Depletion in stock, setback in production in the primary cropping months and higher internal and export demands were defining trends of the tea industry in 2010. Prices have been high during the year and are expected to remain so in 2011.
The season has ended with an all-India drop of 25 million kg in output, much of it being accounted for by Assam and North Bengal. Factoring in an already the negative carry-forward would add up to a deficit close to 100 million kg. Unsurprisingly, prices were higher by around 10 per cent over last year.
Profitability was affected, but “some of it was recovered through higher prices, even though we lost out on the quality period,” said Aditya Khaitan, managing director of McLeod Russel (India), the world’s largest bulk tea producer.
Globally, after an unprecedented shortfall in Africa and Sri Lanka in 2009, the current year clocked in an excess of more than 100 million kg. Yet, prices remained firm. India, Kenya and Sri Lanka account for around 80 per cent of the world’s black tea production.
E-auction in India, aggressively taken up by the Tea Board of India, gained understanding. The move to the electronic auction system was in consonance with the broader objective of initiating fundamental changes in the system. These included improving the process of price discovery, enhancing efficiency and addressing the high transaction and time costs.
Dust and CTC, the bulk of India’s 950 million kg production, are now being routed through e-auction, while the orthodox variety and tea waste have been kept out.
Indications are, the next season will start on a good note. The sector has to cater to huge domestic consumption, steadily increasing around three per cent yearly, though per-head consumption is still below 750 gm.
Factoring in the pipeline deficit and the rising consumption necessarily points to better prices next year.
Unless, of course, the weather gods decide to play truant.
