Dry weather and high cumulative inventory deficit have ensured better opening prices at tea auctions this year.
Good quality tea was quoted higher by Rs 60-80 a kg this year. Last year, good quality Assam tea was quoted at Rs 150-180 a kg and went up to Rs 200 a kg. This year, prices are at Rs 220-280 a kg and may even go up to Rs 300 a kg.
“The new season tea has just come in. We have sold it privately at prices higher by Rs 50-60 a kg,” said Aditya Khaitan, managing director of McLeod Russel India, the world’s largest bulk producer.
“Dry weather in the northeast, no carryover stock and a high cumulative deficit aided in getting high opening prices,” said Azam Monem, former chairman, Calcutta Tea Traders Association.
While there was shortage in the system, the dry weather resulted in less output at the beginning of the season.
According to the Indian Tea Association, member-companies’ output in January was lower by almost 30 per cent and in February, too, the crop scenario was not good.
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The cumulative deficit for the year was 50 million kg. The pipeline stock, which wasn’t much in the first place, was exhausted by February-end. Though production was a robust 988 million kg, higher by 2.3 per cent, consumption increased 3-3.5 per cent.
More, global tea production till December last year was also lower than the previous year. Excluding China, a green tea producer, output was 26 million kg less. Till December, Kenya, world’s leading exporter, had lost five per cent of output.
Tea prices in Kenya are also holding out, with the sector hit by harsh weather conditions early in the year. Indian tea companies are expecting good exports compared to last year, when these dipped about three per cent. A strong export market, a huge deficit and increasing consumption in the domestic market is expected to keep tea prices high.
“Normally, the crop picks up in the later half of the year. Hoping that we get better rain in the coming months, prices will stabilise at a level higher by Rs 25-30 a kg over the corresponding period,” Khaitan said.
Packeteers are not particularly worried. “For packet tea companies to review rates, high prices will have to be sustained. Normally, packet tea companies don’t buy first flush tea and we cannot revise prices every now and then,” an official from a packet tea company said. All packet tea companies had revised prices a year ago.