Skiffing, unfavourable weather conditions to shave 50% off second flush teas this year

The tea industry in North India is likely to lose close to 50 per cent of its prized second flush teas this year due to the unfavourable weather conditions and skiffing undertaken to support growth of the bush.

Second flush is the crop, which is typically harvested between May 15 and June 15.

Skiffing is the light pruning of tea to limit the top growth.

As per the data available with Tea Board of India, the North Indian tea estates had produced close to 112.8 million kg (mkg) of crop in May 2019. The estimated production in May is likely to be 50 per cent lower at around 55 mkg this year compared to the same period last year.

North Indian tea estates already lost close to 65 per cent of its first flush crop as plucking activities came to a standstill between March 25 and April 13 on account of the countrywide lockdown due to the Covid-19 pandemic. It is estimated that the crop loss is to the tune of around 80 mkg till April this year. Production was close to 129.86 mkg last year in March and April (2019) put together.

“The second flush is massively down. We are expecting 50 per cent lower crop in May this year compared with the same period last year, and this is due to the skiffing that happened in April and the slow growth due to the weather conditions,” Vivek Goenka, Chairman, Indian Tea Association, told BusinessLine .

Coupled with the crop loss in March and April, North India is estimated to produce close to 140-150 mkg lesser crop till May this year compared to the same period last year. It would be difficult to make up for the lost crop in June and the industry is likely to incur losses of about ₹2,700 crore.

“We are in constant touch with the TRA (Tea Research Association) since this is a new phenomenon and is something we have never experienced in our lives before, so it is difficult to understand the behaviour of the bush. But TRA has been clear that it is difficult to make up for the loss,” he said.

Cost push

The industry was anticipating crop loss to be in the range of 10-20 per cent. However, a 50 per cent shortfall in May would cost the industry dear.

A 10 per cent loss in crop would push up the cost of production by 15-20 per cent. Though the new season teas are fetching close to ₹20-30 a kg higher price compared to the same period last year, this would not be good enough to offset the increased cost of production.

“The current price rise is not good enough to offset the increased cost of production but it will help narrow down our losses. We do not see this shortfall being offset in June also. So, we expect prices to remain firm at least until July,” said DP Maheshwari, MD, Jay Shree Tea.

The Indian tea industry has already been reeling under higher costs outstripping realisations. Most companies are cash starved and have been facing issues on the profitability front.

ITA has also made several representations to the Commerce Ministry to support the industry with some sort of financial aid package which could include interest moratorium and moratorium on working capital.

“The current moratorium will only help us for three months but after that we will again fall in that trap because cash flow is an issue. There is nothing for the tea industry in the packages so far announced by the government,” Goenka said.

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