Nov. 16 (Bloomberg) -- Malawi, the world’s largest grower of burley tobacco, is changing its system for selling the leaves to move away from the auction method now used to dispose of the entire crop.
The so-called Integrated Production System will enable farmers in the southern African nation to agree to grow the leaves for specific customers, according to a statement yesterday from the country’s Tobacco Control Commission. The government aims to carry out 80 percent of sales through the new system and the rest via auctions, the statement showed.
The change will control production and improve the quality of tobacco, which generates 60 percent of Malawi’s foreign exchange, according to the government. The shift may hurt the local economy because some growers will be unable to take up contract farming, said Auction Holdings Ltd., which has origins going back to a local tobacco warehouse built in 1936.
“About 1.06 million Malawians were actively involved in tobacco growing,” Evans Matabwa, chief executive officer of Auction Holdings, said in a presentation given over the weekend at the annual meeting of the Economics Association of Malawi and e-mailed to Bloomberg. “In the new arrangement, not all these will have the opportunity to earn revenue from tobacco, as not all of them will be contracted.”
The new system will take effect when the next marketing season begins in March, according to the commission. Buyers will collect tobacco from growers via existing trading floors after the change and use auctions to buy any leaves they may need in excess of those produced by farmers, it said.
Malawi grows more than 101,000 metric tons of tobacco a year, according to Auction Holdings.
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