Higher output cools North tea prices

Tea producers in North India are a worried lot. Higher production of the crop in February, March, and April has sent prices down. While average prices of CTC in Sale 22, which concluded last week, was down by around 2 percent over last year; that of dust was down by about 11 percent.

While the average prices of CTC in Sale 22 were ₹143.83 a kg, as compared to ₹146.14 a kg last year; that of dust was ₹146.26 a kg against ₹164.53 a kg.

Output surge
As per data available on the Tea Board of India website, production of tea by both big growers and small tea growers in North India in February 2019 was close to 4.64 million kg (mkg), nearly 150 percent higher than the 1.85 mkg recorded in 2018. Production of tea in March 2019 was around 59.49 mkg (46.72 mkg), while that in April 2019 was close to 70.37 mkg (65.46 mkg).

According to Sujit Patra, Secretary, Indian Tea Association, the industry harvested a bumper crop in February, March, and April. This had an impact on prices. However, the kind of price decline that has been witnessed is rather “unexpected”.

In fact, the industry had expected the first flush crop, which usually comes in by April, to open on a firm note following the Tea Board directive of curtailment in production beyond December 10. This was done primarily to reduce the quantity of sub-standard teas, which usually get into the system when plucking activities are carried on till end December, thereby exerting pressure on prices.

“We have had a pretty good first flush crop and that has affected the sentiments of buyers so CTC prices are down. However, orthodox prices are higher as teas are moving to Iran,” Jagjeet Kandal, Managing Director, Amalgamated Plantations, told BusinessLine. Orthodox prices were higher by about 16 percent at ₹242.74 a kg in Sale 22 this year, as compared to ₹212.17 a kg last year.

Banking on the second flush
The industry is expecting prices to firm up for the second flush crop backed by better quality and good demand.

The second flush, which starts coming into the market by June, usually is the most premium quality and commands a better price. Coupled with the drop in production in Kenya and a relatively stagnant production in Sri Lanka, the industry is hopeful that prices will head north.

“There is good demand from overseas markets. Moreover, there is a drop in production in Kenya and Sri Lanka has been stagnant. Hence, naturally we expect demand for Indian teas to pick up.

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