Low output, good exports to push up tea prices.

Kochi: Declining production and higher exports are likely to push up tea prices in the Indian market. Traders said production is lower in July and is expected to be the same in August as well.

This, coupled with good export demand, especially from Egypt, is pushing up auction prices in India, traders added.

Global tea production in 2010 is estimated to fall short as against the initial estimate of higher production. Erratic weather in Kenya is expected to lower production for the year by almost 20 million kg.

According to statistics of the Tea Board, tea production in India was down by 3.79 million kg in July while the total production during the January-July period was marginally up by 1.2 million kg as compared to the same period of 2009.

The cumulative shortfall for the January-July period for North India is more than 13.7 million kg while production in South Indian plantations have increased by 15 million kg, but still fell short in July.

“The overall drop in production is reflecting in the auction prices. Auction averages in South India have already moved up by Rs 10-12 per kg in the past few weeks,” Pankaj Kapoor, managing director of Harrisons Malayalam Ltd (HML) told FE.

In the first half of the year, poor quality of tea was the major problem and prices declined consequently.

“Most of the inferior quality tea has been cleared and the market should rally with good domestic and export demand,” he said.

Ajith MK of the Cochin Tea Buyers Association said the market in South has already bounced back due to good enquiries from Egypt, which has been so far buying from Kenya and other African countries.

“They are looking for cheaper tea and the prices of the lower grade have moved up a bit helping in higher average rates,” he added.

In the last auction held in Kochi, widespread enquiry was seen in CTC dust with CIS and other traditional buyers seen very active.

Lower production in Kenya helped in higher exports for South Indian tea, which produces primarily CTC type, which is consumed in countries like Egypt and Pakistan. Higher production in Kenya and Sri Lanka during the first quarter of the year saw global tea prices easing a bit. The unit realisation of tea exports for the current year has been lower at Rs 129.92 per kg as against Rs 136.19 per...

Source : financialexpress.com