COVID-19 drives tobacco farmers to the brink

Malawi President Arthur Peter Mutharika waves at supporters during a recent campaign rally. (AFP)
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Updated 22 June 2020

COVID-19 drives tobacco farmers to the brink

  • We are not operating normally as there is no interaction between the buyer and the grower

LILONGWE: During his 15 years as a Malawian tobacco farmer, Boniface Namate has had to overcome many difficulties growing the plant that is the country’s biggest export earner.

Namate had banked on a bumper crop this year and had hoped the proceeds would enable him to buy a new car and even build a new house.

However, the coronavirus pandemic has seen the 56-year-old’s dreams go up in smoke.

Due to restrictions imposed to control the spread of the virus in Malawi — one of the top 10 tobacco producers — growers were barred from physically attending the auctions where prices are set.

That has left farmers feeling cheated by buyers.

“We are not operating normally as there is no interaction between the buyer and the grower,” said Betty Chinyamunyamu of the National Smallholder Farmers’ Association of Malawi.

“Because of this, there are trust issues,” she said.

When the auction season opened in April, Namate and other small-scale farmers said their earnings had indeed evaporated.

“The prices that came from the auction are not what we expected. We are devastated,” said Namate.

Burley leaf from Malawi makes up 6.6 percent of the world’s tobacco exports.

Known locally as “green gold,” it is Malawi’s top crop in terms of employment.

It also accounts for over 50 percent of foreign exchange earnings and 23 percent of tax revenues.

So, when its 50,000 growers suffer, the country has every reason to be worried.

Last November, the US restricted tobacco imports from Malawi over allegations of worker exploitation and child labor.

And the coronavirus has turned up the heat on farmers even more.

Once he saw the prices being set in the first round of auctions, Namate immediately knew he was in trouble.

He had been expecting his first bales of 1,116 kg to fetch up to $1,500. Instead, he received a meagre $540.

And out of 3 tons overall from this year’s harvest, he had hoped to make around $6,000 in total. But now he says he will be lucky even to make $1,500.

“I was devastated because I had planned a lot of things with the money,” said the farmer from Ntcheu.

He is even contemplating abandoning the crop altogether.

“Even my family have threatened to stop helping me in the fields if I insist on tobacco farming,” Namate said.

Another farmer Alick Munthali, who has harvested eight tons of tobacco in Rumphi in northern Malawi, finds himself in a similar predicament.

“We don’t know how much the tobacco is fetching and we have no opportunity to negotiate the price with the buyer,” said Munthali, who has been farming the crop since 1989.

“It is difficult to sell your crop when you are not physically present,” he said.

Nevertheless, auctioneers and large-scale growers insist that the farmers are being short-changed by buyers.

“Farmers are not cheated on the sales,” said Felix Thole, chief executive of the Tobacco Association of Malawi Farmer’s Trust, which represents large-scale growers.

He pointed out that growers continue to be represented on the market by farmers’ associations.

“Auction sales bidding continues by the individual buyers, only this time around there is no chanting of the prices. Buyers continue competing and the highest bidder gets the bale,” Thole argued.

Nevertheless, Malawi’s main opposition leader Lazarus Chakwera believes farmers have been unfairly treated.

“The farmers basically have been abused,” he said.

“The government gets a lot of foreign earnings through this particular industry and yet the farmer is treated like a laborer that should not even prosper,” he said.

Iranian oil in perfect storm of storage shortage, low demand, sanctions

Updated 07 July 2020

Iranian oil in perfect storm of storage shortage, low demand, sanctions

  • Coronavirus, US economic action sees inventories reach bursting point

LONDON: Iranian oil production has reached its lowest point in almost four decades, according to industry experts, with the country’s storage facilities fast approaching full capacity.

The news comes amid a dip in Iran’s oil exports due to a crash in global demand, and in a period when its refineries have been hampered as a result of the coronavirus outbreak.

With over 11,000 confirmed fatalities, Iran has suffered the worst coronavirus outbreak in the Middle East, affecting all areas of industry. 

This has created a perfect storm for the country’s vital oil sector, with what little selling ability it has further disrupted by sanctions imposed by the US in 2018 following Washington’s withdrawal from the Iran nuclear deal.

Iran’s total liquid production dropped from 3.1 million barrels per day (bpd) in March this year to 3 million bpd in June, according to FGE Energy, which predicts that the figure will drop by an additional 100,000 bpd in July.

Crude production was as low as 1.9 million bpd in June, the lowest since the beginning of the Iran-Iraq war in 1981.

Exports also fell, with estimates varying depending on source — 100,000 bpd in May according to market intelligence firm Kpler, and around 210,000 bpd according to FGE — well under 10 percent of the 2.5 million bpd Iran exported in April 2018.

Iran’s onshore crude stocks, meanwhile, hit 63 million barrels in June, having been just 15 million barrels in January, according to FGE.

Kpler said Iran averaged 66 million barrels in storage throughout June, meaning that around 85 percent of the country’s total onshore storage capacity was full.

“However, it will technically not be possible to fill tanks to 100 percent, given technical constraints at storage tanks and potential infrastructure bottlenecks,” Homayoun Falakshahi, a senior analyst at Kpler, told Reuters.

Offshore the story is much the same, with options running out fast. Iran has 54 crude oil tankers, according to valuations specialist VesselsValue, and is thought to be using around 30 ships, mainly supertankers with a maximum capacity of 2 million barrels of oil each, to store over 50 million barrels of crude and condensate.

“The exact number of Iranian vessels on floating storage is a bit of a black box as they have all turned off their AIS (tracking transponder) signals,” said a spokesman for shipping group NORDEN.

“Storage is expected to continue as we do not see these vessels being able to trade anytime soon.”