Coronavirus lockdown buoys Indian tea prices as domestic demand increases

A 15 percent lower production and higher domestic demand due to the coronavirus pandemic-induced lockdown have helped Indian tea prices gain this year.

The South Indian tea industry, in particular, has benefitted from this with prices at the auctions topping Rs 150 a kg.

According to Indian Tea Board data, the country’s tea production during the January-September this calendar year was 856.90 million kg against 1007.22 million kg during the same period a year ago.

Production is lower mainly in view of the problems in the northern growing regions of Assam and West Bengal, where the production has dropped to 697.30 million kg during January-September versus 853.35 million kg a year ago.

"There is nearly 155 million kg drop in North India till now. It has been brought down to about 150 million kg as South India’s production is up by five million kg,” said Sriram Narayanswamy, President, Global Tea Brokers.

Usually, tea production in West Bengal and Assam come to a halt from December until at least mid-February every year due to winter before the new flush is ready to be plucked.

Coronavirus forces northern planters to forego first flush

“This year, the new flush could not be plucked in the North in view of the Coronavirus as the spread of the pandemic was more in that region. When planters returned to the gardens to pluck, they had to skip that flush.

"By the time actual production began it was almost mid-May, leading to a production shortfall,” said Sriram, who is also director of Coonoor-based Contemporary Tea Auctioneers Pvt Ltd.

United Planters Association of Southern India (UPASI) Secretary R Sanjith Nair said the overall decline in India’s tea production was due to lower north Indian crop.

In contrast to the north, the southern sector managed to commence production quickly once the Union government allowed essential agricultural operations to resume.

With many people spending more time at home, tea consumption increases

According to Sriram, when tea auctions commenced prices were initially not good. “But later on, prices picked up on strong domestic demand. With many people at home due to the lockdown, especially in the North, there has been a higher consumption of tea,” he said.

Currently, no tea variety in India is available below Rs 150 a kg and in the case of some, the prices are nearly double the pre-Coronavirus levels.

According to the Tea Board, the all-India average price currently is a little over Rs 200 a kg against around Rs 150 during the same period a year ago.

Tea prices in the North are averaging at about Rs 220 a kg versus around Rs 155 last year. In the South, they are averaging a little over Rs 150 against nearly Rs 100 a year ago.

Exports drop as Indian tea gets outpriced by Kenya

The strong domestic demand has helped the Indian tea sector overcome the effects of a fall in exports as Indian offerings lost their competitive edge.

According to Tea Board data for January-July this year, India exported 115.27 million kg compared with 141.26 million kg during the same period a year ago.

“Exports have fallen due to lower production,” said UPASI’s Nair.

“There has been a lack of demand for exports due to the hike in Indian prices. Kenya is offering its tea at a more competitive price and this is on top of higher production in the African nation,” said Sriram.

According to GlobalTeaDigest.com data, Kenya produced 95.41 million kg of tea more during January-September at 376.68 million kg versus 281.27 million kg during the year-ago period.

The Global Tea Brokers President said that Kenya had taken charge of the export market so far this year.

The tea industry, however, has benefitted from the Coronavirus pandemic. The sector has had a good run with higher prices from the middle of March to the middle of September.

Southern tea sector gains

“Tea green leaf fetched Rs 30 a kg this year against a maximum of Rs 15 it fetched in the previous years. Of late, some correction is taking place,” said Sriram.

The southern tea industry, in particular, has gained in view of this as both crushed, tear and curl (CTC) and orthodox tea have witnessed good demand.

According to industry analysts, tea companies in the South have been able to recover the losses they had accumulated in the last couple of years. Some of these companies were in doldrums last year.

Tea prices are expected to rule firm, at least until March when the new flush from northern India estates hits the market, said Sriram.

“Prices should rule firm at least for some more time for the sustenance of tea plantations,” said UPASI’s Nair.

(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)