Kenya’s loss of tea output could mean India’s gain

A whopping 50 million kg (mkg) loss in production in Kenya due to drought in the first half of current calendar has thrown open a fresh opportunity for exports of Indian tea.

“Kenya has had a bad year with production trailing behind 2014 each month until May. June was relatively a better month with production increasing marginally to 32.20 mkg from 31.94 mkg. However, the overall output in the first half fell to 175.13 mkg from 225.18 mkg,” Rajesh Gupta, compiler of Global Tea Digest, told BusinessLine.

This drop of 50.05 mkg marked a decline of as much as 22.23 per cent.

This is significant because Kenya is the world’s largest exporter of black tea accounting for over a quarter of the global tea exports.

As Kenya produces mostly CTC variety which is similar to the Indian output, there is scope to covert Kenya’s loss into India’s advantage.

“The supply situation in India is favourable with production so far rising by as much as 29.86 mkg over the corresponding period of 2014 to reach 274.93 mkg,” Rajesh Gupta noted.

As of now, Pakistan exerts strong demand in Mombasa auction for all available Kenyan tea. Afghanistan, Kazakhstan and Yemen are other strong bidders there. The UK is selective for some grades. Russia, Egypt, Sudan, Iran and Somalia which have been buying Kenyan teas are now facing the heat of high prices and limiting their offtake.

Kenya has reportedly exported some 40 per cent less tea to its major markets, compared to last calendar, because of lower supplies and concomitant high price.

“The reduced supplies from Kenya so far and the less possibility of the short supplies being made good in the near future brighten the prospects for Indian tea exports. We are aiming at increased shipments to Iran, the UK and rest of European continent where short supply of Kenyan tea is felt”, said D Hegde, former UPASI President and Director of The United Nilgiri Tea Estates Co Ltd, substantial portion of whose production is exported (as Chamraj tea).

“Producer-exporters are expecting a rise in shipments by this month-end or September beginning and a concomitant increase in Indian tea prices by at least 10 per cent”, he disclosed.

Merchant exporters also see bright scope. “Indian exporters are aiming at Egypt and Pakistan where Kenyan teas are in short supply now. We are increasing our procurement and this should play a major role in halting the falling trend in prices of South Indian teas witnessed recently. This will help producers and small growers as well,” Hemant Shah, a leading exporter, opined.

“Indications of increased demand from exporters are seen. Substantial portion of the teas auctioned by us belong to CTC grade manufactured by bought-leaf factories which are suitable in markets consuming Kenyan teas. We are waiting for a major revival in price now,” Ramesh Bhojarajan, Chairman, Coonoor Tea Trade Association, said.

India’s tea exports so far this calendar has been trailing behind the corresponding period of last year.

According to Tea Board, till May, the latest period for which official data is available, India exported 76.09 mkg of tea worth ₹1301.72 crore against 85.07 mkg worth ₹1592.98 crore in January-May 2014.

This marked a decline of 12.41 per cent in volume and 1.15 per cent in value.

COMMENT NOW