Tobacco prices head northwards

Last Updated: Mon, Nov 19, 2012 19:32 hrs

Indian tobacco farmers are in for a bonanza this year. The price of flue cured virginia tobacco (FCV) had already increased to Rs 145 a kg in the current auctions in Karnataka compared to a maximum price of Rs 125 a kg realised by the 42,000 registered tobacco farmers in the state last year.

According to Tobacco Board chairman G Kamala Vardhana Rao, prices are expected to rise further in the coming days. This is on account of a sudden spurt in the demand for Indian tobacco due to a reduction in crop sizes in major producing countries like Brazil and Tanzania.

Brazilian FCV crop in 2012 is expected to be around 587 million kg (mkg), down 20 per cent from 708 mkg in 2011. Similarly, in Tanzania the 2012 crop is expected to be around 90 mkg, down 32 mkg from 122 mkg in 2011. Shortage of rainfall and high temperatures have affected the quality and yield of the crop in the two countries.

Even in India, the crop is expected to decline because of incessant rains caused by the recent Nilam cyclone leading to production of more low grade leaf in Andhra Pradesh (AP), except in northern light soils (NLS) where quality is reported to be good.

Rao, however, told Business Standard the decline in production in AP would not be more than five mkg. The board, which regulates tobacco production, has fixed the crop size at 170 mkg for the state in the current year. The NLS of AP were known for production of the best quality FCV tobacco in the country, which secured a maximum price of Rs 150 a kg last year.

For Karnataka, where tobacco auctions have commenced, the crop has been fixed at 100 mkg. The auctions will continue till February next year as not more than 1,000 bales (about 100,000 kg) would be auctioned in a day. The 2011 Karnataka auctions were concluded on April 10, 2012.

Also, about 15 mkg of uncommitted stocks reportedly remained with the trade in the two states at the end June 2012. Tobacco experts say these inventories were expected to be absorbed in the current year on account of lower crop sizes and thereby, stronger pricing.

Last week, the Tobacco Board launched an e-auctioning platform at Periyapatna in Mysore district. It is planning to introduce a similar facility in all 11 auction platforms in Karnataka. It will be extended to AP by next year.

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