Tea prices simmer with export demand, fall in N India output

The drop in production of North Indian tea and a steady export demand from markets such as Kenya are likely to push tea prices up. Tea prices in north India have already firmed up by 6-10 per cent across various categories so far this year.

The average selling price of good quality Assam tea at close to ₹215 a kg is up by ₹15 a kg over same period last year.

“The price of best quality Assam tea was ruling at ₹245 a kg in the last sale compared to ₹220 same period last year,” J Kalyan Sundaram, Secretary-General, CTTA, told BusinessLine.

As per data available with the Tea Board, production in North India dipped by 42 million kg (mkg) to 127.54 mkg in September. The decline was pronounced in Assam which saw production drop by around 31 mkg at 81.75 mkg.

Production in Dooars and Terai regions of West Bengal also declined by around 9 mkg owing to climatic adversities.

“Last year, we had a bumper crop in September and this year there has been an unprecedented drop primarily on account of very little sunshine and a lot of rain. Though there is some recovery in October, but that will not be enough to cover the loss in production,” said Azam Monem, chairman, Indian Tea Association.

The advent of early winter has also compounded matters as this would curtail the production period by at least a fortnight. With the end-season approaching, the industry is apprehensive about the scope of recovery of the crop within the current production cycle.

Nearly 65 per cent of the country’s tea is produced during the July-November period. In calendar 2016, the country produced 1,267.36 mkg of tea, with North India accounting for 1,054.51 mkg.

Tea prices, which have remained largely stagnant the last three-four years, are likely to firm up in the days to come.

“The overall crop shortage this year is expected to be in the range of 20 mkg. Prices, which were stagnant in the last couple of years, are expected to firm up,” said Kamal Baheti, CFO, McLeod Russel India. With consumption growing at 2-3 per cent and exports also looking up, prices are likely to firm up by 10-15 per cent in the January-March quarter, Monem said. The country exports around 20 per cent of the tea produced.

“The demand for Indian teas has increased in Kenya and Sri Lanka. A decline in production and higher exports are likely to keep the prices firm,” said Kaushik Das, Vice-President and Sector Head, Corporate Sector Ratings, ICRA.

According to Jagjeet Kandal, managing director, Amalgamated Plantations, while the rise in price has brought in some cheer for the industry, the drop in production is likely to push up costs by 5-10 per cent.

Production cost, which has been rising by 8-10 per cent annually, has been exerting pressure on the profitability of bulk tea producers in recent years.

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