Tea prices to stay firm as global output slips

Kochi, Sept. 19: Tea prices are likely to remain firm as production shortfalls loom large before Indian and global tea markets.

Persistent rains over the tea growing regions of South India during August and September is likely to adversely impact the crop. Though the rains seem to have abated by the third week of September, sources said, much of the damage has been done.

The surfeit production from North India made up for the sharp production shortfalls from South, said Mr R. Sanjith, Head of Commodities, United Planters Association of Southern India (UPASI).

Production affected

The incessant rains had affected plucking operations in South India. But it does not seem likely that the increased North Indian production, which had helped to buttress the slippages from South India, is likely to continue into the next few months.

Along with India, production shortfalls in Kenya, Sri Lanka and Uganda are likely to drag global production lower.

Kenya and Uganda

Global production had dipped by 11 million kg by July on account of huge shortfall from Kenya and Uganda. A dip in tea production from India could further tilt the delicate demand-supply balance in the global markets.

Indian production was higher by close to one million kg while Kenya reported a huge shortfall of 31 million kg. Ugandan production had slipped by over 5 million kg. Latest reports also indicate that persistent rains have begun to affect the tea crop from Sri Lanka. The island nation's tea production was up by close two million till July 2011. Sources in the trade said that all that could now change.


Tea exports from big producing countries, excluding China and Sri Lanka, had dipped during the current year. Indian exports witnessed the steepest decline on 17.5 million kg till July 2011, while Uganda recorded an export shortfall of six million kg and Kenya close to five million kg. The decreased tea arrivals in the coming months could mean that the prices are likely to remain firm.

Growth in China

While several countries recorded fall in exports, China reported brisk growth by close to 14 million kg by June 2011. Kenya was the biggest tea exporter in the world last year, accounting for over 25 per cent of the global tea trade, followed by China and Sri Lanka with over 17 per cent and with India with over 11 per cent.

After the sharp rise in tea prices during 2009, there was a dip in 2010 and the prices are continuing to rule at last year's levels. The emerging trends in global prices could become evident depending on the world production trends in the coming months.

Source: Business Line