AP Tobacco Auctions Ahead of Schedule

Source from:  RAGHU KRISNAN TIMES NEWS NETWORK[ TUESDAY, MAY 09, 2006 02:43:40 AM]  05/10/2006

BANGALORE: The very positive trend in the ongoing auctions of India's main FCV (Flue-Cured Virginia) tobacco-growing state of Andhra Pradesh has maintained over the last 80 days of trading with 83 million kg being sold, as compared to 35m kg for the corresponding period of the previous season of '05. Speaking to ET here on Monday, Tobacco Board acting chairman J Suresh Babu says that if this trend continues, auctioning for this year's AP crop of 140m kg could be completed by the middle of next month, some six weeks ahead of the scheduled closure. FCV tobacco is used in cigarettes. Auctioning for the Karnataka FCV crop got over in mid-February, four weeks ahead of schedule. The present average AP auction-volume of over a million kg a day is, Mr Babu says, unprecedented. He attributes this to a combination of factors on the supply front, internationally and domestically. Apart from a 10% fall in this year's Brazil crop which is down to 630m kg and the EU's contemplated removal of subsidies expected to severely impact on its average annual crop-size of 300m kg, with a similar trend projected for the US crop, annual production in Zimbabwe has plummeted from 200m kg to 80m kg over the last few years. Meanwhile, in India, unseasonal rains in the two main FCV tobacco-growing states have seen Karnataka's annual crop fall from 92.5m kg in the previous year to 83m kg and AP's crop drop from 153 to 140m kg. According to AP Tobacco Board chief, "All this has translated into not just an unprecedentedly high daily average volume of over a million kg a day in the ongoing AP auctions but also higher realisations for the tobacco crop which is broadly categorised on an ascending scale as low, medium and bright, depending on the texture, colour and quality. Low grades are presently realising an average of between Rs 32 to Rs 33 a kg, as compared to Rs 25 last year. Medium grades are averaging between Rs 42 to Rs 45 a kg, as compared to Rs 35. Bright grades are averaging between Rs 49 and Rs 50 a kg, up from Rs 44 to Rs 45. Cutting across all categories, the overall average is Rs 46.4 a kg, as compared to Rs 39.9." Mr Babu says that the overall-average realisations at the AP auctions have dipped over the last week. This, he says, is due to two factors. "For one thing, with the bright grades being almost sold out, there is now a greater proportion of low and medium. For the other, foreign buyers are in AP, having discussions with traders. This period of negotiation usually sees a dip in prices, which are now, however, once again stabilising." Enditem