The Hindu Business Line : Tea prices remain low despite tight supply

The domestic tea market may be showing signs of recovery on the quality and price front but market sources are not too certain as to how long this tempo would last. "While the present optimistic trend could last for a while, the internal trade is already going through a `fairly tight' supply situation as large volumes of the CTC dust grades are being absorbed for exports. The CTC dust availability (up to May) slipped by 10 per cent in 2006 compared with the corresponding period last year. In such a situation, price levels would shoot up, but this has not happened so far because of the absorption of the carry forward stock,'' said Mr A.I. Kurien of Forbes and Co, a tea broking firm.

Kochi auction

Statistics reveal that about 19.42 million kg (mkg) of CTC dust was sold at the Kochi auction between January and May compared with 19.04 mkg during the corresponding period of 2005. While the export volume was less than one per cent of the total sale at 0.15 mkg in 2005, it swelled to 12.5 per cent in 2006, leaving just about 87.5 per cent for internal consumption. Export quantities were up by 2.27 mkg this year resulting in a shortfall of 1.9 mkg in domestic supplies.

Market sources are expecting the internal supply shortfall to rise in the coming months and this in turn could trigger the price levels.

The reported drop in Kenyan tea production, Mr Kurien said could spark off higher export demand.

A glance at the crop production, export and average price that prevailed in the past decade shows that the price levels continued to remain depressed between 1996 and 2005, irrespective of internal supply shortage. The rates tended to move up only during years of higher export offtake, in spite of improved production/comfortable supply situation.

"Only during years of global shortage did India's tea exports shoot up. By accelerating our exports, we can expect better price for our teas,'' Mr Kurien said.