With tea production falling, the market is likely to firm up with good support from domestic demand, traders said. Tightening of supply could help the market to regain some ground, Paulose Joseph of Forbes Ewarts and Figgis said. Lower exports had eased the market to a small extent.
Tea production has dropped more than 20 million kg in the first 10 months of 2007, and reports suggest that more crop could be lost due to extremities of weather in November and December, he said. Some small but new markets like Turkey and Egypt also show some promise, he added.
The total tea production during January-October is 802.56 million kg, down from 822.72 million kg in the first 10 months of last year. Output has fallen by 13.56 million kg in the north (Assam and West Bengal) and 6.6 million kg in the south (Tamil Nadu, Kerala and Karnataka). Industry sources attributed the lower production in India to prolonged rains during the year.
Lower production in north India has helped the south Indian CTC tea, Krishnakumar J Shah, a leading exporter said. Upcountry demand is propping the south Indian market, which had eased due to lesser exports to Iraq, he said.
India continues to be the largest consumer and producer of tea in the world. Domestic consumption supports the industry with less than 20% of the tea produced exported. Krishnakumar expects the market to remain stable and firm in the short-term. Production will be lower in January-February and the market could benefit from the supply shortage, he added.
The orthodox market continues to remain sluggish, with exports down, compared to last year, he said. Exports have registered a drop of 40 million kg during the first ten months of 2007.
Traders do not see a sudden and significant increase in exports for the later part of the year, as Kenya has reported a good crop.