Tea prices drop on higher supply in South India

Written by Rajesh Ravi | Kochi | Updated: Oct 31 2014, 07:51am hrs
Higher supply of tea has put pressure on the market with prices in South India declining by nearly R20 per kg year-on-year. Further, lower prices of tea in Kenya have limited Indian CTC tea exports, leading to a glut in the market, traders said.

The situation is alarming for many plantations in South India, which are operating on wafer-thin margin due to higher input and social costs.

India is a leading producer of tea in the world with an approximate annual production of 1,100-1,200 million kg (mkg).

The situation is grim and similar to the one faced during 2004-05. With adequate amount of tea in the market and lower exports, there seems to be no scope of improvement in price in the short-term, Chacko P Thomas, managing director, Kanan Devan Hills Plantation (KDHP) told FE. He said most of the plantations are facing a very serious crisis with production looking good.

Market prices have dropped to R40-50 per kg for lower grade CTC tea from R65-75 per kg a year ago, N Sriram of Contemporary Tea Auctioneers said. Whenever tea production in South India increases, it has put pressure on the market because most of the production is CTC. Higher production of CTC tea in Kenya lowers Indian exports .Orthodox tea is faring better when compared to CTC, he added.

Tea Board data shows that total tea production during 2014 for the January-August period is higher by 10.76 mkg in South India ,while North India stands lower by 17.98 mkg when compared to the corresponding period of 2013.