Tea prices in the new season are at a decade's high on fear of global shortage. Both the leading tea producers — India and Sri Lanka — are facing a fall in tea output. A 10 per cent crop loss in March has led prices of Indian teas to climb.
According to industry representatives, if the dry spell continues, then April could see a similar drop in output. Coupled with a global shortage of carryover stocks, prices of Indian teas are likely to move up further in the coming months.
Aditya Khaitan, chairman, Indian Tea Association (ITA), said that the new teas had opened at Rs 20-25 per kg higher than last year, in line with the expectations given the shortage.
Dooars teas were selling at Rs 125-160 per kg, higher by Rs 20-25 while the small quantity of Assam teas that have made their way into the market were at Rs 140-150 per kg, again higher by Rs 20-25.
But this is just the beginning. The season has started with a shortage, and to top it all, the March crop was down by 20-30 per cent in Assam due to the dry spell.
The arrival of new teas was delayed by about two weeks with an unusual dry spell around the tea growing areas of Dooars in north Bengal and the northern bank of Upper Assam.
Basudeb Banerjee, chairman, Tea Board of India, said, “It looks like a shortage right at the beginning of the year.”
Though the Tea Board would review estimates for the year, but was unlikely to revise projections.
On the global shortage, Banerjee added, “For Sri Lanka, it’s a 10-year low.”
Going forward, the industry expects prices to exceed expectations. Khaitan said, “We expected only a price increase of Rs 25-30 per kg, but prices will be better. If the weather in April is as dry as now, then the shortage will increase.”
According to projections for 2008, production is likely to be around 962 million kg, exports at 200 million kg, imports at 20 million kg and consumption at 825 million kg. In the beginning of the last year, there was a shortage of six million kg.
However, if production is lower than the projection and exports increase on the back of a global pipeline shortage, then the shortage could increase further, pushing up prices.
Azam Monem, former chairman, Calcutta Tea Traders Association, the only licensed and official organiser of public tea auctions in Kolkata, said that the March crop, which was normally around 31 million kg, would be down at 28 million kg and indications were that the April crop would also be down by 10 per cent.
Production in April last year was a record with the crop at 55 million kg, compared to a normal 40-42 million kg.
Monem said it implied that the second flush from May would be even stronger.
The season started with a deficit of around 25 million kg compared to a shortfall of six million kg in the previous year.
