Expect 15-20% higher tea prices in new season: McLeod Russel

Tea prices are likely to increase by at least 15-20 percent in the new season from July to October, feels Kamal Baheti, CFO of Mcleod Russel.  

Considering supply shortages, good demand and firm closing prices during the last season (higher by Rs 20-25 per kg), tea prices are expected to be strong in the upcoming auction, Baheti said in an interview to CNBC-TV18.

Baheti pointed out that a major chunk of the company’s profitability kicks in only during the third and fourth quarters as the new season begins.  Although overseas business of the company is also expected to perform better, the focus will be on the domestic market, he said.Below is the verbatim transcript of Kamal Baheti’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: Can you just give us a sense in terms of what exactly tea prices are trending at currently and how would you compare it say in terms of the season ago and a year ago as well?A: It is too early in the day to talk about tea prices trending. However, what we can say that the last season ended on a very firm note. When we ended the last season the prices where Rs 20-25 higher as compared to the previous year same period. As we open up now and the tea season has started and we will see the auctions in another week or two weeks time. The opening level will then be compared with the last year. Our expectation is that since there has been a shortage closing prices had been good, the demand is pretty strong we expect the overall opening to continue to be very strong. Anuj: If you could confirm have they been recent auction in Siliguri, Guwahati and Kolkata and the pricing in those auctions we have been told that it is slightly higher compared to the previous prices if you could confirm that?A: You are right, see these auctions keep on happening throughout the year. It is only in the next week that the new season tea from Assam will be seen in the auctions. There had been some tea which has come from Doha, Darjeeling etc has been trending higher. If we look at the South Indian new season tea which they have come up in last couple of months there the prices have gone up by 15-20 percent. So, looking at how the price has opened for whatever the little tea which has come in the auctions and the tea which is going to come in the auctions in the next couple of weeks from Assam and Doha I think the trend will be pretty similar to what it has been there in the parts.Peak season is going to be July to October to make a full note on how much the prices will go up for the year it is too early but looking at the shortage and the strong demand we expect 2016-2017 to very strong on prices. Ekta: When you say very strong on prices would it be fair to assume say 10-15 percent higher or may be beyond that?A: If the overall monsoon remains good and we recover the kind of crops which we loss in last couple of years and the indicative prices which has been there from the last year of Rs 15-20 higher are on the closing prices not for the full year but only on the closing price I think we can assume that 10-15 percent increase in the price is must likely to happen this year. However, if there are more export demands and there are shortages in the other places, in the international market it can even trend higher. However, 10-15 percent increase it was the best case which we are assuming is going to be. However, as I said it is too early in the day we have to really see how the overall season opens up.