India’s tea production, exports decline in 2018

Tea.jpeg

India’s tea production nudged 0.8 percent lower in 2018 from a year ago to 1311.63 million kg, trimming exports from the world’s biggest black tea producer by 1.1 percent, the state-run Tea Board said.

India’s exports eased to 249.11 million kg from 251.89 million kg a year ago, the board said in a statement.

India, the world’s second-biggest tea producer, exports CTC (crush-tear-curl) grade mainly to Egypt, Pakistan and the United Kingdom, with the orthodox variety exported to Iraq, Iran and Russia.

India has set an export target of 300 million kilograms for 2020 but based on year-to-date production totals it is unlikely to meet this goal. The unit price of the exported teas is feared to remain almost stagnant at Rs197 to 198 ($2.75) a kilogram, according to tea exporters.

Complicating these projections is the imposition of U.S. sanctions on Iran, India’s top tea trading partner. The U.S. granted India a six-month waiver allowing it to continue to import oil from Iran so long as it reduces consumption. Unfortunately for India, oil is a critical link in compensating growers for more than 12 million kilograms of tea.

Iran imports far more tea than it grows and as cash flow tightens, the Middle Eastern country exchanges oil to make up the shortfall. Last year Iran ordered 7.4 billion rupees worth of tea but concerns about payment led exporters to seek other more reliable partners.

The challenge is that consumer preferences are changing in the next four largest markets for India’s tea: Russia, the U.K., the United Arab Emirates, and Germany.

In 2018 India will earn an average $2.70 per kilogram (INRs 197) for its CTC exports. Sri Lanka tea exports have averaged $3.32 per kilogram this year. China’s tea exports will sell for almost double these averages.

In the meantime, global demand has shifted to the point where 50 per cent of revenue is from orthodox and green tea. These numbers rise to 90 per cent in some markets like the U.S. and western Europe, Egypt, UAE, and Iran.

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.

Leave a Reply

Your email address will not be published. Required fields are marked *