Prices of local tea to rise next year on shortage

The domestic tea industry appears to be heading for a shortage early next year, with a positive impact on prices.

After the good cropping months of August and September, producers estimated 5-8 per cent drop in October output.

The Tea Board is yet to release the latest figures, but October production seems to be below expectations.

The figures till August show an increase in crop of 16 million kg over the year-ago quantity of 587.6 million kg. While north registered a rise of 22 million kg in crop, crop in south was down by 6.2 million kg.

The industry expects the year to end with an increase of 15 million kg over the previous year, which will take the production to 945 million kg.

Meanwhile, the Indian Tea Association (ITA) has pegged consumption at 805 million kg, which is 25 million kg more than the previous year.

Factoring the consumption growth over the previous year's 780 million kg, and additional exports of 10 million kg this year, there appears to be a shortfall of 15-20 million kg, with no carryover stocks from last year.

However, this was lower than the ITA estimate of 27 million kg. The shortage was expected to have a positive impact on prices. Industry sources said the industry's prospects would depend on the level/quality of production and its competitiveness in the global market.

The shortage is likely to hit the market around February. At present, auction prices are a little soft owing to poor quality tea, on account of labour shortage during the festive season.

On an average, CTC tea prices are lower by Rs 1-2 a kg. The bottom-end teas are selling higher by Rs 10 a kg, while the top-end is holding out.

The teas that are being sold at the auction are September teas. The industry expects a turnaround in prices around December, when better quality teas will hit the markets.