COLD CUPPA: Tea prices may fall 14% this year, before making marginal gains in 2020, says World Bank
Tea plantation companies are up for some bitter brew with the World Bank predicting a 14% drop in global tea prices in 2019.
Prices in the first quarter of the calendar year dropped a sharp 23% in Kolkata auction and 7% in Kenya, the World Bank Commodity Markets Outlook for 2019 noted, adding that prices would continue to remain subdued for the rest of the calendar year 2019 before recovering lost grounds in 2020.
"Tea prices are expected to decline 14% in 2019, before making marginal gains in 2020. Prices, especially Kolkata and Mombasa (Kenya), plunged 23% and 7%, respectively, in the first quarter and stand 7 and 25% lower than a year ago. Large tea crops due to favourable weather conditions in East Africa, especially Kenya, and India have caused the price collapse," the World Bank report said.
Tea prices at the auction centre of Kolkata, where teas from Darjeeling as well as Assam are traded and sold to large marketers like Hindustan Unilever, Tata Tea as well as many smaller domestic and global brands, fell to an 11-year low.
With Kenya producing excess tea of 50 million kg in 2018, tea prices were on the downhill from the middle of 2018, forcing Tea Board of India to order a suspension of tea production in December, the World Bank has noted.
Kenya being one of the largest global exporters of tea, its auction centre at Mombasa usually sets global prices, which influence prices for a similar variety of teas in Indian auction centres as well.
Indian tea plantation companies are already bleeding with the biggest entity, McLeod Russel regularly selling off its gardens, including three estates for which it struck a deal on Monday to pay off its bankers.
On Tuesday, another planter, Dhunseri Tea sold off its CTC tea brands to Tata Tea to satisfy its bankers.
World Bank's price forecast comes on the back of decision of United States to enforce a restriction on exports of oil to Iran by countries like India, which also sends tea to Iran, and in January-February 11.37 million kg were exported, double of 5.13 million kg shipped in the corresponding period of the previous year.
"Higher export volumes from Kenya and the uncertainty on demand from Iran, given the likely impact of the economic sanctions, adversely affected Indian bulk tea export performance, particularly of high-quality orthodox teas, from North in 2018," rating agency Icra said in a report.
GETTING TEPID
- Prices in the first quarter of the calendar year dropped a sharp 23% in Kolkata auction and 7% in Kenya
- With Kenya producing excess tea of 50 million kg in 2018, tea prices were on the downhill from the middle of 2018
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