Tea prices seen ruling firm on tight supplies

The tea prices, showing an upward trend for the past couple of months, will harden further in the coming year, according to a status paper on tea released here on Thursday by the Indian Tea Association.
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Dec 12, 2008, 08.46 AM | Source: Business Line

Tea prices seen ruling firm on tight supplies

The tea prices, showing an upward trend for the past couple of months, will harden further in the coming year, according to a status paper on tea released here on Thursday by the Indian Tea Association.

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Tea prices seen ruling firm on tight supplies

The tea prices, showing an upward trend for the past couple of months, will harden further in the coming year, according to a status paper on tea released here on Thursday by the Indian Tea Association.

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Kolkata, Dec. 11

The tea prices, showing an upward trend for the past couple of months, will harden further in the coming year, according to a status paper on tea released here on Thursday by the Indian Tea Association. The paper attributes it to tightening supplies and rise in demand. The supply will tighten because the projected increase in production will not be enough to meet the projected demand growth and there will be no carryover stock.

Rise in production costs

Cautioning against probable euphoria over the present rising trend in prices, the paper points out that the average realisation so far in the current year is yet to touch the level recorded in 1998. Worse, the average cost of production in the past 10 years jumped by nearly 60 per cent. Also, during the period, though the overall tea production increased by 74 million kgs, there was a decline in crop in the organised sector by an estimated 114 million kg.

Price rise lowest

If viewed from the global perspective, it will be clear that the price increase in India has been the lowest among the major tea producing countries. Between January and September, the average price increase in Kenya and Sri Lanka was around 70 cents a kg compared with India’s 40 cents.

The paper emphasises that the rising trend must continue for the next few years to help the tea industry to recover and grow and the growth is possible only if the producers generate enough surplus for ploughback.

“The difficult phase that the industry passed through since 1999 left a majority of the producers bleeding and most ran into debts, with consequent slowing down of rejuvenation and replantation activities and the workers too suffered immeasurably,” the paper observes.

The ITA status paper projects the current year’s production at 962 million kg, exports at 200 million kg, imports at 20 million kg and domestic consumption at 825 million kg.

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