Oversupply fears likely to hit Indian tea exports

Tea exports from India, the worlds second-biggest producer, may shrivel this year as a bumper crop in Kenya raises the risk of oversupply.

Shipments could drop by 8 million to 10 million kilograms in the year through March from a record of 256.57 million in 2017-18 as Kenya’s output is likely to rise by as much as 60 million kilograms -- a large volume for the world market to absorb, said Azam Monem, director at Mcleod Russel India Ltd.

Once Kenya produces that volume and their prices come down, it will become very difficult for India to compete, Monem said in an interview on Monday. Kenya delivers good quality tea at a low price, while India’s tea in that category is quite expensive in relative terms, he added.

Weaker exports from India may hurt domestic producers, which have been suffering from oversupply, and local tea prices will probably remain stagnant or increase only marginally this year.

Lower production

Tea output in India could drop 5 to 10 percent this year because of poor weather in some of the major growing areas, Monem said. Production climbed almost 6 percent from a year earlier to a record 1.33 billion kilograms in 2017-18, according to Tea Board India data.

India may export more than 30 million kilograms to Iran in 2019, from about 28 million kilograms a year earlier, as demand for good quality tea is on the rise, he said.

Mcleod Russel, which traces its origins back to a partnership formed by two Englishmen in 1869 and now owns about 28,000 hectares of plantations, expects its production in India to drop to 55 million kilograms from 87 million kilograms in 2017-18 as it sold some gardens this year. The company is set to produce a further 30 million kilograms from overseas plantations in places such as Vietnam, Rwanda and Uganda.

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