Agri Business

Tea prices may see some buoyancy on flat output, rising export demand

Shobha Roy Kolkata | Updated on January 09, 2018 Published on August 07, 2017

BL08_Tea_estate_Srilanka



India’s tea production is likely to remain flat or witness a marginal dip in calendar year 2017 as compared to last year. The country produced 1,267.36 million kg (mkg) of tea in 2016, according to data available with the Tea Board of India.

All India production in June came down by nearly 3 per cent to 143.02 mkg. The drop was mainly on account of a lower crop in North India, which was down by nearly 5 per cent at 116.4 mkg.

Overall tea production in the January-June period of the current calendar year, however, increased by 4.51 per cent to 443.15 mkg over 2016 period.

According to industry experts, while it was a bumper crop in April and May, the flood in North India brought down production in June.

While crop production in July and August this year could be similar to last year, it could come down in September and November, the peak producing months for the crop. Nearly 65 per cent of the country’s tea is produced between July and November.

“The production usually goes up or drops between September and November. This year Puja sets in earlier in September, which could herald an early winter. If that happens then the crop could be marginally lower than last year,” said Azam Monem, Chairman, Indian Tea Association.

According to CS Bedi, the flood in Assam has affected the crop. The Tea Board data suggests a 10 per cent drop in crop in the region for June. “Tea leaves require normal sunshine for growth. If this continues then pest attacks could drag down production to some extent,” he said.

Assam, Darjeeling weigh

In calendar year 2016, Assam produced 669.52 mkg of tea, nearly 63 per cent of North India’s tea production (1054.51 mkg). During the January-June 2017 period, production of Assam tea was lower by nearly 3 per cent at 195.65 mkg (201.33 mkg in the same period last year).

With total output of 8.13 mkg, Darjeeling accounted for less than 1 per cent of the entire North India production. Unrest in hills has adversely affected the second flush teas, which account for almost 25 per cent of the total production. Output plunged 89 per cent to 0.14 mkg in June (1.33 mkg in June 2016).

According to J Kalyan Sundaram, secretary general, CTTA, there may soon be no Darjeeling tea on offer at the tea auctions. In sale 31, the last auction, only around 10,783 kg of tea was sold, as compared to 88,314 kg a year ago. “Actual arrivals are dropping. No fresh arrival is happening,” he said.

Lower supply, better prices

The marginal drop in overall supply could help bring about some buoyancy in prices, which has not been in tandem with the demand-supply situation, experts said.

While prices have remained largely stagnant in the last three to four years, costs have gone up by nearly 8-10 per cent annually, exerting pressure on the profitability of bulk tea producers in recent years.

Higher exports

Meanwhile, demand for Indian tea in global markets has risen, with Kenya and Sri Lanka, the major exporters of bulk tea, witnessing erratic cropping patterns this year, said a report put out by ICRA.

While India exports only around 20 per cent of the tea produced domestically, it plays an important role in maintaining the balance between demand and supply and price levels.

“With the kind of shortage in Kenya, we expect exports of Indian tea to be better this year. This in turn will help improve prices,” said Jagjeet Kandal, Managing Director, Amalgamated Plantations.

Export volumes during the first four months of 2017 increased by around 5.7 per cent and realisations also witnessed a modest increase of 5.6 per cent, ICRA said.

“While the export performance in recent months is encouraging, the full-year performance will be determined by the volumes between June to August, when most of the export contracts are finalised,” said Kaushik Das, Vice President and Sector Head, Corporate Sector Ratings, ICRA.

“With the likelihood of lower tea production outside India in CY2017 and given the trend in international prices, the prospects for exports from India appear favourable,” he added.

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Published on August 07, 2017
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