Tea prices likely to rally on shortfall in production

By: | Published: February 22, 2017 3:28 AM

Tea prices are seen firm and likely to rally due to the shortfall in production. Production of tea is estimated to be on the shorter side for the first half of the year due to the drought-like conditions in major black tea producing countries like India, Kenya and...

Sri Lanka’s tea output fell 15.3 % in January due to adverse weather and poor application of fertilizers, says a Sri Lankan government report.

Tea prices are seen firm and likely to rally due to the shortfall in production. Production of tea is estimated to be on the shorter side for the first half of the year due to the drought-like conditions in major black tea producing countries like India, Kenya and Sri Lanka. India is the leading producer of black tea in the world with 25% share of the total production. Interestingly, India consumes 75-80 % of its own production. R Sanjith, head (Commodities) of United Planters’ Association of Southern India (UPASI), told FE that the production scenario looks bleak with major countries reporting lower production from November.

“‘The crop scenario for the next six months looks bleak due to drought-like conditions in most of the tea producing region. Kenya did well last year but from November the crop is seen lower and prices have gone up,” he added. He estimates the market to remain firm on the lower production.

Sri Lanka’s tea output fell 15.3 % in January due to adverse weather and poor application of fertilizers, says a Sri Lankan government report, adding that the island nation’s tea output hit a seven-year low in 2016,falling 11% in its third straight year of declining production.

“Tea prices have gone up in Kenya and Sri Lanka and this will help us export more. Even the lowest grade Kenyan tea was selling above $2.50 per kg, while Sri Lankan tea has gone up to $2.60-2.80 per kg. This should be good news for South India tea and we may gain more export orders,” Sriram Narayanaswamy, president of Global Tea Brokers said. He added that the Kenyan scenario turned bad after the first half of January and many factories are reported to be closed on lower availability of tea.

You May Also Want To Watch:

The average auction price of tea in India for the year 2016 stands at R134.34 per kg as against R124.48 in 2015. South Indian average price for 2016 stands at R103.72 per kg and North Indian average price for the year stands at R143.97 per kg, according to data from the state-run Tea Board.

Sriram said that auction prices in the domestic market are firming up in most of the auctions on the report that the crop situation is bad. He added that but for demonstration the tea prices in India, particularly north India, would have been above the current prices. Demonetisation has led to more tea coming to the auctions with private sales declining.

India produced 1239.15 million kg of tea in 2016 as against 1208.66 million kg in 2015 and 1207.31 kg in 2014, according to data compiled by the Coonoor based Global Tea Brokers.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition