Indian tobacco prices may head for a correction soon

Indian tobacco prices may head for a correction soon

New Delhi: After hitting records, prices of Indian tobacco may soon see a correction in global markets, with surplus output in two major producing countries threatening to dent prospects of the third largest producer.

“China, the largest tobacco producer, is expecting 300 million kg more this year. Similarly, second largest producer Brazil has witnessed surplus output of 60-70 million kg. We think the excess production will dampen prices of Indian tobacco," Tobacco Board chairman J Suresh Babu told PTI.

China is set to produce around 2,300 million kg of tobacco this year from 2,000 million kg last year. Similarly, production in Brazil is pegged at about 700 million kg from 630 million kg in 2007-08, he said.

India, too, is projected to produce more tobacco this year, with output estimated at around 270 million kg from 252 million kg last year. Output in the largest producing state, Andhra Pradesh, is pegged at about 170 million kg, while the rest is to come from Karnataka.

If Brazil decides not to raise prices and keep them at the present level, India may lose business, as prices of the Indian tobacco are already ruling very high, Babu said, adding that the Brazilian tobacco is also of a bit superior quality.

Tobacco prices skyrocketed to a record average of 84.85 per kg during auctions in Andhra Pradesh this year against 47.47 last year, as leading producers such as China witnessed some shortfall last year.

Similarly, prices of highest-quality tobacco in Andhra Pradesh spiralled to a record 141 a kg this year against 65 last year.

Even the ongoing Karnataka auctions are fetching high returns, as prices have shot up even higher than the Andhra auctions to an average of Rs104.80 a kg.