Weak demand and tepid exports put tea prices under pressure

At 458.27 million kg from January to June 2023, tea production in the country was only marginally lower than 466.73 million kg in the same period in the previous year, as per Tea Board data.

Tea prices have declined in the absence of sufficient offtake in the domestic market and a slowdown in imports by Iran, a key buyer of Indian tea. Meanwhile, tea production in North India, which accounts for over 80 percent of the country’s total output, picked up in July and August after remaining flat till June.

At 458.27 million kg from January to June 2023, tea production in the country was only marginally lower than 466.73 million kg in the same period in the previous year, as per Tea Board data.

"The production has been almost the same as last year till June but has gone up in July. At the same time, local as well as export demand has diminished. As a result, prices of orthodox tea varieties have fallen by Rs 100 to 200 per kg from last year. The CTC teas are also down by Rs 30 to 40 per kg from last year," said Ajay Jalan, President of the Tea Association of India.

As per the association’s data, tea production in North India from January to July 2023 was at 488.45 million kg, up by 5 million kg from a year earlier. The production has been good in Assam and various regions of West Bengal except Darjeeling, which continues to suffer production loss.

In the domestic auctions, a large quantity of tea remains unsold.  "Good quality teas still have buyers and are fetching premium prices. But in recent times, there has been an increase in inferior quality teas, which are not finding many takers. Large quantities of unsold stock are lying at the auction centres of Kolkata, Siliguri and Guwahati," said Viren Shah, former Chairman of the Federation of All India Tea Traders Association (FAITTA). The association had recently voiced concerns over increasing instances of the addition of artificial colours in tea.

Tea exports have flagged in the second half of 2023 as there is no strong buying. The shipments from January to May have been marginally less at 79.05 million kg (79.69 million kg in the previous year) as per Tea Board data. But exporters say they have been weak in the last couple of months with Iran buying less.

"Iran is yet to register import contracts and allocate foreign exchange for the imports. The situation in Europe is also not good. The weakening of the rouble has affected Russian buying. Exports are not likely to touch 200 million kg in 2023," said Anshuman Kanoria, Chairman of the Indian Tea Exporters Association.

Tea exports had gone up by around 18 percent year-on-year in 2022 to 231 million kg. This was made possible by the higher offtake by Iran, Russia and the UAE. As Sri Lankan production of Orthodox tea had fallen short, there was robust demand for the Indian variety. Though global demand has waned this year, Sri Lanka has been able to sell higher quantities than India. The Russia-Ukraine war has hit exports to that region as well.

Kenya, a major producer of CTC tea, has been left with more stock because of the currency crisis in Pakistan and Egypt, its two principal buyers. This has led to a glut in the world tea market, squeezing demand, according to industry sources.

South Indian tea production was at 113.72 million kg in January-June 2023, less by 5.86 million kg compared with the same period of the previous year. The prices have been going south in the last couple of months in the absence of sufficient takers.

"The local demand is poor with the number of buyers decreasing in the auctions. In the last two decades, the number of buyers in the Cochin auctions has declined from 104 to 77," said a senior executive of a major tea producer.

Deficient rain in Kerala is likely to affect tea output in the next few months. "Rainfall is down by over 50 percent in tea-growing areas of the state. The dry weather has increased the incidences of pests. Intense rains in the next few months can also be damaging for the crop," said Anil George Joseph, Vice President, Tea, Harrisons Malayalam Ltd.

Big tea-producing companies are struggling as the prices have declined at a time when the wages of tea workers in Kerala and the cost of chemicals for spraying have increased.

The domestic demand has remained stagnant in the last few years with the young population in the cities preferring coffee to tea. "All the stakeholders should together work out a generic tea promotion programme to increase the consumption of the beverage in the country," said Ajay Jalan.

The industry is pinning its hopes on pushing up exports. Exporters are keen on raising shipments to countries like the UAE and Iraq. "Iraq was a good buyer of Indian tea. But we lost that market to Sri Lanka. We need to strengthen our presence in Iraq," said Kanoria.