Tea prices likely to head north on tight supply

Written by RajeshRavi | Kochi | Updated: Feb 20 2013, 06:22am hrs
Tea prices are likely to move up in the first half of the current year due to continued tightness in supply, officials of United Planters Association of South India (UPASI) said. Black tea prices during 2012 moved up by 16 % at auctions due to robust demand and low supply. FAO reports that the world tea market would see slow growth in black tea production during the coming decade while green tea production is slated to increase at a faster pace.

The market is likely to witness supply tightness during the first half due to lower production in North Indian plantations. Supply of black tea is seen lower for the top three global producers. Demand is robust and this would mean firm prices, R Sanjith, head (commodities), UPASI said.

The average auction price for 2012 moved up to R121.81 per kg as against R104.06 per kg during 2011. The South Indian average moved up 24% to R87.39 per kg from R70.17, while the North Indian average moved up by 15.7% to R135.59 per kg.

Sanjith says that black tea production has been consistently declining for the three top producers due to a variety of factors. Demand, on the other hand, has been quiet buoyant and seen increasing, he said.

Looking ahead at the next ten years, the working group for tea constituted by FAO estimates that world black tea production will grow at almost 1.9 % annually to reach 3.28 million tonne by 2021 and also come into equilibrium with demand at a price of $2.75 per kg. The projected production growth rate for black tea at 1.87% is slightly lower than the 1.99 % annual growth averaged over the previous decade. Tea consumption is set to grow at 1.8% per annum and reach 3.36 million tonne in 2021.

Reports suggest that India consumes about 25 % of the worlds total tea output, and over 75-80 % of its own production. Domestic consumption during 2011 is estimated around 856 million kg, a per capita consumption of 720 gm.

The tea board recently revised the production estimates for the country, with production in 2012 pegged at 1,111.76 million kg and that in 2011 pegged at 1,115.72 million kg. Western India Tea Traders Association (WITDA) reports that India would become a net importer of tea as current production is unlikely to show any significant increase in the near future.