No storm in the tea cup, courtesy Assam

Bucking the trend in commodity prices, the tea season in 2009 is likely to open Rs 20-30 per kg higher than the previous year’s average.

Industry representatives expect good Assam tea, which averaged at Rs 105-120 per kg this year, to open at Rs 125-140 per kg in the new season. The strong opening would be led by a shortfall of 30-40 million kg.

The Indian Tea Association (ITA) has recently made projections for 2008. As per these projections, there will be production of 962 million kg, exports of 200 million kg, imports of 20 million kg and consumption of 825 million kg, indicating a shortfall of 43 million kg.

ITA chairman Aditya Khaitan said the shortfall is led by the increase in exports. Last year, exports were at 179 million kg. But unlike other markets, the Indian tea industry was backed by a strong domestic consumption. The industry has been growing at 3-3.3 per cent every year.

“The African issue is just an added benefit,” he said. Kenya, a major CTC producing country, has registered 35 million kg lower crop, which impacted the supply line in the international market.

By the end of September 2008, the world production was marginally down by 6.3 million kg. Kenya was down by 35 million kg, while India and Sri Lanka together were up by 46 million kg, but all African countries were showing a decline in production.

Not surprisingly, Indian tea prices moved up in the last few months, but are still lower than the peak levels recorded in 1998, if inflation is factored in. If inflation rates pertaining to food articles are adjusted, the price should be Rs 143.47 per kg. In contrast, the cost of production has increased by Rs 33.41 per kg, which is about 60 per cent higher.

According to ITA, the prevailing price trend must continue for the next few years to help the industry grow.

The Indian tea industry saw lower production and lower exports during 2007 compared to 2006, which witnessed a record crop and exports. After a prolonged recession since 1999, prices during 2007 witnessed marginal increase.The year 2008 began with the promise of recovery with encouraging pointers from 2007.