Strong export demand due to supply shortage in the global market has lifted the tobacco prices at the ongoing auctions in Andhra Pradesh, the largest producer of the commodity in the country.
In Andhra Pradesh, the cumulative average prices during 2024 auction season are higher by 27 per cent over the last year on growing overseas demand. The cumulative average prices, so far, have been in the range of ₹286.57 per kg — an increase of 27 per cent over the previous year’s average of ₹225 .
Tobacco sector stakeholders said a shortfall in supplies from countries such as Zimbabwe and Brazil among others has led to increased demand for the Indian produce in the overseas market in the recent months.
Higher prices
Tobacco exports jumped 35 per cent in value terms during April-June quarter of current financial year to over $426 million over same period last year’s $314 million. Exports during the financial year 2023-24 grew over 19 per cent to $1,449 million.
Farmers are elated at the record price they received this time. “But this is the game of averages. Some lots must have received a high price but a good number of them with low-grade tobacco ended up getting up ₹205-220. The average prices hover around ₹250-260 a kg,” a farmer from Kanigiri (AP) said, wishing anonymity.
Ramanaiah, another farmer from Ongole, said farmers are happy as they could see some returns. “But we are worried about the next auction season as the cost of the production has gone up. We are not getting the labour. You know, unlike in other crops, you need highly skilled people. Moreover, they have to climb up to take care of the crop,” he said. A team of two (jattu) gets ₹2 lakh (for 90-120 days) in the last cropping season. “They are now expecting ₹2.75 lakh,” he said.
Another farmer cites an example. “I received an authorisation for about 50 quintals for seven acres. (The Tobacco Board regulates the crop by assigning a permissible output to each farmer). If things go well, I would see a return of ₹10.75 lakh against a production cost of ₹17 lakh. If you don’t count the family labour costs and lease costs, you will see the break-even point,” he said.
Vivekananda, a farmer from Koyyalagudem, attributed the sudden demand for tobacco to the international shortages in the availability of the commodity. Recently, the Union Government has allowed the farmers to sell the ‘excess’ (beyond the authorised tobacco), costing over ₹111 crore and benefiting over 34,000 farmers. The government’s decision followed after the Michaung cyclone damaged the crop on 15,000 hectares in Andhra Pradesh.
Karnataka crop
The higher prices fetched in Andhra Pradesh has raised hopes among growers in the neighbouring Karnataka, where the new crop is set to hit the auction platforms next month.
“We are expecting the prices to open higher this year,” said BV Javare Gowda, President, Federation of Karnataka Virginia Tobacco Growers Association in Periyapatna. Growers in Karnataka had realised an average price of ₹253.7 per kg last year.