If the present situation is any indication, the outlook for tea globally does not appear exciting. The shortfall in production in Kenya, Sri Lanka and India,currently exceeds 43 million kg compared with the previous year, according to J. Thomas & Company Private Ltd, the world’s biggest tea auctioneers.

The adverse weather conditions across the globe have affected supply of tea in the world market. With the exception of China, which is the largest producer of green tea and growing crop exponentially, extreme and erratic weather has affected production elsewhere in Asia and Africa.

Climatic conditions and pest attacks, particularly in North India, mean a deficit of 15.4 mkg till July-end; the dip is 21 mkg all-India.

While the August crop is likely to show a small surplus, September harvest in North India is expected to be well below that in the same month last year. The deficit in crop, therefore, is expected to widen further by October-end.

Green leaf prices are moving which would signal the hardening of prices at the bottom of the market, as well as a shortage of green leaf availability.

Demand and supply

Liquoring Assams continue to hold levels in spite of normal arrivals at auction centres.

With increased purchasing power and discerning tastes, the consumer is willing, and able, to pay significant premiums for good quality.

Medium Assams and Dooars are irregularly easing in value, but overall averages continue to be well above last year.

The demand for these categories is also expected to rise as the supply line gets squeezed. .

The supply of quality Assam teas for the rest of the year will be limited as the production season gradually draws to a close.

In North India, factories close down by December end as the cold weather inhibits leaf growth; they resume operations only towards March end.

Most upcountry markets are low on stock and the usual winter buying will start shortly.

With domestic consumption growing at over 2.5 per cent annually, an additional 20 mkg of tea would be required, further accentuating the supply shortfall.

Crop shortages

Crop shortages traditionally impact year-end prices the most. Already the year to date North India auction average is up by Rs 25 over the previous season.

Continuing shortfall in production, increased demand and low stocks at buyer’s destinations all indicate that tea prices are clearly poised for a further strengthening. Yet, tea prices, per se, continue to remain below the commodity and inflation index.

Drop in production and increased costs have negated price increases for producers. Recent wage revisions and sharp hikes in input costs like fertiliser and fuel have added to the burden of the planter, which even the buoyant prices, have not managed to mitigate.

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