After a dream run, tobacco prices internationally may cool off
After four years of good demand abroad, Indian tobacco farmers might see a stabilised price scenario this year. With indications that production in Brazil and Zimbabwe is coming back to normalcy, the demand for Indian tobacco may be subdued for the current year.
Both the Tobacco Board and the Indian Tobacco Association (ITA) cautioned the farmers well ahead of last year’s sowing season not to increase the production beyond the stipulated production levels.
- Also read: India’s tobacco exports double over last 4 years, likely to top $2 billion this fiscal
Farmers, however, went ahead to increase the area significantly anticipating a repeat of last few year’s price in international markets. Tobacco exports from India went up by two-and-half times over the last five years. From ₹6,496 crore in 2020-21, exports breached the ₹15,000-crore mark in the first 11 months of the financial year. When the full year numbers are available next month, experts see the number would cross the ₹16,000-crore mark.
Admitting that the farmers increased the acreage this year encouraged by the good prices, a veteran tobacco farmer said that farmers did try to grow chickpea (which is being promoted as an alternative to tobacco crop).
“But continuous intermittent rains in December and November caused crop failure. This led them to come back to tobacco that offered them good prices last year,” he said.
According to the preliminary forecast, the production is set to breach the 240-million (m) kg mark in Andhra Pradesh as against the stipulated 167 m kg. For Karnataka, the board stipulated a production of 100 m kg.
In Karnataka, where the market season is nearing its end, about 77 m kg have already been sold. Though the industry sees no challenge in Karnataka and Andhra Pradesh, where the auctioning process has started in phases, the challenge of excess production is seen.
“We have organised awareness campaigns to educate farmers against excessive cultivation, highlighting that the favourable conditions of the previous year (crop failures in Brazil and Zimbabwe) might not repeat,” Yashwanth Chidipothu, Chairman of the Tobacco Board, told businessline.
Obtaining information from tobacco-growing countries like Brazil and China often involves relying on assumptions, trade contacts or inquiries with export companies and individuals with connections, making concrete information scarce.
Having learned about the expected higher production in Brazil (700 m units) and Zimbabwe (300 m units) for the current year, the board decided to caution the farmers not to cross the stipulated production limits.
“We have printed pamphlets and disseminated this information across all 16 auction platforms in Andhra Pradesh to educate farmers about potential market changes. We also held meetings to advise farmers against overproduction,” Yashwanth said.
- Also read: India’s tobacco exports set to exceed ₹13,000 crore this year
Even the ITA asked the farmers about the risks of oversupply and challenges in export opportunities in case of good supplies in the international markets.
“Reports suggest that production of tobacco is growing in other countries. In this scenario, we can’t anticipate a similar demand and prices that we saw last year. Keeping this in view, please stick to the area and production stipulated for you,” the Tobacco Board said in the pamphlet.
Global production trends
“Due to lack of rains, the tobacco production in some countries had come down by 150-200 m kg. Because of this shortfall, we could realise better export prices despite an increase of 50-80 m kg in production in India,” the ITA pamphlet said.
“If the demand goes up, farmers in other countries try to increase production like in India. But if the production levels go up internationally, there is a chance of a fall in prices. We request you to keep this in mind and stick to the stipulations made by the Tobacco Board,” it said.
