Tea prices surge on domestic demand

Domestic tea producers have clocked an average price increase of over Rs 8 per kg at auctions, till November this year, on the back of a surge in domestic consumption.

The Indian Tea Association's data showed that growth rate of domestic consumption is around 3.3 per cent and may reach 4 per cent this year. Last tea season (March-April), local consumption increased by 3.3 per cent to 805 million kg.

Besides, with exports also rising by 3 million kg and an expected stock runout by February-end, the new season may start on a positive note. Exports last season stood at 195 million kg.

Tea Board of India figures showed that tea production would hit a new high this year. Till November 2006, the total domestic output was 909 million kg against 928 million kg for the whole of 2005.

Imports rose to 21.8 million kg till November compared with 15.3 million reported in the last year. Half of the tea imports, primarily from Lanka, are re-exported.

All-India prices are at Rs 66.10 per kg compared with Rs 57.63 last year. Industry sources said for high-quality tea the difference was as high as Rs 9-10 per kg. Besides, there is hardly any carryforward for the year. The sources said the prices are expected to be higher by Rs 9-10 per kg for the March-April period. The prices also may stay firm throughout the year, they added.

The situation in Kenya, a major tea-trading country, will also exert influence on the domestic tea prices. Tea production in Kenya, for the first six months of the year, declined by 19 per cent to 134 million kg from 166 million kg reported during the same period last year.

The decline in production is mainly attributed to the drought in the tea-growing regions during the first quarter of the year.