Trade with Commodities: Indian tea now in great demand on global shortfall

Friday, May 15, 2009

Indian tea now in great demand on global shortfall

Russia, Iran, Egypt And Pakistan Queue Up

THE Indian tea industry is flooded with enquiries from Russia, Iran, Egypt and Pakistan as global shortfall in tea has touched 55 million kg in the period January to March 2009. The greatest loser is Sri Lanka, which has suffered a shortfall of 34 million kg of tea in the same period.
    India has lost 8 million kg in the first three months of calendar 2009, while countries like Kenya and Zimbabwe have each lost 5 million kg in the same period.
    Talking to ET, Mr Aditya Khaitan, MD of McLeod Russel said: "According to reports trickling in from the global markets, the shortage till April is likely to be in the region of 90-100 million kg. Leading tea producing nations in the world — India, Kenya and Sri Lanka — have suffered major crop loss due to adverse weather conditions. This shortage has pushed up prices of tea across the globe." Incidentally, McLeod Russel is the largest integrated tea company in the world with a production base of 80 million kg tea annually.
    Tea prices have moved up by Rs 20-25 per kg, making it the highest in a decade. However, the impact on packet tea manufacturers would be known only after May, since packeteers are covered for the next two months.
    Enquiries are coming in to the Indian tea producers from international markets as the weather condition has improved in the last few weeks, which will improve the second flush tea production. The production of Assam orthodox teas, which is imported by Iran, has also kicked off.
    Mr Khaitan, who is also the chairman of Indian Tea Association (ITA), said: "There is a lot of hue and cry over rising tea prices. It's only after a sevenyear period that the tea prices are showing some sort of recovery. From 1999-2000 onwards, cost of production has gone up by Rs 35 per kg whereas drop in prices has been Rs 40 per kg. Nearly 70% of our cost of production is fixed. None of the buyers had raised their voice when tea prices slid abnormally year after year."
    The ITA chairman felt that tea prices will settle between July and October if production picks up in these months. "We are expecting the crop situation to improve in the July-October period, which may soften tea prices by Rs 5 per kg. Improvement in prices will help tea companies to recover losses that they had faced in the last seven years. The companies can reinvest in the estates to produce better quality of teas," he added.
BREWING TIME
Global production shows a shortfall of 55 million kg in January-March period 2009 Leading tea producing nations in the world — India, Kenya and Sri Lanka — have suffered major crop loss due to adverse weather Sri Lanka has recorded a maximum shortfall of 34 million kg Shortage has pushed up tea prices across the globe In India, retail tea prices have moved up by Rs 20-25 per kg, its highest in a decade