Agri Business

Cuppa to cost more on unfavourable weather

Shobha Roy Kolkata | Updated on April 28, 2021

This is the second time in a row that the production of the first flush crop in the region has been impacted   -  The Hindu

Prices up by ₹40-50 per kg as output in the North seen down by 25-35%

Tea prices have increased by ₹40-50 a kg across various categories as the beverage’s production in North India (which includes the gardens in Assam and West Bengal) is likely to be lower by 25-35 per cent on the back of unfavourable weather conditions.

This is the second time in a row that the production of the first flush crop in the region has been impacted thereby pushing up prices. The drop in production of tea in 2020, on the back of Covid-induced lockdown, had pushed up prices which had increased by ₹120-130 a kg across various categories on a year-on-year basis.

According to Vivek Goenka, Chairman, Indian Tea Association, the estimated crop shortfall in North India for April is around 20- 25 million kgs (mkg) compared with 2019.

Tea estates in North India had produced close to 70.47 mkg of tea in 2019. The production of first flush crop in Assam was down by 66 per cent at 23.91 mkg in April 2020 as the plucking activities had come to a standstill between March 25 and April 13 last year on account of the countrywide lockdown due to the pandemic.

Crop loss

“A majority of the tea-growing districts in Assam is facing extremely unfavourable weather conditions. The inadequate rainfall and the prevailing drought like conditions have resulted in extremely low green leaf intake. Many estates have temporarily suspended plucking and are expecting crop loss of around 25-50 per cent in April. Similar situation is prevailing in North Bengal where crop loss is expected to be around 20-25 per cent,” Goenka told BusinessLine.

The unprecedented crop loss is likely to push up costs for the industry. As per estimates a 10 per cent loss in crop is expected to push up the cost of production by 15-20 per cent. This is because the industry has to bear fixed costs in terms of labour and other expenses. Labour accounts for 60-65 per cent of the industry’s total cost.

According to an industry insider, given the extremely poor weather conditions and no signs of relief, the crop loss is expected to continue in May when the premium second flush is harvested.

Price rise

The drop in production has pushed up tea prices. While prices are down year-on-year compared with 2020, they are up by ₹40 a kg compared with same period in 2019, said Kalyansundaram, Secretary, Calcutta Tea Traders’ Association (CTTA).

As per figures available on the website of Tea Board of India, prices firmed up by 11 per cent on a week-on-week basis from ₹195.14 a kg as on April 10, 2021, to ₹215.88 a kg as on April 17. There was no corresponding sale last year due to the lockdown.

“It may not be right to compare tea prices with last year as in 2020 the situation was extraordinary due to the lockdown and production was hit. But as compared to 2019, prices are up by ₹40 a kg at the auctions. The arrivals have been slightly less as the production has been impacted due to less rainfall in Assam,” he said.

Any further drop in production could impact the harvesting of second flush crop which could further push up tea prices, industry insiders said.

Published on April 27, 2021

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