KOLKATA: Tea prices in India, the world's second-largest producer of the beverage, have jumped as much as 29% tracking global cues.
At Tuesday's auctions, Indian new season quality tea fetched 29% higher prices, while the average quality rose 15%. The spike in prices could see consumers paying more for their "cuppa", as tea producers are unlikely to absorb all of the increase. The quality teas have fetched Rs 200 - Rs 213 a kg, compared with Rs 155 a kg in the corresponding period of the previous year. Similarly, average CTC (crush, tear and curl) teas have garnered Rs 150 - Rs 160 a kg, as against Rs 130-Rs 140 in the same period last year.
According to reports, tea production in India in FY12 is seen at 80 million kg. If the prices remain buoyed over the next few months, Indian tea companies can expect an improvement in margins in the current financial year. "Outlook for tea is very strong this year and Indian tea should do well. What is interesting is that people from tier-II cities are also asking for quality teas and they are ready to shell out a little for a good cuppa," said Azam Monem, director of McLeod Russel India, the world's largest tea producer.
Despite India ranking second in tea production after China, its per capita consumption of the beverage is only 0.8 kg compared with 2.5 kg in the UK and 1.5 kg in Ireland. It is 0.95 kg in Pakistan and 1.2 kg each in Bangladesh and Sri Lanka.
However, domestic consumption of tea is increasing at the rate of 3%-3.5%, according to a Tea Board official. "The tea has mainly been picked by local buyers. The outlook is strong but it is early to predict whether this trend will continue. The real test for Indian tea will kick off from early June, when the second flush teas enter the market in huge volumes. But definitely the domestic demand is increasing," said J Kalyansundaram, secretary of Calcutta Tea Traders Association.
Analysts feel that the rise in global tea prices is impacting that of Indian tea. The average price of Kenya's top-grade tea at the latest auction rose to an average $3.36 a kg from $3.20 a week earlier. According to Mombasa-based African Tea Brokers' weekly market report, packers from Egypt, Pakistan, the United Kingdom and Afghanistan were more active, while Yemen and other middle-east countries maintained interest.
According to reports from Sri Lanka, prices of some varieties of 'Western high grown' teas cultivated on the western slopes of the central hills of the country rose by Rs 15 per kg.
source - economictimes.indiatimes.com
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