The Hindu Business Line : Buyers unfazed by ITA outlook

Tea buyers are not feeling threatened by the Indian Tea Association (ITA) Status Paper which said there would be a shortfall of 26-27 million kg by the end of the year.

Tea prices at the major auction houses across the country have hardly reacted to the report though it had sufficient amount of statistics to make it move northward.

The dominant view among a large section of the buyers is that the whole exercise — the Status Paper and its conclusion — is a "producers' gimmick" and is aimed at jacking up tea prices.

According to the ITA report, after seven years of recession the industry is likely "to regain the growth momentum" which it enjoyed in the mid-90s. Production in 2006 has been pegged at 930 million kg (mkg), consumption at 805 mkg, imports at 20 mkg and exports at 195 mkg.

In 2005, production was 928 mkg, consumption was 780 mkg, imports 16 mkg and exports 192 mkg. The year ended with a surplus of 23 mkg.

Mr P.O. Desai, Chairman of the Ahmedabad-based Wagh Bakri Tea, a major packet tea player in Gujarat, Rajasthan and Madhya Pradesh, has rejected ITA's contention.

Mr Desai told Business Line that the buyers were trying to create panic in the market. "Instead of concentrating on the quality they are practicing wrong methods of increasing the prices. This is an unfair exercise," he said.

He further added that the consumption trends reported in the ITA Status Paper goes against their experience. "There is no growth in consumption of tea in the areas where we are present. Instead coffee is gaining substantial markets," he added.

Auction markets

Meanwhile, the auction markets have hardly reacted to the report. According to buyers, at the Calcutta Tea Auction Centre, the average price on the higher end is Rs 95-100 per kg and at the lower end is Rs 70-75 per kg. In 2004, the average price was Rs 64.55 per kg. The next year it dropped to Rs 58.06 per kg.

"Though the ITA report has said about a shortfall there are no signals in the market that anyone is trying to stock up teas. We would have to wait for another fortnight to see if any trend is emerging," the buyers said.

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