KOLKATA: As Kenya is flooding the global black tea consuming markets with the commodity attributable to larger manufacturing within the nation, Indian tea producers are relying extra on the home market this 12 months for higher price recovery. Tea costs have already gone up 20% up to now three months and are anticipated to stay agency owing to scarce provide. Kenyan tea manufacturing has gone as much as 500 million kg, up 16.2% from 430 million kg final 12 months. High manufacturing has pulled down costs of Kenyan tea on the earth markets to $1.8-2 per kg, which is way decrease than the price at which India exports its teas. Besides, the lockdown within the UK following the outbreak of a brand new pressure of coronavirus has additionally impacted Kenyan tea costs because the UK is likely one of the largest importers of Kenyan teas. In 2020, tea manufacturing India fell because of the lockdown. Once the lockdown was withdrawn, it took nearly a month for the bushes to return in form to generate recent tea leaves and buds. In 2019, India had produced 1,390 million kg of teas. Till November 2020, the nation produced 1,181.69 million kg of teas in 2020. The shortfall until November was 2,018 million kg and the manufacturing hole is unlikely to have crammed up in December because the gardens had closed down operations from mid-December. “The new season teas or first flush teas that will come into the market from March-end will open on a strong note as there are no teas in the pipeline. Tea prices will remain firm,” stated Azam Monem, director, McLeod Russel India. Since most individuals are staying at dwelling or are working from dwelling, the consumption of tea at dwelling has gone up considerably amid the pandemic. “Domestic demand is strong. However, what will happen in the export markets is still not clear. Kenya is offloading tea at a much cheaper price which is hurting Indian tea producers in the world markets,” stated Monem. In addition, funds from Iran stays a problematic challenge, particularly since Iran is likely one of the greatest export markets for Indian teas. Meanwhile, the Tea Board of India is all set to introduce a brand new public sale system from February primarily based on the Japanese public sale system. This has created loads of confusion amongst a bit of merchants, together with packet tea gamers. “The present e-auction system is being replaced by a tender system. This will result in tea prices moving up,” stated Viren Shah, chairman, Federation of All India Tea Traders Association Source: Economic Times
Tea industry may continue to face challenges in 2021-22: Report
Rating agency Icra in the report also expects the challenges for the tea industry to remain in 2021-22, after considerable improvement in performance during 2020-21.
MUMBAI: The tea industry may continue to face challenges in the next financial year with hike in wages and its impact on prices, as production returns to normal, according to a report. Rating agency Icra in the report also expects the challenges for the tea industry to remain in 2021-22, after considerable improvement in performance during 2020-21. The impact on bulk tea prices once the production returns to normal in the new season would be a critical factor determining the profitability in the next financial year, the rating agency said. West Bengal has recently announced a 15 per cent increase in wage rates, on an interim basis, which would increase the cost of production for bulk tea companies, it added. Domestic tea prices have witnessed a significant increase in the current financial year, with the North India (NI) auction average increasing by 46 per cent y-o-y during April-December 2020 and the South India (SI) auction average up by 41 per cent during the same period, the report stated. Tea prices witnessed a sharp increase on the back of a 10 per cent fall in domestic production, while consumption remained firm, it said. While tea prices moderated during November-mid December 2020, following a seasonal quality decline amid normal production levels in September and October 2020, the prices rebounded in the recent auctions in the domestic market in the calender year 2020. Thus, the profitability of NI-based bulk tea players is expected to witness a significant improvement in 2020-21, on the back of a sharp improvement already witnessed in the first half of 2020-21 and significantly lower losses expected in the second half of 2020-21. However, the sustainability of the same in 2021-22 will depend on the price and input costs, the rating agency stated. ICRA Vice-President and Sector Head (Corporate Sector Ratings) Kaushik Das said, "While it would be premature to comment on the exact level of tea prices, nonetheless, overall prices are likely to witness a negative bias, once the production returns to normal in the new season. " He added that trend in prices apart, another challenge facing the industry is the increase in wage rates. "West Bengal has already announced an interim wage increase, Assam is also likely to follow along similar lines. " Das also said the sustenance of the healthy profitability would be critical to ensure the long-term financial health of the bulk tea industry. Meanwhile, on the global front, the report said the decline in production from India and Sri Lanka (a contraction of 11 per cent for both in 11 months of 2020) is estimated to result in an overall decline in global production in 2020. This is despite a significant increase in the Kenyan crop by 32 per cent during the nine months of 2020, it added. The report said the global supply of crush tear curl (CTC) teas largely remains the same, with the increase in Kenyan CTC crop compensating for the decline in Indian CTC production. Global orthodox (ODX) production was hit following the decline in both India and Sri Lanka, it added. The sharp jump in production from Kenya led to softening of the CTC prices in the international market, while lower availability of ODX teas provided support to its prices in 2020, the report said. Export from India during 2020 is estimated to be down by 17 per cent in volume terms on a y-o-y basis, it said. Almost two-thirds of the decline is because of lower ODX exports, given the sharp decline in production of such teas, the report added. With CTC prices increasing dramatically, most producers reduced the share of ODX production (estimated to be 30 per cent lower on a y-o-y basis).
Source: The New Indian Express