Tea Majors Fear Glut As Prices Come Crashing Down

Prices of plainer and medium descriptions of tea would dip below the existing rates if Russian off-take does not improve, according to P K Sen, chairman and managing director of J Thomas & Co, a leading tea broker.

The falling price trend of both north and south Indian varieties commenced in August.

The auction prices of July showed that north Indian tea was Rs 4 ahead compared with last year's levels, while those from the south were higher by Rs 2 in the same month.

Prices of the south Indian tea were at par in August while north Indian varieties continued to show an uptrend.

 

With Russia buying more of Sri Lankan tea, prices this September have dipped by almost Rs 3 per kg in north India.

Industry circles fear a further fall in south Indian varieties in the coming months. The last quarter of 1995 saw a rising market compared to a falling trend the market has witnessed in the current year. One irritant staring in the face of Indian tea majors is the increased buying of Sri Lankan tea against 365-day credit. India does not provide any credit at all.

In sharp contrast to declining Indian tea prices, Sri Lankan prices by the end of August shot up over 55 per cent, fetching record average prices of over Rs 100 a kilogram. Colombo prices were Rs 104 in August this year compared to Rs 65 in the corresponding period last year.

Sources said Sri Lanka had, in the last couple of weeks, bought some tea from Cochin auctions, taking advantage of low prices of south Indian varieties. Russia continues to buy from Sri Lanka in spite of the much lower prices prevalent in India. Owing to extended demand, it is believed that Russians are absorbing huge quantities of tea through buyers

in Turkey.

If the situation continues to worsen, a cut-back on increased production, along with regulated auction offerings, has to be made, industry analysts say.