Smallholders grow the majority of Malawi's main export crop – burley tobacco. We analyse this value chain segment for the 2003/4 and 2009/10 seasons. The comparison shows smallholder profits in 2003/4 were limited by two main factors: a cartel of leaf merchants at auction and inefficient marketing arrangements. In 2009/10, there was greater competition at auction, improvements in marketing, tighter state regulation (including minimum prices) and much more contract farming. The paper concludes by reflecting on aspects of the political economy of the tobacco industry at national and global levels.