S. India tea prices surge on global shortage

Kochi, August 17:

With a persisting shortage in the global market, both Indian and global tea prices have been firming up. In South India, average price realisations have been up during January-June 2011, with the number going up to Rs 71.17 a kg.

Mr Peter Mathias, Chairman, UPASI Tea Committee said that it was interesting to note that despite a decline in production in South India, quantity sold in auction centres was higher by 2.3 million kg (mkg) and the supply in the pipeline would be relatively dry. Given the demand supply gap, he expected the prices to remain buoyant.

In addition, the quantity on offer at the orthodox category has come down very sharply and increasing export demand for orthodox teas is expected to have a very positive effect on prices. This comes in the backdrop of a lower Kenyan crop by 34.5 mkg which has led to a shortage in supply during the first six months of the current year. Although this was partially compensated by higher North Indian crop of 23.9 mkg, the global deficit stood at 20.6 mkg.
Less exports

South Indian crop, meanwhile, was down by 4.6 mkg, the fourth year in a row of lower South Indian production. The increase in price realisation from South India was despite lower exports of 9.7 mkg. The lower export from India in general, and South India in particular, was on account of disturbance in West Asia and North Africa region. As the situation in this region is improving, exports are poised to look up, taking up the prices along with it.
Tight supply

A close scrutiny on auction offering at major auction centres such as Mombasa and Colombo suggest that quantity offered at the forthcoming auctions are bound to be very low, suggesting a tighter supply position in the short run. The Kenyan offering at Mombasa Auction has declined from 6.5 mkg in the 23rd sale to around 4.1 mkg in the 31st sale.

Similarly, in Sri Lanka also the quantity offered has shown marginal decline, falling below the 7-mkg mark. With the Iran payment problem being sorted at least partially, it appears that exports are bound to pick up and South Indian tea sector looks forward to a very positive second half.

The Hindu