Tobacco Traders Buy at 'Unrealistic' Prices

Source from:  The Hindu 12/31/2008

GUNTUR: Tobacco auctions that ended on a high price band for all grades in Andhra Pradesh reached unrealistic levels in Karnataka auctions crossing the unsustainable levels of Rs.152.30 per kg for the best grade, but farmers closed auction when the price came down by just Rs. 3 on Tuesday. World's best tobacco from Brazil today commands a price of 6 dollars and the filler grade from India had also reached 5.1 dollars and some deals freezed at 4.6 dollars at a time when dollar was Rs.50. The current price is Rs.145 per kg at which the promised export quantum if shipped might land them in losses. Industry sources see it as an unhealthy competition between exporters with an ugly game being played by some of the major players to take the prices high. The Tobacco Board, on its part, was only watching the rise and fall and was content with the cumulative average of Rs.107 per kg as on Tuesday. "We are neither pushing the auctions nor discouraging," said Tobacco Board Chairman J. Suresh Babu. The daily price averages for all grades were ruling around Rs.113 and Rs.114, a sustainable price. With a majority of deals having come mid-auction season, the competition for remaining leaf had increased. Indian Tobacco Association vice-president and Ethnic Tobacco director T. Murali Mohan sees this trend very dangerous as this could lead to complete shifting of major players from the Indian market. From among the major players, Phillip Morris, which usually buys 20 million kg from India, had stopped at 12 million kg and Japan Tobacco reducing its total import by 2 to 3 million kg. Unhealthy internal competition between traders is leading to this unrealistic rise in prices, he opined. While the best grade in Northern Light Soils of Andhra Pradesh was paid Rs.142 at JR Gudem beginning at Rs.60 last season, in Karnataka, day one began at Rs.100 and on day 2 it went up to Rs. 110. Enditem