Tea likely to fetch higher prices in 2019 auctions on output shortfall

According to the Indian Tea Association, production was down by 13 million kg during January-October last year

In face of an expected 50 million kg (mn kg) shortfall of tea, producing companies are looking at a good opening in this year’s auctions.
 
After a three-month hiatus, the first flush (first plucking) of tea starts to hit the auction centres in early March. During the first flush, 120-130 mn kg is produced in north India (the entire country apart from the southern region).
 
According to the Indian Tea Association (ITA), the apex body for north Indian tea, production was down by 13 mn kg during January-October last year; November-December is also expected to register another 12 mn kg dip, owing to climatic changes in Assam and north Bengal. Coupled with this, the Tea Board’s crackdown on ‘bad tea’ (by not allowing plucking during winter) is expected to result in another shortfall of 25-30 mn kg.
 
“These factors together will lead to an expected shortfall of 50-60 mn kg when auction resumes,” said Vivek Goenka, chairman at ITA.
 
Sources among brokers say consumption is also expected to improve, primarily led by a long winter, the general election and the Ardh Kumbh Mela. “It is usually noticed that when there is a prolonged congregation like some fair or meetings or rallies, tea consumption increases. This year, we have two big events to drive higher demand — the 2019 Lok Sabha election and the 55-day Ardh Kumbh,” a leading broker said.
 
After consultation with the industry, the Tea Board has mandated annual closure of gardens in the Assam-Bengal-Cachar region, so that none can be produced during the winter season. And, for small growers to stop plucking during the winter. No estate factory or bought leaf factory (which often processes the harvest from small growers) can make any form of tea during the winter period. Although the larger estates usually close down during winter, a small section of growers from the Assam-Bengal belt traditionally continued to produce. Unlike South India, where production is perennial, north Indian gardens traditionally observe closure during winter, so that the bushes are rested. The plucking during winter is of inferior quality tea, which is held to damage the bushes and also depress the price during auctions. Hence the ban.
 
“This is not only going to improve the quality when plucking resumes but will also help flush out bad tea from the market,” said Atul Asthana, managing director at the Camellia Plc-owned Goodricke Group.  “We cannot say by how much prices can improve,” said A K Ray, chairman at the Tea Board.
 
The Board has threatened punitive steps under the Tea (Marketing) Control Order, 2003 against those caught harvesting or processing tea during the winter. The threat has begun working. In Kolkata, the largest auction centre in the country, average prices towards the end of December were up by nearly five per cent. Lower grade prices are up 10-15 per cent in the Assam-Bengal belt.
 
Better grade produce from the Halmari estate in Assam had fetched Rs 342 a kilo and the average for good grade teas from the state had hovered around Rs 260 a kilo, an unusual price during December.
 
During the first flush, around 120-130 mn kg of tea is produced in north India.