Differing Estimates Created Glut, Pushed Down Tea Prices

Differences in tea crop estimates between the tea plantation industry and the Tea Board are believed to have created an artificial glut in the market leading to tea prices plummeting in the last few months, just before the recent spurt in prices.

According to sources, there is a gap of 11 million kg on account of the difference in methodology adopted by tea corporates and the Tea Board.

The issue was discussed at an export promotion and marketing sub-committee meeting in mid-December last. The Consultative Committee of Plantation Associations (CCPA) had taken into cognizance the adjustments made by tea companies at the end of each month. The Tea Board, on the other hand, adopted a different procedure altogether.

 

The committee, after reviewing the prices and stock position at various action centres, felt that the CCPA estimates were more realistic.

Sources said the CCPA figures till October 1996 showed an increase in crop by 21 million kg, while the Tea Board estimate showed an increase of 33 million kg. It is believed that the members of the sub-committee had no other option but to project the two variants for year-end figures.

The planters had anticipated the December crop to go down by nearly 11 million kg compared with the previous years production.

Industry analysts however said the hammering of prices had led a drop by almost Rs 15 per kg for CTC varieties.

Tea prices have, after remaining depressed for the past few weeks, shot up over the last few weeks due to higher price realisation. This is a marked departure from the trend over the last few months, when prices plummeted.

However, despite the sudden spurt, the prices are still lower compared with previous years figures. This has affected the profitability of the companies, which have not been able to leave any investible surplus for expansion purposes, said a producer.

Sources said the tea companies price realisation from tea auctions has dropped too steeply to cover even inflation. Market trends for various descriptions of tea indicate that Calcutta tea auction prices for a few gardens have shot up by over Rs 10 over the last few auctions, though average prices spelt a marginal increase.

This is mainly because of the lesser-than-estimated tea stocks. Besides, the last three or four auctions have seen a distinct improvement in demand, which together have pushed up prices.

The trend was contrary to that of last year when prices, which increased from August, dipped during November-December. The prices of both north and south Indian varieties showed a declining trend, particularly from August.

The auction prices of July showed that the north Indian teas were Rs 4 ahead compared with last years levels.