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Tea deficit rises with season progress, prices shoot up

Source : BUSINESS_STANDARD
Last Updated: Wed, Jun 27, 2012 19:55 hrs

With a slump in output and poor weather, the tea industry is staring at a cumulative deficit of 160 million kg. The season started with a pipeline deficit of 130 million kg. The shortfall over January to May, sector representatives indicate, was an additional 30 million kg.

Consumption in India grows at three per cent yearly. Lower output and increasing domestic consumption over the past three to four years resulted in a cumulative deficit of 130 million kg. The latest figures from the Indian Tea Association (ITA) indicate that till April, the output across India was lower by 24 million kg, with North India (Assam and Bengal) accounting for 15.8 million kg.

“North India has been losing crop since November. While that has reflected in higher prices, it also means we lost crop in the quality period,” said Aditya Khaitan, the India managing director of McLeod Russel, the world’s largest bulk tea producer.

There is segmentation of the tea market in two tiers, with the good ones fetching much higher prices and medium teas getting relatively less. Top-level teas are Rs 250-290 a kg, higher this year by Rs 30-40 a kg. Medium teas are Rs 130-250 a kg, higher by Rs 10-15 a kg.

The high prices have reflected in packet tea, too. “Regional packet tea companies have been forced to raise prices. We increased prices by Rs 12 a kg in May and by the same amount in June. We cannot go on increasing prices; we have to keep our customers’ interests in mind,” said Piyush Desai, chairman of the Wagh Bakri tea group.

The trend in pricing and supply is not restricted to India. According to ITA officials, the crop was lower by 64 million kg globally till April/May. In May, Sri Lanka’s output was down 8.4 per cent, while in the first five months, the decline was 3.8 per cent. Kenya’s tea production during January-April was lower by 22 per cent. India, Sri Lanka and Kenya account for 70 per cent of global black tea output.

However, the domestic sector hopes that over the next three months, supply would improve, resulting in prices coming off these highs. However, the increase expected in the coming months is unlikely to make up for the crop loss in the first half of the year.




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