Drought in Kenya to boost Indian tea prices

Kenyan CTC prices rose by 30% in January to $3.31 a kg

Indian CTC tea exports can look forward to a healthy start in the beginning of the year as the Mombasa auction prices in Kenya, backed by a drought-like situation in the country, have started to pull up international prices of this tea variant.

Kenyan tea prices for the nine months ending September 30, 2016, had fallen to $2.3 per kg as against $2.7 per kg as the production increased because of optimal rains. However, according to data from Africa Tea Brokers, the Kenyan CTC auction prices rose by 30 per cent in the January auctions to $3.31 a kg, while the average prices from April 2016 to January 2017 rose 13.5 per cent to $3.04. There has been a drought spell in Kenya in the past few months.

"Mombasa auction prices have a direct correlation with the Indian auction prices as far as CTC is concerned. If there is a crop shortage in Kenya and Indian crop is normal, then prices in the Indian auctions will show an upward trend," Kalyan Sundaram, secretary of Calcutta Tea Traders Association said.

According to McLeod Russel, the world’s largest tea producer, Kenya has reported very dry and hot conditions since the beginning of 2017, which might have a major impact on the production for the first quarter.

Industry officials are of the opinion that on account of this situation, the Kenyan crop will be lower this year and this will pull up global CTC prices; a situation from which India, which exports around 200 mkg of tea, stands to gain.

"In case tea prices are high in the international market, India stands to benefit from the CTC auctions," Arun Thekedath, chairman of the Assam Tea Planters Association, said.

The Indian tea industry is expecting the very dry and hot conditions in Kenya to continue at least till June, which is likely to pull up global CTC prices.

However, while Kenya registered a good start to the new year, Indian auction prices remained stagnant. The January 7 auction of CTC teas fetched an average price of Rs 125.48 per Kg, which thereafter dipped to Rs 115.06. Prices for these auctions in January last year stood at Rs 128.38 and Rs 114.56, respectively.

According to tea trading firm Van Rees, of the 21,122,955 kg of tea offered in the Mombasa auctions, 89 per cent was sold and the prices are likely to remain buoyant as 3,49,337 more packages will be put up for sale.