Tea price at all time high in 2009 due to drought in North-east India

Wednesday, April 1, 2009, 20:10 by Business Editor

According to Tea Board of India, the tea production in the country could drop by up to 50 per cent. That is around 45 million kilograms less tea this year due to drought since the beginning of 2009 in the northeastern part of the country.

India is the largest producer of tea worldwide, producing 857 million kg which is around for 28 per cent of global tea production. In India, tea production and exports of tea have been growing consistently at close to 1.2 per cent per year. Currently, India is the fourth largest tea exporting nation. So obviously, daught hitting India’s tea produce is bound to have its impact in international markets

The first tea leaves harvest in the month of March is generally considered produce the best quality tea. Last year, the March harvest produced around 90 million kilograms of India’s total production of 980 million kilograms. India is the second largest producer of tea in the world. This year might be a different matter altogether for India’s tea industry though due to the drought-like conditions.

The drought conditions have forced the tea prices to go up in the global market and also at the indian auction. Tea prices are likely to go up in India too. William Gorman, executive chairman of the UK Tea Council, this was the first price hike for tea in 10 years. He added that the typical cost of 80 tea bags which retailed at £ 1.89 in 1999 in the UK, had recently gone up to £1.97.

“FY 10 may turn out to be a good year for the Indian tea sector. The Indian tea companies are expected to perform better this year as tea prices have already gone up by Rs 20-25 per kg,” McLeod Russel India MD Aditya Khaitan told ET.

Good Assam tea, which was priced Rs 85-90 per kg will be priced somewhere in the range of Rs 90-135 per kg. As per the initial reports tea production in India has gone down to 21.5 million kg in the month of January 2009 as compared to 21.6 million kg the previous year. But this was just the beginning and the production in the month of May has gone down by 25-30% due to the dry spell.

If the climate remains the same, India’s tea industry expects prices to go beyond their expectations. “We expected only a price increase of Rs 25-30 per kg, but prices will be better. If the weather in April is as dry as now, then the shortage will increase.” Khaitan said. Not surprisingly, the higher prices of tea are making international markets very nervous indeed, as tea lovers there will have to pay extra for tea produced in India.

“March crop, which was normally around 31 million kg, would be down at 28 million kg and indications were that the April crop would also be down by 10 per cent.” Azam Monem, former chairman, Calcutta Tea Traders Association, the only licensed and official organizer of public tea auctions in Kolkata said.

A similar situation occured in 1999 too, when the total tea production as down by 40-45 million kg but the global tea production was not down overall – and therefore, prices were not affected too badly. But this year, the production in major tea producing countries like Kenya, Srilanka, Indonesia and even Bangladesh are down.

Srilanka has been hit the worst as they witness the January collection go down by 8.7 million. The country could only produce a total 17.6 million kg in January against 26.3 million kg last year. Indonesia’s production is down by 0.6 million kg and in Bangladesh the production is down by 0.6 million kg.

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