The Hindu Business Line : No reversal seen in rising trend of tea prices

At a glance
The consumption is growing at 3-3.5 per cent in the domestic market.
The export demand is on the rise due to drop in world availability of teas.

Santanu Sanyal

Kolkata, Aug 20 The tea industry sees no chance of reversal of the current rising trend in prices, at least in foreseeable future.

Between January and June, the average auction price was up by about Rs 10 a kg over the same period last year. In July alone, the prices of North Indian teas were up by more than Rs 15 a kg and of South Indian teas by about Rs 12-13 a kg over the same month last year. Normally in July and August, tea prices stop rising. Not so this year.

Carryover stock

The industry sources offer several reasons for the current trend.

First, the absence of carryover stock. “The carryover stock at the beginning of the year was virtually negative,” observed the sources.

Consumption growth

Second, the steady consumption growth at 3-3.5 per cent in the domestic market. It means an additional demand over 25 million kg (mkg) is being created every year. At this rate, an additional demand of 125 mkg will be created in next five years.

“Where is the additional tea going to come from to meet such a burgeoning demand, more so when the production is virtually stagnating?” ask the sources.

Between January and June there was no increase in the production of North Indian teas and there was only 10 mkg increase in South Indian varieties.

Export demand

Next, the export demand is on the rise due to drop in world availability of teas. Till June, the shortfall in availability was estimated at five million kg. At the same time, the global demand is rising by two per cent. No wonder, the international tea prices too are showing an upward trend.

Kenya, Lanka teas

In the international market, the Kenyan prices have jumped by more than 40 per cent on the back of crop failure, the Sri Lankan prices by 30 per cent despite rise in production and the Indian prices by 20 per cent due to near stagnancy in production. The Kenyan crop is down by 40 mkg, while the Sri Lankan production is up by 25 mkg.

The rise in the prices of Sri Lankan teas, all orthodox, is believed to have been caused by a steady increase in the demand for orthodox variety in West Asian and CIS countries.

Last year, India’s exports, as per the revised figures, were about 178.5 mkg. The estimated figure this year might touch 200 mkg as increased demand is expected to materialise from countries such as Russia, West Asia and Egypt.

Finally, the factor which is causing concern and also, to some extent, contributing to the price rise is the rising cost of production. The input costs having risen by about five to seven per cent, the producers too are adjusting their prices accordingly.