Heavy rain helps Assam tea industry clear stock, but production to decline
A tea garden worker plucks tea leaves inside Aideobarie Tea Estate in Jorhat in Assam, India. Photo: Reuters
Tea plantations in Assam are facing a production dip because of excessive rain. This might help sell off a 24-million-kg carryover stock at stable prices.
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Industry sources said the situation would help balance availability at tea auctions and help fetch expected prices. Had production been normal at 30 million kg in March, it would have affected the forthcoming auctions as this tea would have gone under the hammer along with the carryover stock.
Auction prices of CTC (crush, tear, curl) tea opened at expected levels in January at Rs 142.07 a kg in Kolkata and Rs 123.86 a kg in Guwahati but declined thereafter to Rs 105.09 a kg in Kolkata and Rs 109.54 a kg in Guwahati. Industry executives attribute this to excess availability of tea last year and carryover stock.
Production declined by 50 per cent in March in Assam compared to last year, said Azam Monem, chairman of the Indian Tea Association. “Prices at auctions are expected to remain firm as the March production is low," he added.
India had a bumper tea crop in 2016 at 1,233 million kg with Assam, which accounts for 52 per cent of the country’s tea production, registering a seven per cent output growth. Average auction prices of CTC tea during the year rose three per cent to Rs 148 a kg.
The Cachar region, which contributes 20 per cent of Assam’s annual tea output of 600 million kg, was most affected by rain and hail this March. “In April, there will be some recovery in prices as well as production," Monem said.
However, the net earnings of tea plantations are likely to fall in the near term. “The investment for this season is nearly lost," said A N Singh, managing director, Goodricke.
S S Bagaria, former chairman of the Darjeeling Tea Association, said gardens in West Bengal had lost 65 per cent of the March output, which would heavily affect the first flush. Tea harvested in March-April fetches a premium over other flushes.
Darjeeling tea does not have a carryover stock. “The heavy rainfall in Darjeeling comes just at a time when leaves had started fetching 10 per cent more than the previous year," Bagaria said.
Shortage-driven price increases will not compensate for the revenue Darjeeling tea producers were expecting during the prime season. The first flush comprises 34 per cent of the eight million kg annual tea production in Darjeeling and contributes over 35 per cent to the earnings of these tea gardens.