Adverse weather conditions drag down tea prices

Prices fall 3.6% to Rs 124 a kg during the first six months of 2014

Even as production declined 4.5 per cent to 381 million kg during the first six months of 2014, tea prices remained subdued. Between January and June 2014, prices across varieties have dipped 3.6 per cent to Rs 124.20 a kg from Rs 128.83 a kg in the corresponding period last year.

In south India, too, prices of all teas dropped a sharp 15.7 per cent to Rs 85.74 a kg from Rs 101.76 a kg during the same period a year ago. However, north Indian markets reported a marginal gain of Rs 1.43 to Rs 144 a kg.

“Normally, prices decline due to oversupply and less demand. However, this year, demand is robust and the production is also lower due to adverse weather conditions that prevailed in most of the tea-growing regions,” said R Sanjith, head (commodities) at United Planters’ Association of Southern India (Upasi).

The price drop in the context of lower supply both in the domestic and global markets suggest a weakness in market fundamentals. This, according to Sanjith, does not augur well for this industry.

Incidentally, prices declined in other major producing countries such as Kenya (18.1 per cent), Bangladesh (38.4 per cent), and Indonesia (18.4 per cent). However, Sri Lanka recorded an increase of 9.7 per cent in tea prices.

Decline in production
Adverse weather conditions that prevailed in most of the tea-growing regions of Assam, North Bengal and parts of South India during the summer months has impacted tea production in the first half of 2014. The crop was lower by 17.8 million kg during the January-June 2014 period to touch 381 million kg, a decline of 4.5 per cent year-on-year.

“Erratic weather, scanty rains and high temperatures were common in most of the growing regions during the first half of this year, which affected production,” Sanjith told Business Standard on the sidelines of 121st annual conference of Upasi, atop Blue Mountains on Monday.

North India has shown a decline of 22.3 million kg, while south India has shown an increase of 4.5 million kg during the first six months of this year.

During the second half of the calendar year 2014, the crop in south India is expected to be marginally higher on account of showers received during June and July.

However, for full-year 2014, south India's production is anticipated to be more or less the same as last year’s, because the shortage of rainfall has resulted in tea gardens not able to follow the standard agricultural practices, which would have a telling impact on 2014 crop outlook, Sanjith noted.

“Climate change issues such as longer dry period and peak flow of monsoon are not at all conducive for crop intake, which the tea sector has to address in the years ahead so that this agro-industry remains sustainable,” he said.

Domestic tea production in 2013 increased 6.6 per cent to 1.20 billion kg compared to 1.12 billion kg in the previous year. Since 2011, the Tea Board has included both organised and unorganised grower, especially in north India, who were not reporting their production numbers.