For the first time ever, tea prices surge by 40-60% due to severe scarcity

Strong demand from buyers especially for quality teas supports uptick

For the first time ever, average tea prices in the country’s auctions rose by 40-60 per cent, driven by strong buyer demand and a huge shortfall.

According to Tea Board data, in the first auction held in May, prices surged by over 52 per cent to Rs 217.12 per kg in Guwahati.

In a similar auction in Siliguri, prices surged by around 39 per cent to Rs 204.25 a kg. By mid-May, prices in Guwahati rose by 61 per cent to Rs 217.12 while Siliguri maintained the 39 per cent surge.

“This is a record for Indian tea industry and such a price surge has happened for the first time in the country. Buyer demand has been extremely strong, which pulled up prices significantly,” said Dinesh Bihani, secretary of the Guwahati Tea Auction Buyers’ Association (GTABA).

Industry officials have been saying that there is practically no tea with the buyers as the lockdown, which hit tea production direly, took place just when fresh teas of the season had started to pour in.

“So far, prices have been good as there is a huge scarcity of tea in the system. The price rise can benefit plantation companies only if it sustains till end-July, when the second flush tea auctions will be over,” said Atul Asthana, managing director at the Goodricke Group.

 

 

Industry officials feel that given the scarcity and demand from buyers, the momentum of price increase is likely to be sustained.

According to the Indian Tea Association (ITA), the country has already registered a 120-140 million kg (mkg) shortfall in production. This is likely to spill over to next year. Under the prevalent weather conditions, production is expected to be normal. Over-production, which can make up for the lost crop, is being ruled out.

Goodricke has already lost 1.65 mkg of crop, representing eight per cent of the total annual production, which is resulting in a Rs 54.4 crore impact. Warren Tea has registered an estimated crop loss of 1.35 mkg, representing approximately 18 per cent of the expected annual production.

Asthana said Goodricke usually makes up for 30 per cent of its annual crop by June but so far this year, it has been able to produce 20 per cent.

“There has been a significant shift both from producers as well as buyers to improve quality, which can spur prices. The age of sub-standard teas is nearing its end,” said Asthana.

However, Warren Tea said with firm market prices, quality teas are fetching around Rs 30-40 kg higher rates prevailing during the same period of last year.

Others are of the view that despite the surge in prices, the revenue loss owing to production shortfall cannot be made up.