Tea price surge fuels hope of turn around

Siliguri: Frantic end-of-season sales have taken tea prices to a new high in north Bengal, making this year the best since the industry went into recession about six years ago.

“It’s boom time with tea prices going up significantly,” said S.K. Saria, the chairman of Siliguri Tea Auction Centre (Stac). “Although the benchmark set by the golden period of the 90s is still far away (see chart), this year’s is a remarkable gain compared to that of last year, which itself was better than the preceding year. The industry seems to have made a U-turn and if the trend carries on for the next few years, the tea sector will be able to regain its lost glory.”

The average price during Sale 50 held on December 20 was Rs 74.98 per kg, while that of Sale 49 held on December 13 was Rs 73.24, according to auction sources.

“The average price of Sale 50 last year was Rs 62.50,” said Ravi Agarwal, a former chairman of Stac and a member of Siliguri Tea Traders Association. “That is a gain of more than Rs 12.”

According to the latest figures, the average auction price this year — up to December 20 — is Rs 67.44 per kg. The corresponding figure in 2006 was Rs 66.60 and in 2005 Rs 59.29.

“This year’s average price is the best ever since the recession set in,” said P.K. Bhattacharya, the secretary of the Dooars Branch of Indian Tea Association. “This end-of-season fillip will help keep the prices high until the middle of next year at least.”

Industry watchers said the price boom was driven by a combination of several factors.

“There was no tea in the pipeline,” Bhattacharya said. “In addition, there was a drop in the overall crop production by about 20 million kg. The shortfall in supply had an obvious effect on prices.”

The trend was also affected because several CTC manufacturers took to making orthodox teas, Agarwal said. “This year, more than 20 million kg tea was converted into the orthodox variety, which always fetches good prices. The shortfall in CTC helped boost its prices,” added Agarwal.

“Major buyers like Unilever who were silent for most part of the year, were at their active best as the end approached,” Saria said. “The competition from major buyers firmed up the prices further.”

However, all stakeholders of the industry agreed that it would be a challenge to sustain the trend.

“To take the industry forward, we have to ensure that we do not compromise on the quality of tea in our bid to sustain the boom,” Saria said.

“Often there is a tendency to compromise on quality to increase production and meet the increasing demands. If we give in to market pressure in this way, we will get sucked up into recession again,” the Stac chairman added.

Source: The Telegraph