The sentiments have been weak so far this year primarily on the export front due to geopolitical situation
The drop in production of first flush crop notwithstanding, tea prices at the auction centres in North India have been witnessing a decline on a year-on-year basis, leaving the industry and trade rather puzzled.
While average prices of CTC across various auction centres in North India has declined by around Rs.12-18 a kg on a year-on-year basis, the drop is significant in case of orthodox which is down by nearly Rs.100 a kg at around Rs.220-230 a kg this year over same period last year, sources said.
The weekly average prices of CTC leaf and dust at Kolkata auction centre for the week ending July 1 was ruling at around Rs.242 a kg, down by nearly Rs.15 a kg as against Rs.257 a kg same period last year. While the prices at Guwahati auction centre was almost flat at Rs.213 a kg, the same at Siliguri auction centre was down by Rs.11 a kg at Rs.187 a kg, Tea Board data said.
While production of tea in April in North India was down by 8.74 million kg (mkg) at 63.71 mkg as compared with 72.45 mkg last year, the same during January-May 2023 period was marginally up by around 6.37 mkg at 234.26 mkg. Production of orthodox tea was higher by around 29 per cent at around 40 mkg during Jan-May 2023 as it had fetched very good prices last year.
According to industry insiders, the sentiments have been weak so far this year primarily on the export front due to geopolitical situation, particularly in Russia, and with exports to Iran remaining a concern due to lack of clarity on payment mechanism. “It is a little early to estimate production as it usually picks up during the peak season that is July, August and September. Overall sentiment seems to be impacting prices. Kenya has a high stock as Pakistan was not importing and probably lower export possibility from India this year (seems to be affecting prices),” Kaushik Das, Vice President and Co-Group Head, Corporate Sector Ratings, ICRA, told BusinessLine.
Exports to Iran have not picked up as yet and that is impacting orthodox tea prices and impacting the overall sentiments. Trade sources said that Iran had stopped issuing order for registration of Proforma required for importing tea from India since November last year. The Ministry of Agriculture in Iran, as per available reports from some tea buyers, has been prevented from issuing order of registration. Tea buyers have advised their Indian exporters not to consign any tea cargo until further advice as any cargo without order registration is not allowed to enter any Iran Port by the customs and the cargo has to be returned to the origin country.
“However, last week some contracts have been issued so that is likely to improve sentiments. Iran is a key market for Indian orthodox tea. Now that they have started giving contracts, orthodox prices should improve,” said Sujit Patra, past secretary of Indian Tea Association.
The production is likely to pick up in July as weather conditions have improved and demand outlook looks good, said Vikram Singh Gulia, MD, Amalgamated Plantations.