Stronger rupee dents tea exporters' income

India’s income from tea export has risen 6.3 per cent in the first six months (April-September) of this financial year to $500.8 million. However, producers and exporters are under stress as the average price for exports has stagnated, primarily owing to the rupee’s rise against the dollar and euro, and lower realisations from orthodox variety export.

Industry officials said in April-August the dollar and euro fell 3.2-3.4 per cent year-on-year. The higher forex income is because export surged 4.5 per cent this year to 166.36 million kg (mn kg). However, the average price per kilo during January-September fell by one per cent to Rs 196.34, against Rs 198.53 in the year-ago period.

“The rupee has remained strong against the euro, pound and dollar in global trade and this is why the price realisations fell,” Azam Monem, chairman, Indian Tea Association (ITA), told Business Standard. As much as 55 per cent of the entire tea trade is conducted in dollars and another 35 per cent in the euro.

Prices fell particularly in the UK, Ireland, Netherlands, Germany, UAE and Australia. And, gained by about four per cent in Russia and other CIS countries, at Rs 159.98 a kilo. Overall prices rose for 16 per cent of the total export and went down for the remaining 84 per cent (140 mn kg).

The export market was expected to pick up well this year, owing to crop shortage in Kenya, India’s closest competitor in its key markets.

There has also been a fall in orthodox tea prices in the global market by five per cent this year. A N Singh, managing director at the Goodricke Group, said one reason could be increased competition between orthodox tea producers. Depending on the season, export of the orthodox variant is 20-35 per cent of international sales.

Developed tea markets — UK, Germany, Russia, China, USA, Canada, UAE, Egypt, Iran — are moving towards either ready-to-drink beverages or orthodox tea. This is limiting the uptake of the traditional black and crush, tear, curl (CTC) leaves. Micro and small scale blenders of orthodox tea, 15 per cent of the export market, have been cutting down on uptake of this variant and substituting with CTC. Although the blend is changed as a result, this doesn’t change the brewed flavour and colour of the tea.

Sugato Dutta, a director at export firm Subodh Brothers, told this publication that one of his clients, which used to mix 15 per cent CTC with orthodox leaves, had asked him to ship a blend comprising a lower percentage of orthodox leaves and higher of CTC, to keep the price same.

On the other hand, after a sharp decline of around 10 per cent in CTC prices last year, prices have rebounded in the segment this year, helping cushion the fall in orthodox prices.