Tea prices. Adverse weather to keep tea prices firm

Tea prices, which had increased on an average by around ₹60-100 a kg across various categories on a year-on-year basis in 2020, are likely to rule firm during the current calendar year.

According to industry insiders, the drop in production of first flush crop on the back of unfavourable weather conditions, particularly in the tea growing areas of Assam, and the possible impact on quality of second flush crop due to lower deployment of labour during peak plucking season is likely to keep prices firm this year.

As per estimates available, the first flush crop in North India tea gardens, which includes Assam and West Bengal, is likely to be lower by 30-40 million kg (mkg) this year compared with 2019. The total tea production in April and May 2019 was 182.8 mkg.

“The adverse weather condition in April and May has impacted production, which is estimated to be lower by 25-30 per cent over that in 2019. Given that we are down by net of 100 mkg due to lower production last year, another 30-40 mkg drop in production we need to see what impact it has on prices,” Kaushik Das, Vice-President and Sector Head, Corporate Sector Ratings, ICRA, told BusinessLine.

The prices, particularly of CTC which had increased by ₹60-70 a kg, was expected to witness a correction and come down by ₹20-25 a kg this year but that looks slightly difficult given decline in production, industry experts said.

Lower crop

Tea production was impacted in 2020 as plucking activities had come to a standstill on the back of Covid-19 induced lockdown and it came down by nearly 46 per cent to 99.54 mkg in April-May 2020.

This is the second time in a row that the production of the first flush and second flush crop has been impacted.

In the wake of spike in number of Covid cases, West Bengal government had recently announced that tea gardens can operate with only 50 per cent of workforce. No such restrictions have been announced in Assam so far, but any estate which has a certain number of cases would be declared as a containment zone thereby limiting any plucking activities.

“The restriction on deployment of labour is likely to impact quality of crop as you need to pluck at regular intervals and need to deploy a lot of pluckers,” said Vikram Singh Gulia, MD & CEO, Amalgamated Plantations Private Ltd (APPL).

According to Atul Asthana, MD & CEO, Goodricke Group, the estates may still be able to manage with the 50 per cent workforce but the adverse weather conditions, particularly in Assam is likely to impact production.