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Farm-Level Economics of Tobacco Production in Malawi

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Farm-Level Economics of Tobacco Production in Malawi FARM-LEVEL ECONOMICS OF TOBACCO PRODUCTION IN MALAWI REVISED REPORT Project Coordinator Jeffrey Drope, Ph.D Task Team Principal Investigator Donald Makoka, Ph.D Co-researcher Raphael Lencucha, Ph.D Co-researcher Adriana Appau Prepared by: Centre for Agricultural Research and Development (CARD) Lilongwe University of Agriculture and Natural Resources (LUANAR) P.O. Box 219, Lilongwe, Malawi Presentation Version April, 2016. The Economics of Tobacco Farming in Malawi – Presentation Version. Page 1 Table of Contents ACRONYMS .......................................................................................................................................................................... 4 ACKNOWLEDGEMENTS ................................................................................................................................................. 5 1. INTRODUCTION ....................................................................................................................................................... 6 1.1 About this Report .......................................................................................................................................... 6 1.2 Tobacco and the Malawi Economy ......................................................................................................... 7 1.3 The Malawi Tobacco Industry.................................................................................................................. 9 1.3.1 Tobacco Farmers’ Associations ..................................................................................................... 9 1.3.2 Leaf Companies in Malawi ............................................................................................................ 10 1.3.3 Regulatory Framework .................................................................................................................. 11 1.3.4 Extension and Research Services ............................................................................................... 11 1.3.5 Main Actors in the Malawi Tobacco Supply Chain .............................................................. 12 2. STUDY OBJECTIVES ........................................................................................................................................... 15 2.1 Study Limitations ....................................................................................................................................... 15 2.2 Structure of the Report ............................................................................................................................ 15 3. DATA ........................................................................................................................................................................ 15 3.1 Quantitative Data .............................................................................................................................................. 15 3.2 Qualitative Data .......................................................................................................................................... 16 4. STUDY FINDINGS ................................................................................................................................................ 18 4.1 Household Demographic and Socio-economic Characteristics ............................................... 18 4.1.1 Sex of Tobacco Farmers ................................................................................................................. 18 4.1.2 Age of Tobacco Farmers ................................................................................................................ 19 4.1.3 Household Size .................................................................................................................................. 20 4.1.4 Secondary Occupation .................................................................................................................... 20 4.1.5 Main Livelihood Sources of the Sampled Tobacco Farmers ........................................... 21 4.2 Agricultural Practices ............................................................................................................................... 21 4.2.1 Types of Crops Grown .................................................................................................................... 21 4.2.2 Land Allocated to Tobacco Production .................................................................................... 22 4.2.3 Determinants of Land Allocated to Tobacco Cultivation.................................................. 24 4.3 Tobacco Production under the Integrated Production System .............................................. 25 4.3.1 IPS Loan Package .............................................................................................................................. 26 4.3.2 Cash Advance under IPS ................................................................................................................ 29 4.4 Labour Costs ....................................................................................................................................................... 29 4.5 Other Input Costs .............................................................................................................................................. 32 4.6 Total Costs of Production .............................................................................................................................. 33 4.7 Tobacco Marketing ........................................................................................................................................... 34 4.7. 1 Tobacco Side Selling ........................................................................................................................ 35 The Economics of Tobacco Farming in Malawi – Presentation Version. Page 2 4.7.2 Farmers’ Perceptions on Tobacco Classification/Grading System .............................. 36 4.7.3 Farmers’ Satisfaction with Tobacco Selling Prices ............................................................. 37 4.8 Tobacco Income and Profitability .............................................................................................................. 38 4.9 Farmers’ Debts and Credit Demand .......................................................................................................... 40 4.10 Child Labour in Tobacco Production .................................................................................................. 40 4.11 Household Food Security ........................................................................................................................ 42 4.12 Future of Tobacco Production .............................................................................................................. 44 4.12.1 Factors that will Make Farmers to Switch away from Tobacco ................................... 46 4.12.2 How Tobacco Profitability Compares with Other Crops ....................................................... 46 4.13 Tobacco Production and Asset Accumulation .................................................................................... 47 5. CONCLUSIONS AND RECOMMENDATIONS ............................................................................................. 51 5.1 Conclusions ......................................................................................................................................................... 51 5.2 Recommendations ............................................................................................................................................ 52 REFERENCES ................................................................................................................................................................... 53 The Economics of Tobacco Farming in Malawi – Presentation Version. Page 3 ACRONYMS ACS American Cancer Society ARET Agricultural Research and Extension Trust ARISE Achieving Reduction of Child Labour in Support of Education Project CARD Centre for Agricultural Research and Development EPA Extension Planning Area JTI Japan Tobacco Incorporation GDP Gross Domestic Product NIH National Institute for Health ILO International Labour Organization IPS Integrated Production System TAMA Tobacco Association of Malawi TCC Tobacco Control Commission The Economics of Tobacco Farming in Malawi – Presentation Version. Page 4 ACKNOWLEDGEMENTS We would like to thank the United States National Institutes of Health (NIH – National Institute on Drug Abuse, Fogarty International Center and National Cancer Institute, Prime Award No. 5R01DA035158-04) for the research grant that allowed the researchers to undertake this study. Special thanks to the American Cancer Society for partnering with CARD (ACS Contract No.30721). We are grateful to Dr. Jeffrey Drope of ACS for coordinating the Building Research and Capacity on the Economic Policy-Tobacco Control Nexus in Africa Project, through which this study was undertaken. We are grateful to management of CARD for their support. Special thanks to the project team – Prof. Ronald Labonte (Canada), Dr. Fastone Goma (Zambia), Richard Zulu (Zambia), Peter Magati (Kenya), and Qing Li (USA) – for their input and contributions that helped to shape this report. We would like to thank members of the research team at CARD who assisted in the data collection and analysis. We thank all the farmers and
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