The Hindu Business Line : Tea prices subdued on fall in exports, higher arrivals

Chennai, Dec. 30 A 24 million kg (mkg) fall in Indian tea exports and higher arrivals at various auctions across the globe have resulted in a general fall in prices of the commodity during the first 10 months of this year. The fall, in particular of Indian tea prices, is despite a 20 mkg fall in tea production during January-October.

According to data available, production during the first 10 months in the country slid to 802.6 mkg against 822.7 mkg during the same period a year ago. The decline in production has been mainly in North India, where it slipped to 623.7 mkg against 637.2 mkg. In the South, it was down to 178.9 mkg from 185.5 mkg.

Exports slid to 132.7 mkg against 173.9 mkg and, according to industry sources, the decline has been mainly of teas from South India.

“A fall in exports, particularly from South India, dampened whatever chances there might have been in recovery of prices,” the sources said.

Exports declined on account of two reasons when compared with 2006. One was the recovery of crop in Kenya, where production slumped last year due to adverse weather. Two, Indian exporters faced problems of payment in Iraq and, as a consequence, they were reluctant to sell to that country.

“We have orders from Iraq but our exporters are not willing to take risk in view of the payment problems. Negotiations are on at the diplomatic levels,” the sources said.

On the other hand, Kenya’s exports increased 35.8 mkg in the first 10 months to 270 mkg. However, the surprising aspect is that exports from Sri Lanka, a key player in the tea market, were also down due to poor crop there.

Data reveals that Kenya has filled in Lanka’s slot in the exports market.

Despite lower production in the country, sales have been higher at all auctions. Sales at Indian auctions totalled 366.2 mkg against 352.2 mkg, whereas in Kenya it was 292.1 mkg against 232.8 mkg.

Realisations

On the realisation front, teas in North India fetched Rs 72.17 a kg against Rs 73.14 last year, whereas in the South, it was Rs 50.55 a kg against Rs 51.48. In Kenya, it was Rs 69.10 a kg against Rs 89.71 last year. Lanka has been the only country where realisations have improved significantly to Rs 100.34 a kg against Rs 85.23 a kg last year.

According to industry sources, exports this year would be only marginally less than last year. “We have seen some pickup in orders,” they said.

While the Indian Tea Association has already painted a rosy picture for the tea sector next year, saying prices would recover in view of low carryover stocks, industry sources point to a couple of other factors for likely gains in prices.

“Prices have already shown improvement in November. They are better than last year, maybe since buyers have begun to feel supply pinch. Two, the crop in Kenya is seen affected again next year due to weather woes,” the sources said.

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