Tea to get dearer in New Year on low stocks

Written by Commodities Bureau | Kolkata | Updated: Dec 13 2008, 03:47am hrs
Notwithstanding the recent dip in inflation, your daily cup of tea is all set to get dearer in the New Year. According to a status paper released by the Indian Tea Association (ITA), tea supply is likely to further tighten. Hence low stocks and good exports would push up tea prices, the ITA said.

According to ITA estimates, there was no carryover stock at the beginning of 2008 and with exports expected to touch 200 million kgs this year, up from 179 million kgs in 2007, the supply situation is likely to tighten further in 2009. While 2006 began with a surplus of 26 million kgs in the pipeline stock, there was a deficit of 2 million kgs in 2007 as the year began. An inevitable fallout of this would be a further hardening of prices, the report said.

While most African countries showed a large dip in tea output, with Kenya going down by 35 million kgs, the output in India till September 2008 was just marginally down by 6.3 million kg. Tea output in south India registered an increase, while output in north exhibited mixed trends.

Going forward, output in south India will continue to rise and that of north India will also improve thereby pushing up overall tea output in the country in 2008 to around 962 million kg up from 945 million kg in 2007, the ITA said. As projected by the ITA, output of orthodox tea in 2008 is expected to be marginally up from 94 million kg last year.

At one point of time, it was expected that during 2008 another 10-15 million kg of orthodox tea would be produced. But due to adverse climatic conditions, pest attack and non-availability of vital fertilisers in Assam and north Bengal, Orthodox output would not be to the extent expected, said S Patra, joint secretary, ITA.

The output of Orthodox in 2009 would depend on factors like timely application of fertilisers, favourable weather conditions and demand from export markets like Iran, Iraq and Russia, Patra added. CTC production is likely to touch 862 million kg this year up from 851 million kgs last year

According to the report, exports this year is likely to touch 200 million kg, but financial crisis in markets like Russia and Pakistan might impact buoyancy. During the last 10 years, while bulk tea prices went down, retail prices have not moved up, the report stated. The trend towards higher prices was seen at the end of 2006 and this continued till mid-2007, before it took a short dip to rise again by the end of the year.

The all-India auction average in 2007 was Rs 67.97 per kg- an increase of Rs 1.37 per kg over the level of 2006. In 2008, the average auction price of tea during the period from January to October, stands at Rs 102.23 in Kolkata (Rs 80.20 for the same period in 2007), Rs 90.32 in Guwahati (Rs 68.32 in 2007) and Rs 69.95 in Cochin (Rs 56.33 in 2007).