Tobacco prices head northwards

Price of flue-cured virginia tobacco has increased to Rs 145 a kg in the ongoing auctions in K'taka against a maximum price of Rs 125 a kg realised last year

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 ongoing auctions in Karnataka as against 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, the 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 by 20% compared to 708 mkg in 2011. Similarly, in Tanzania, the 2012 crop is expected to be around 90 mkg, down by 32 mkg compared to 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 that the decline in production in AP would not be more than 5 mkg.

The board, which regulates tobacco production, has fixed the crop size at 170 mkg for 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 kgs) would be auctioned in a day. The 2011 Karnataka auctions were concluded on April 10, 2012.

This apart, about 15 mkg of uncommitted stocks reportedly remain for trade in the two states at the end June 2012. 

Tobacco experts stated that these inventories were expected to be absorbed in the current year on account of lower crop sizes and thereby strengthen the overall pricing.

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