Expect tea prices to rise by Rs 20-25 kg by March: Jayshree Tea

DP Maheshwari, MD & CEO of Jayshree Tea and Industries expects prices of tea to increase by Rs 20-25 per kg by the new tea season during March-April.

“The yield of the last season is about to finish. We expect production in India to lag by at least 25 million kg," Maheshwari said in an interview to CNBC TV-18."This, and additional demand of 25 million kg likely every year coupled with 5-7 million kg export demand is likely to create shortage of 57 million kg. That will mean increased prices," he says. 

He expects the better quality tea, in particular, to see steep increase in prices due to short supply.

As for Jayshree tea, Maheshwari said, the blended realisation during the December quarter has improved by Rs 10 per kg, adding that this will enable the company to post much better performance  compared to last year.DP Maheshwari, MD & CEO, Jayshree Tea & IndustriesBelow is the transcript of DP Maheshwari’s interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.Ekta: We do understand that Coonoor tea prices are at a one year high. This was in the auction that was just conducted as well as Bangladeshi tea prices have rallied for the second consecutive week. Can you just tell us what the supply-demand scenario is looking like for tea prices and what is the incremental rise that we have seen in the past couple of weeks?A: The year is about to finish and January-December we expect that the production in India will be behind by at least 25 million kg verses last year. And every year, 25 kg additional demand is created. So, there will be a less availability of 50 million. And add to that, the exports will be up by around 5-7 million kg, so there will be less availability of 57 million kg and that would put pressure on prices. And add to that, the quality teas, especially, is really a supply crunch. There is a shortage of it. So, prices, we expect will remain firm and when the new season tea comes, it should be up by around Rs 20-25 year-on-year (Y-o-Y). Reema: So, new season would be in March and at that you are saying that tea prices will be higher by Rs 20-25 per kg?A: This is a presumption, yes.Reema: Could you tell us that for the near-term, say in the December quarter, how much of the blended realisations have gone up for your company?A: In my company, my share leverage is up by around Rs 10 per kg. So, I expect the results will be much better than what it was last year, because though the cost has increased, because the share leverage is higher and my production is slightly better than last year. So, I expect my financial to be better than last year.Ekta: So, it is up currently by Rs 10, your realisations on your blended amount?A: Yes. Ekta: So, when tea prices rise further by March, how much more increase do you expect?A: That time, the prices will go up, but that time production levels are so low, it does not make much of an impact on the overall yearly averages because March is a very poor production month, but that sets a trend that next year, how the market is going to be, demand-supply scenario. So, that is a thing. And let us not forget that the cost in the general has gone up by around Rs 5-6 a kg during this year, because of wealth division and then the general increase in power and fuel, pesticide, fertiliser, etc. So, you can expect that Rs 34 additional gains will be there for my company.