Tea prices higher as domestic market increases

Despite a higher crop and lower exports this year, domestic tea prices have continued to hold firm. One of the prime reasons for firm price trends was a spurt in domestic demand, Mr Peter Mathias, Chairman of the UPASI Tea Committee said.

The poorer global tea production, catalyzed by adverse weather patterns, has not helped prop up domestic prices as exports continue to reign low. Latest reports indicate that Kenyan crop continues to reign lower by 31.3 million kg, Indonesia by 8.5 million kg, Uganda by 5.3 million kg and South India by 4.3 million kg.

In contrast, North India was one of the few regions which registered an increase in tea production during the current year. While South India recorded a shortfall in tea production, North India recorded a growth of 38 million kg over last year. This has enabled the country's production to grow by 33.7 million kg during January-August.

South Indian tea production till September is also likely to be lower since it was hampered by consistent rains and lower sunshine days, Mr N. Sanjith, Head of Commodities of the United Planters Association of Southern India (UPASI), said. Heavy rains in the first three weeks of last month hampered plucking operations.

Although the quantum of exports has fallen, the value realization has been looking up. During January-August, tea exports fell by 14.9 million kg, of which North India contributed 11.8 million kg even as South Indian exports fell by 3.1 million kg.

Tea export prices have recovered the most. Average tea export prices were up by Rs 14.19 a kg over last year's Rs 144.77 a kg. The prime reason for lower exports was disturbances in some of India's principal export destinations. Lower exports to Pakistan and Iran during the first half of the year also contributed to the fall. However, sources in UPASI said the association expected the export momentum to pick up in the coming months.

In the domestic market, average price realisation of South Indian tea till the middle of September this year was higher by Rs 2.53 a kg over last year's Rs 69.27 a kg. Orthodox teas continued to fetch a handsome premium over CTC grades at South Indian auctions.

Source: Business line