Tea producers see higher auction prices

Rain in Assam and depleting stocks fuel the expectation of a better price

Tea producers across the gardens in Assam, north Bengal and the Niligiris are seemingly upbeat about the forthcoming auction prices beginning April 1 this year as on an average, the prices are poised to rise by Rs 25-30 a kg.

Good rains in the Assam valley, backed by a recovering stage in crop production and depleting stocks, are the primary reasons for the tea gardens' supposed cheer.

As per industry estimates, even under the worse case scenario, April auctions can fetch a minimum of Rs. 130 a kg on an average for the CTC (crush, tear, curl) leaves in north India while for south, the same leaves may fetch Rs. 117 per kg.

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"The pipeline stocks now are practically dry and auctions in Kolkata and Guwahati are getting cancelled because of this. It is indeed a good sign as the auctions, begining April 1 will fetch higher prices", vice chairman of Indian Tea Association, Azam Monem told Business Standard.

This year so far, however, prices fell from Rs 128.38 a kg in January on an all-India average basis to Rs 100.20 in mid-March.

Industry officials said the price fall is primarily on account of low supply in the auctions and the expected new stock which will hit the market in the begining of the next financial year.

Neverthless, last month, Kangra, Assam and other CTCs reamined flat at Rs 143 a kg while the south Indian CTCs rose by nearly Rs. 4 a kg to touch Rs 84.52.

"There is optimism in the market now after prices fell in February. Nevertheless, throughout in the auctions, this year (2015-16) has been better than the last one," V Shankar, who offers consultancy services in the tea industry, said.

Average auction prices for CTC leaves in north India surged by 5.9 per cent at Rs 122.13 a kg during January-February this year while in the auction markets in the south, the increase hopped by 28.3 per cent at Rs 107.36 a kilo.

"The rains in the Assam valley has been good and this will drive growth in the Assam CTC prices. The demand for tea is also picking up as the auction quantity is getting sold at a much faster rate now," Monem added.

Assam CTCs on an average has fetched Rs 158 a kg in the 2015-16 auctions as against Rs 155 a kg in the 2014-15 auctions. The Assam orthodox prices, however, rose significantly in the ongoing fiscal year at Rs 219 a kilo when compared to the average price of Rs 197 per kg in 2014-15.

Tea stocks on the exchange reacted positively to the trend surging by 11 per cent in the day's trade.