Tea prices may rise by Rs 10/kg in new season

For the second year running, the tea season will end with zero stock despite higher retention levels.

The new crop is expected to hit the market by the end of March and the industry is expecting a buoyant beginning for the new season.

An industry representative said prices in the new year were expected to be higher by Rs 8-10 a kg and the big boys of the industry such as Tata Tea were expected to start buying from the beginning of the season. "There are no stocks. So the season will start on a very buoyant note," said a Tata Tea source.

During January-December, the production at 945 million kg was lower than last year's 956 million kg. But lower exports ensured that the availability remained higher at 62 million kg.

According to estimates after factoring in lower exports , imports and production, retention level of tea was around 30 million kg.

However, the excess appears to have been wiped out, giving credence to assumption that domestic consumption was seeing a healthy growth.

So much so that a couple of auctions were likely to be dropped in Kolkata next month and one in Guwahati due to dwindling stocks.

Prices have moved in tandem. An industry source said till about August, prices were higher by Rs 3-4 a kg. However, September saw a drop of Rs 3 a kg and then in November, the market picked up and Assam tea moved up by Rs 9 a kg and Dooars by Rs 6.50. In December, Assam tea rose by Rs 15 a kg over the same period last year while Dooars appreciated by Rs 10.50.

However, the average all-India auction prices for January-December was at Rs 81.23 a kg compared with Rs 79.60 a kg over the same period a year ago.

The industry expects prices to move up significantly.

"As the season ends, there will be zero balance of stocks and exports will also improve on account of the political crisis in Kenya," said an industry source.

The turmoil, which erupted towards the end of December, is persisting and the situation has become very volatile.

"Since the industry moves at a lag, most of the gains will come in the new season and India will definitely stand to gain, being the biggest alternative CTC market," pointed out an industry representative.