Tea Market Report

Indian tea hit by drought

The winter has landed a double whammy on tea planters in Assam and West Bengal.

After setting in early, the season saw almost no rains in the hills of the tea growing regions of these two states, a crucial factor that determines the quantity of tea at the beginning of the tea season starting April and also the quality of the prized first flush that commands highest prices among all teas produced during a year. “The tea industry has been hit by severe drought. Tea production in Assam and West Bengal for 2012 is set to register a sharp drop due to a prolonged dry spell and rising temperatures. Data compiled by our members confirm rainfall deficit for West Bengal at around 31% to 42% during the period January-March 2012 compared to the same period in 2011. Upper Assam estates in the South Bank of the Brahmaputra are also experiencing severe drought conditions,” the Indian Tea Association (ITA) said on Monday. If an early winter robbed off about 15 million kg of tea in December, absence of rainfall during January to March might cut down production by another 26 million kg. “Crop is estimated to drop by around 60% up to March compared with 2011. In Assam and West Bengal, it can therefore at best touch 20 million kg as against 46 million kg recorded for the corresponding period for 2011.

This dry spell would undoubtedly have an adverse impact on the first flush. The production decline is also evidenced by a drop in the fresh arrivals at the auction centres of West Bengal and Assam,” the report said. “This is the worst-ever drought seen in the past 15 years,” C S Bedi, chairman of ITA, said. “Early winter in North East India has affected production during the quarter ended December by approximately 15 million kg,” McLeod Russel India, the largest tea planter in the world, earlier said while announcing its third quarter results. Add to this, the global crop output also looks bearish, with Kenya set to report lower crop. “In Kenya, production in the first quarter of 2012 is expected to be lower than that of 2011 because of dry weather at the end of December 2011 combined with incidences of frost that affected the tea growing areas at the beginning of 2012. As the hot and dry weather conditions continued in January, production for the first quarter of the year is likely to drop by 17% to 70,000 tonnes, compared with the first quarter of 2011, which is likely to affect production marginally by an estimated 2% for the year,” Food and Agriculture Organisation, an arm of the United Nations, recently said in its global tea crop outlook for 2012. All these factors would now conspire to push up tea prices when the new season tea hits the market next month. Higher prices, ITA said, might not be able to compensate lower income from drop in production.

“Besides severe cash flow problems, the likely drop in production due to abnormal weather conditions would result in significant revenue loss which will not be compensated by higher prices,” the report said.

There was good but irregular demand for the 6,475,611 kilos (100,726 packages) on offer with prices closely following quality but (16.61%) were neglected.

Brighter BP1s were well supported at steady to USC20 easier while mediums saw less interest at firm to USC10 easier but a few well made lines gained upto USC22; lower mediums met good inquiry at USC2 to 20 dearer. Plainer descriptions were very irregular and varied between USC8 to 10 dearer with a few improved lines appreciating but poorest types were discounted.

Brighter PF1s saw better absorption gaining USC2 to 10 with mediums well absorbed at firm to USC4 dearer but some eased by upto USC7 with a few poorer lines neglected; lower mediums were irregular and ranged between firm to USC6 dearer to easier by upto USC20. Plainer teas were a very weak feature varying between firm to USC35 easier and poorest teas remained unsold; a few selected improved lines however gained marginally.

Brighter PDUSTs were irregular varying between USC4 dearer to easier by upto USC6 while mediums met improved interest at firm to USC8 dearer, lower mediums held firm to USC4 above last levels. Plainer sorts varied between USC6 to 14 dearer to easier by a similar margin but some lines remained unsold.

Brighter DUST1s were well absorbed at USC2 to 3 dearer but a few lines lost upto USC2 while mediums were well competed for at firm to USC6 dearer although a few lines shed upto USC2. Lower mediums were firm to USC10 dearer with plainer teas steady to USC2 easier.

In the secondary catalogues BPs were firm to dearer while PFs were irregularly dearer. Clean well sorted coloury Fannings and Dusts gained. Other Fannings were dearer while Dusts were firm. BMFs were well absorbed at easier levels. Egyptian Packers, Sudan, Afghanistan, Yemen and other Middle Eastern countries lent more support while the Bazzar maintained interest.

Pakistan Packers, Kazakhstan (CIS) and Russia were less active while the UK was more selective and there was some activity from Iran, Somalia continued active.

6.33 Mnkg of tea were on offer at this weeks Colombo Tea Auction. 2.96 Mnkg were Low Grown Main Grades and 2.29 Mnkg were High and Mid Grown Main Grades.

Low Grown teas once again met with good widespread demand. In the leafy catalogues BOP1s recorded price gains all-round. High priced OP1s took a dip this week, but all others appreciated in value. OP/OPAs recorded price gains all-round. High priced Pekoe’s declined marginally, whilst all other Pekoe/Pekoe1s appreciated further on last weeks high levels. In the Small leaf catalogues FBOP1s appreciated all-round. High priced FBOP of last week tended lower, but all others recorded price gains. FBOPF1s recorded high prices all round this week. FBOPF varieties were dearer all-round. BOPs too gained in value, BOPF sold at firm to dearer rates.

The 1.1 Mnkg of Ex-Estate teas that were on offer met with fair general demand. Quality Westerns and Nuwara Eliya BOPs and cleaner Uva’s sold at around last levels, whilst their below best sorts tended lower and at times Rs 5 to Rs 10. Western BOPFs and their Uva’s sold at last levels, whilst Nuwara Eliya and Udapussellawa’s lost Rs 5 to 10. Medium BOPs lower Rs 10 to Rs 15 whilst their BOPFs lost Rs 5 to 10. CTC PF1/BP1s maintained last levels.

Source: Daily News analysis – India