Global dip in production boosts demand for Indian tobacco

With top global tobacco producers such as China, Brazil and Zimbabwe reporting issues relating to production output, the demand for Indian tobacco has increased significantly. Tobacco farmers in Andhra Pradesh and Karnataka, who reaped a good harvest in the 2023-24 season, have reported record prices for the produce.

While the sales season in Karnataka closed with farmers reporting a record average price of ₹257 a kg, farmers in Andhra Pradesh sold about 44 million kg (mkg) in auctions, including 34.50 mkg of medium-to-low-grade and the rest being the bright (higher grade) variety. The average price fetched was ₹250 a kg.

As against the crop size of 100 mkg fixed by the Tobacco Board for 2023-24, farmers in Karnataka grew about 88 mkg. In Andhra Pradesh, farmers grew a record 204 mkg of tobacco, well beyond the crop size of 142 mkg fixed by the board.

Dip in buffer stocks

“Prices in Andhra Pradesh have touched a peak of ₹341 kg, with the average price hovering about ₹250. Around the same time last year, the average price was ₹197,” Yashwanth Kumar Chidpothu, Chairman of Tobacco Board, told businessline.

“There is a significant drop in the production of tobacco in Brazil and Zimbabwe this year, causing a shortfall in the international markets. Though there is a free trade pact between China and Indonesia, the former is not in a position to export tobacco to the latter as there is a reported dip in its buffer stocks. This turned the situation favourable for Indian tobacco,” he said.

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He said the Guntur-headquartered Board played a critical role in holding shows, assuring the international markets that India could be a consistent exporter.

The auction season in Andhra Pradesh, which started a month ago, will last till late August. Farmers have, so far, sold medium-to-low-grade produce, leaving higher-grade tobacco for the later phase of the auctions. Of the 204 mkg of tobacco produced in the State in 2023-24, about 47-48 per cent is medium-to-low grade tobacco, with the rest being the higher grade tobacco, which could fetch higher prices.

Crop outlook

The delay in pre-monsoon showers, however, is a cause of concern for farmers in Karnataka. Farmers grow Flue Cured Virginia (FCV) tobacco in the areas around Mysuru.

“Buoyed by the high prices, farmers, who are ready with their tobacco nurseries, are worried over the delay of the pre-monsoon showers. The seedlings are getting aged. There is a possibility that the acreages could expand marginally, but it would all depend on the timing of the rains,” BV Javare Gowda, President of the Federation of Karnataka Virginia Tobacco Growers Association, said.

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Pre-monsoon showers have been delayed this year across the southern region. With ginger growers around Mysuru facing hardships in harvesting their current crop due to the prolonged dry spell, there could be a higher interest in growing tobacco during the 2024-25 season considering last year’s attractive returns, Gowda said.

India exported $1.45 billion worth tobacco in 2023-24 as against $1.21 billion last year, showing a growth of 19.5 per cent.

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