India tea prices rise in June as production declines due to poor rain

Tea prices in India rose 6.75 per cent in June from a year ago as a below average rainfall in the hilly tea estates of Assam and West Bengal affected production since the second half of May.

Production fell by 5 per cent year-on-year in May and the trend continued in June, industry sources said.

India’s total tea production in the first five months of 2018 fell to 290 million kg from 315 kg a year ago. In 2017, India had produced 1,321 million kg of teas. The average auction prices of teas from Assam and West Bengal increased to Rs 161 per kg during this period from Rs 151.81 per kg a year ago.

“The demand for tea is very strong in the domestic as well as export markets. Prices have firmed up and we expect this trend to continue in the coming months,” industry sources said.

While the full year trend would be determined by supply-demand dynamics in the coming months, the prospects of higher exports in the orthodox segment are expected to support weighted average realisations, particularly given the premium prices commanded by such teas, credit rating agency ICRA said.

“The recent trade sanctions imposed on Iran by the US, which affect US dollar trade, are likely to provide opportunities for higher exports of orthodox teas from India, given the payment mechanism between India and Iran, which puts it at an advantage relative to Sri Lanka, the largest exporter of orthodox teas to Iran,” the agency said.

“The recent trade sanctions imposed on Iran by the US, which affect US Dollar trade, are likely to provide opportunities for higher exports of orthodox teas from India, given the payment mechanism between India and Iran, which puts it at an advantage relative to Sri Lanka, the largest exporter of orthodox teas to Iran,” said Kaushik Das, Vice President and Sector Head, Corporate Sector Ratings, ICRA Ltd.

The rise in export volumes from Kenya may place some pressure on Indian CTC tea export volumes. ICRA said.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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