The recent spurt in tea prices in faraway Mombasa is bringing good news for global as well as Indian tea industries.
After hitting a five-year low in November due to higher production, prices are on upswing since December at the auction centre of Kenya, world’s largest exporter of black tea and a price setter.
While production has also been high in India up to November, as per Tea Board figures, prices have held up thanks to higher growth in consumption.
And this augurs well for India, which is readying itself for the new tea season beginning April.
“All this would have a very positive impact as the new season begins in March-April in India. If the current situation continues in India, opening prices in India would be about 8-10% in India, or about Rs 20 a kg,” said Kamal Baheti, finance director of McLeod Russel India, world’s largest tea planter.
Prices in Mombasa had dropped to a low $2.38 per kilo between July and November compared with $3.65 over the same period last year due to higher crop facilitated by favourable weather conditions, according to the Kenya Tea Development Agency data.
But then in middle of December prices suddenly jumped to $4.13, and have been rising since then.
This has happened due to two factors, said Baheti.
“First, Egypt came back to Mombasa auction centre and resumed buying and, second, there are now reports of a beginning of a dry spell in Kenya. If the dry weather doesn’t change immediately, prices would be very strong,” Baheti told analysts.
Pakistan, Afghanistan and Egypt, the traditional buyers of Kenyan tea, had in recent times shunned Mombasa centre after an ad valorem tax was imposed on Kenyan tea, forcing these countries to look at alternative sources including other African countries like Uganda and Rwanda.
“Prices in Kenya were down 15-20% on-year, mainly due to higher crop and disruption in buying during the major production months,” Baheti said.
Indian production is higher by about 75 million kg till November over previous period’s level while global production is up by 150 million kg.
But prices in India have been stable after an increase of 15-20%, which indicates that domestic consumption has been pretty strong, and have been growing at a rate more than the production growth rate.
Tea production rises 9% in Apr-Dec
India’s tea production in the April-December of this fiscal rose by 9% to 1,116.98 million kg on account of higher output in Assam and West Bengal, according to Tea Board data. Production in the same period of the 2012-13 was 1,025.01 million kg. The country’s total tea output was up by 3.62% at 1,135 million kg in 2012-13. Output in Assam was up 5% to 607.83 million kg in April-December 2013-14, from 577.13 million kg in the year-ago period.