Prices have been flat during the past five years, now everyone has jumped on the price bandwagon, Asthana added.
The crop loss
has resulted in a supply deficit. According to the industry, for the year till now, the loss in crop is about 13 per cent compared to last year. But for the months of April, May, June, the drop was sharper; in Assam, it was about 35 per cent.
Major packet tea players that normally have tea in the pipeline, don’t have currently, what has sent prices soaring at the auctions.
According to Tea Board of India
data, for the week ending September 19, average tea prices
at Kolkata auctions were at Rs 281.87 a kg compared to Rs 179.93 a kg a year ago; average prices at Guwahati auctions were at Rs 274.38 a kg compared to 150.14 a kg and at Siliguri auctions Rs 251.40 a kg compared to Rs 132.41 a kg last year.
Prices were higher last month, but on the whole, it has been holding since June. C K Dhanuka, managing director, Dhunseri Tea, said, if the price trend continues losses of last five years may be taken care of.
The industry has been facing excess supply which has kept prices under pressure. Last year, production was a record 1,390.08 million kg.
Rudra Chatterjee, managing director, Luxmi Tea, owner of Makaibari estate, explained, “Ever since bought leaf tea emerged as a major force, chronic excess supply became the bane of the industry. Prices languished below operating costs.”
“The industry got a reprieve, but for lasting solution, we need to adopt a partnership model between farmers and industrial blocks such as the one existing in Kenya where revenue is shared. This will motivate a focus on good quality teas,” he added.
The industry is now looking forward to a better second quarter. Typically, for tea, the first two quarters are good. By end–September, around 65 per cent of the year’s output is produced.
D P Maheshwari, managing director and chief executive officer, Jayshree Tea, said, the second quarter will be much better than the first. “Earlier, we thought that prices would start tapering after June-July, but it’s still holding,” he said.
But the industry is also wary about the outlook for next year, once more tea comes into the system.
“This may be short-lived and next year, prices may fall by Rs 50 a kg,” expects Maheshwari.
For realisations to be at sustainable levels, the industry might have to do things differently. According to Chatterjee, building capabilities of exporting packaged and branded teas is an opportunity to move up the value chain and improve realisations.
“India is a major tea producer but we only export bulk teas,” he pointed out. In 2019, India exported 248 million kg, which is expected to be lower this year.