Tea prices may stay firm on low production

By: | Published: January 23, 2016 1:44 AM

Tea is likely to get firmer on lower global production and good export demand, traders said. South Indian tea production is also seen lower and the Kenyan shortfall is likely to help in higher exports of CTC tea.

Tea is likely to get firmer on lower global production and good export demand, traders said. South Indian tea production is also seen lower and the Kenyan shortfall is likely to help in higher exports of CTC tea.

India is a leading producer of tea in the world with 25% share of the total production but consumes 75-80% of its own production.

“Tea production is seen lower globally with the shortfall estimated at 100 million kg. Kenya leads with a shortfall of 49 million kg, Sri Lanka reported a shortfall of 8.4 million kg and Malawi 8.5 million kg,” R Sanjith, head (commodities) of United Planters’ Association of Southern India (UPASI) said.

Sanjith estimates the market to firm up on lower supply and empty pipelines. “During the first quarter of every year market remains firm as North Indian production dips due to the cold climate. South Indian production is lower in 2015,” he added. Demand for tea usually rises in the winter season, which begins in November.

Tea production is seen lower in South India by almost 17- 18 % in 2015 , while North India compensates with higher production and the total production until November is seen marginally higher. According to Tea Board data, production of tea during the year 2014 stands at 1207.31 million kg.

Ajith MK, member of Cochin Tea Buyers Association, told FE that volumes are down and tea prices are firm. He expects exports to increase due to the Kenyan shortfall and new demand from Iran. India exports the CTC (crush, tear, curl) tea variety mainly to Egypt, Pakistan and the UK and the premium orthodox variety to Iraq, Iran and Russia. Weakening rupee and fall in freight charges are expected to support higher exports, he added.

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