Tea industry faces crop loss for second year in a row on poor rainfall

Industry says crop loss is irreversible as first flush is gone, second is partially impacted

Last year, the tea industry lost much of its premium tea to the Covid-19 lockdown. This year, poor rainfall in North India has hit hard.

The production between March and May is is expected to be lower than the 2019 output by 80-90 million kg, said Vivek Goenka, chairman, Indian Tea Association (ITA).

The crop loss is irreversible, said Atul Asthana, managing director and chief executive officer, Goodricke Group. “The first flush is gone and the second flush is partially impacted,” he added.

The first flush or the first crop is harvested early March through mid-April and the second flush from May to June. Both are premium quality teas.

But the crop in North India was down in March by around 21 per cent. In April, it is estimated to have declined by around 35 per cent and May, too, is likely to see a significant drop.

“Normally, between January and April, Assam and Dooars would have had 15 inches of rainfall. This time, rains have just started,” said Rudra Chatterjee, managing director, Luxmi Tea.

The industry is seeing a repeat of last year when it lost the first flush due to the nationwide lockdown to contain the COVID-19 pandemic. Even when it resumed operations, about a week to 10 days was lost in the upkeep.

According to Tea Board figures, production in 2020 was lower by 132.55 million kg led by North India, which saw a drop of 135.61 million kg. But the lower crop estimates by the industry in the initial months of this year is in comparison to 2019 production figures.

The shortage has kept prices elevated at the auctions. The average price up to April is Rs 173.82 a kg for North India compared to Rs 114.79 last year.

An Icra report earlier this month said that prices in recent auctions in the new fiscal remained firm owing to lower pipeline stocks.

“While it would be too early to comment on the exact level of tea prices in FY2022, the overall shortages in CY2020 are expected to remain at least till around the peak production months of August / September 2021, thus supporting the prices. For the full year, however, prices are likely to witness moderation, once the production returns to normal in the new season,” it said.

In 2020, the industry saw a huge spike in prices as in-home consumption rose due to lockdowns and people working from home. While production dropped, consumption actually rose, which led to an unprecedented increase in prices.

Consumption in India is highly skewed towards at-home, which varies from 70 per cent to 96 per cent. Out-of-home is mainly at the workplace. The trend in at-home consumption, seen last year, was global with people working remotely during the pandemic.