Auction prices have declined since 1996, when they were around US$2.27/kg for flue-cured tobacco and US$1.61/kg for burley tobacco. In 2000, the average auction prices were US$1.35/kg for flue-cured tobacco and US$1.01/kg for burley tobacco, which dropped by 40 and 37 percent, respectively. As a result, the total output of burley tobacco in 2000 was 20 percent higher than in 1996, but the total revenue was 24 percent lower than in 1996. Along with lower production, the total revenue for flue-cured tobacco in 2000 was 58 percent lower than in 1996.
Thus, although more inputs – including land, labour, fertilizer and others – were used in tobacco production in 2000, and more tobacco leaf was produced, the revenue was much less than in 1996, when about 25 percent less land was used for tobacco. Two major factors appear to have been responsible for the significant decline in prices over the past few years. First, the growth in production outpaced the growth in export demand, which resulted in lower export prices for Malawi tobacco, and, second, the increasing involvement of new and marginal growers tended to produce low quality tobacco leaf because of their lack of experience and inputs. The Agricultural Development and Marketing Corporation (ADMARC), the government tobacco marketing agency, which bought tobacco leaf directly from small-scale growers, received only half of the average price for tobacco leaf at the auction market in 2000. According to Tobacco Association of Malawi (TAMA) estimates, the cost of production in 2000 was about K 72 136/ha. If all production expenses were financed by bank loans, the total production cost including interest payment would have been nearly K 108 000/ha, so some tobacco growers would make no profit from tobacco if they had to rely on hired labour and transportation.
Malawi average tobacco production cost estimates for 2000/01 Value (K) Cost share (%) Wages for hired labour 17 000 15.6 Fertilizer 15 380 14.1 Transportation 14 400 13.2 Insurance and licence 1 400 1.3 Rations 8 100 7.4 Ploughing 5 000 4.6 Chemicals 2 100 1.9 All other costs 8 756 8.0 Subtotal expenses 72 136 66.3 Interest 36 679 33.7 Total 108 815 100.0 Source: Tobacco Association of Malawi (TAMA) ISSUES IN THE GLOBAL TOBACCO ECONOMY 67 summarizes the estimated production budget. Labour, fertilizer and transport accounted for more than 60 percent of the total cost.




by Pierre Lorillard and now manufactures a wide range of brands, including Kent, True, Old Gold, Maverick, Satin and Max. 

