Tea prices in India have declined by Rs 50-70 a kg with the drop being sharp last month as crop production has picked up since September across the country.
“Prices have dropped sharply during the last 3-4 auctions despite overall production being lower. Prices have dropped to levels seen last November now,” said R Sanjith Nair, Secretary, United Planters Association of Southern India.
According to Global Tea Brokers, tea production during January-October was 1.03 billion kg, as against 1.18 billion kg during the year-ago period. The 12.80 percent lower production of Indian tea has also dragged global tea output by near 5 percent. This had initially buoyed market sentiments and prices.
However, the decline in prices now comes after prices gained between April and September this year on lower production and higher domestic consumption.
“CTC (crushed tea curl) leaf tea prices have declined to levels of Rs 95-120 a kg from higher levels seen in September. Leaf prices had topped Rs 200 in South India auctions then,” said Sriram Narayanswamy, President of auction firm Global Tea Brokers.
“It is not only lower prices, but over 30 percent of teas on offer have gone unsold at some auctions in the last couple of auctions,” said Nair.
Global Tea Brokers data showed that at the auctions last week, 30 percent of tea went unsold at Kolkata and 46 percent of the offerings found no takers at Coimbatore.
During the week ended November 21, about 55 percent of teas offered at Coonoor and Coimbatore auctions were unsold.
Sriram said prices witnessed a plunge since the auctions for the week ended October 17. The average price fetched at Coimbatore and Coonoor auctions for CTC leaf and dust dropped from Rs 146.26 a kg to Rs 111.60.
In the North India auctions at Kolkata, Siliguri, and Guwahati, the average price dropped to Rs 166.53 a kg from Rs 228.68.
This is against tea prices touching almost Rs 300 at Guwahati in the last week of August and Rs 200 in the first week of September at Coonoor.
According to Tea Board data, all India average tea prices hit the year's highest during the week ended September 5 at Rs 262.91 a kg. By last week, the average had dipped to Rs 165.37 a kg.
During the weekend December 7 last year, the all India average price was Rs 136.99 a kg.
“The drop has been more in the case of leaf as demand, especially from North India, is lacking. Dust prices are better since there is more demand for it in South India,” said Sriram.
Bijoy Kumar Chakraborthy, President, Confederation of Indian Small Tea Growers Association, said the drop in prices since the week ended October 17 has left small tea growers in the lurch.
He said prices had begun to fall at a time when growers were recovering after undergoing a harrowing time. “We lost the first two flushes and had to prune our bushes twice this year as a result of which we lost 18-20 percent of our crop,” he said.
A relief for the growers was that they got good prices from June to September before prices began to head south. “Green leaf produced by small growers is being sold at Rs 13-15 a kg now against the earlier Rs 16-18,” Chakraborthy said.
At one point of time, growers in South India fetched as high as Rs 30 a kg against the normal Rs 15 for green leaf, which is processed into CTC or orthodox leaf or dust tea in factories.
“When dust prices rule higher, factories producing tea switch over to making produce that is in demand,” said Sriram.
When leaf prices were good, the ratio of leaf: dust production, for example, would have been 80:20. Now, when the dust prices are good, the ratio would have been reversed.
What triggered the drop in prices was a two million kg rise in production September at 187.90 million kg compared with 185.80 million kg in the year-ago period. Production in October was lower by one million kg but it is estimated to have recovered this month.
This year, tea production was badly hit in the northern growing regions of Assam and West Bengal, where the production dropped to 852.92 million kg during January-October versus 1,005.16 million kg a year ago. In South India, the output increased by 0.64 percent to 179.76 million kg during the period.
The lower production also affected exports, which dropped to 151.13 million kg during January-September this year compared with 186.4 million kg during the year-ago period.
Despite domestic prices surging at the auctions, the per unit price of exports did not see any huge rise. The per kg unit price fetched for tea export during January-September was Rs 234.74 versus Rs 229.43 in the year-ago period.
India couldn’t afford to raise export prices as it would be outpriced by countries such as Kenya, which offer their tea at a far more competitive price. In fact, Kenya’s tea production is up 32.60 percent this year compared with the decline in India.
With the Tea Board notifying that tea production in West Bengal and Assam will be halted from the middle of this month until mid-February due to winter, prices will likely stabilise.
Source:-moneycontrol.com