Indian tobacco farmers are likely to get good prices this year as estimates indicate a fall in production in top global tobacco-growing regions.

Quoting global industry estimates, Tobacco Board officials have pegged the world (FCV or flue-cured virginia) tobacco production stagnant at 4,596 million kg (mkg) in 2012 as against 4,495 mkg in 2011. The big drop would happen in South America with expected production at 687 mkg this year (818 mkg). In Brazil, the leading tobacco grower, the production might fall to 590 mkg (708 mkg).

Only the Asian and the US reported signs of growth this year, helping the overall production figures to grow, though very slightly.

Signs of the benefit for Indian farmers are already seen in the auction trading platforms in Andhra Pradesh. The tobacco firms have significantly upped their intake in the last few weeks anticipating poor feed from the Western markets. As on July 10, the firms had bought 121 mkg as against 84 mkg the same day last year.

The highest bids recorded in this season for NLS (Northern Light Soils) variety is at Rs 153 as against Rs 144 last year. The average price for this variety went up by Rs 5 at Rs 116. The bright grade fetched Rs 2.28 a kg more than low grade Rs 6 more this year. These two grades contribute 65 per cent of the volume. The price of medium grade tobacco, however, fell by Rs 2.50.

When contacted, Mr G. Kamalavardhan Rao, Chairman of Tobacco Board, expressed confidence that the Indian farmers would get more price this year, keeping in view the supply pressures in the global markets.

Production concerns

The production, however, is likely to be hit next year if monsoon fails to progress well. “This is a crucial week for the farmers in Karnataka,” he said.

In Andhra Pradesh, where the auctions are being conducted, tobacco is a rabi crop. The Ministry of Agriculture expects a fall in the area of production this year at 1.20 lakh hectares as against the normal area of 1.54 lakh hectares.

(This article was published on July 20, 2012)
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