Orthodox tea prices rise, to maintain high rates for now

Guwahati: Orthodox tea prices are showing a rising trend and are expected to maintain an upward trajectory, according to a report.

ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) in its latest quarterly report said prices of new season teas have demonstrated a mixed trend in recent auctions: while prices of orthodox (ODX) teas have firmed up considerably, that of Crush, tear, curl (CTC) teas have witnessed a largely softening trend.

ICRA was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment information and credit rating agency.

“Within the overall CTC teas also, while prices of quality teas have witnessed a firm trend, that of plain/medium category teas, particularly made from purchased green leaf, have witnessed a softening trend,” it says.

Kaushik Das, vice president and co-group head, corporate sector ratings, ICRA, said, “Notwithstanding the likely moderation, on the back of a sharp increase in wage rates, in the financial performance of bulk tea producers in financial year 2022, compared to financial year 2021, it would be substantially better than financial year 2020. Moreover, players focused on producing quality teas are estimated to have witnessed a much lower decline in operating profitability last fiscal, as the average auction prices of such players witnessed a much firmer trend than the industry average.”

As for the production trends, after the sharp decline in domestic production, by 9.7%, in 2020 on the back of Covid-related restrictions and adverse agro-climatic factors, production increased in 2021. Notwithstanding the increase in 2021, the overall production still remained lower than pre-pandemic levels as adverse weather conditions impacted production in the first few months of the last fiscal too.

During the first quarter of 2022, all India tea production remained flat at around 100 million kg on a year-on-year basis. However, North India production during the first quarter of any calendar year generally constitutes about 5% of the annual production. Although the overall production in 2022 is likely to improve, after two consecutive years of lower-than-normal production, the same will be determined by the cropping levels during the peak producing months of June to October.