Tea prices are likely to rule firm this year due to steady demand and low carry-forward stocks, senior industry officials said.

According to Kamal Baheti, chief financial officer of McLeod Russell, tea prices could rule higher by about Rs 15-20 a kg for the opening level crop starting March-April this year.

“Since the production was lower last year, the inventory is also lower. Demand, however, continues to grow. This will keep prices firm for the opening level crop till about end of July,” Baheti told Business Line.

In 2012, tea prices moved up by nearly Rs 20-25 a kg on lower production and steady demand. The country’s tea production during the January-November 2012 period was down by about 3 million kg at 1,016 million kg compared with same period a year ago. The production figure for December is yet to be collated.

The average price of CTC in 2012 at the Kolkata tea auction centre was up by Rs 17 a kg over 2011 while that of orthodox tea was up by Rs 38 a kg. At the Guwahati auction centre, average prices of both CTC and dust varieties were up by Rs 22 a kg in 2012 (over 2011), said a senior official at the Calcutta Tea Traders Association.

“All the categories of tea including CTC, dust and orthodox are fetching better prices even at the tail end of the season this year and there is hardly any stock left. This is a bullish trend for new season cutting across all varieties of the crop,” said Krishan Katyal, director, J Thomas & Co.

Production

However, tea prices post June-July would depend on quantity and quality of production of the new season crop. Tea production is highly dependent on weather conditions among other factors.

Weather conditions remaining favourable, tea crop produced this year could be slightly lower on account of replanting activities being undertaken in several tea growing areas, said M. Dasgupta, secretary-general of Indian Tea Association.

“The industry has been undertaking fairly aggressive rates of replantation in the last three years. Nearly two per cent of the total tea producing area is under replantation at present and this might have some impact on the amount of crop produced,” he said. This apart, cost of production has also increased due to a sharp rise in prices of chemicals and fertilisers. This also might have some effect on tea prices, officials said.

shobha.roy@thehindu.co.in

(This article was published on February 13, 2013)
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