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Tea companies upset over low opening price despite improved quality

Avishek Rakshit/Kolkata 13 Mar 19 | 03:30 PM

The excessive carry-over stock of around 30 million kg (mkg) of tea and lower demand from the buyers kept the opening prices muted for tea companies as the year’s first tea started to hit markets. Average price fall is seen at around 10-15 per cent.

One of the larger tea companies having a significant presence in Darjeeling, Dooars and Assam registered a 22 per cent shortfall in its opening prices while another Assam based large tea company experienced a near 10 per cent dip in its opening prices as compared to last year.

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“Every tea company I’ve been talking to in Assam is complaining that opening prices in private sales are down by Rs 10-15 a kilo as compared to last year", Vivek Goenka, executive director at Warren Tea said. The fall works out to around 5 to 7 per cent depending on the variety and company.

Around 50 per cent of tea produced annually is sold privately and the rest lands up at auction centres.

Goenka, who is also the chairman of the Indian Tea Association (ITA), opined that the opening prices in private sales this year have fallen far short of expectations.

After the Tea Board implemented the mandatory garden and factory closure order to improve prices and quality, tea producing companies were expecting a fillip in the opening season this year because of superior quality and low carryover stock.

However, Dinesh Bihani, secretary at the Guwahati Tea Auction Committee opined that although there was a production shortfall towards the end of 2018, at least 30 mkg of stock was carried forward, affecting prices.

“The prices which the companies are getting from the opening private sales aren’t encouraging. On one hand, quality is projected to be superior as compared to last year, the fresh production is low, but this carryover stock has been playing spoilsport", he said.

The Guwahati tea auction centre had missed listing any new tea for sale till now, this year. With limited packets on offer for sale, the auctions in Assam are expected to start from the fourth week of this month. Last year, auctions started in the second week of this month.

For sale number 13 last year, Guwahati had listed 6,521 packets, while this year, only 2,382 packets are on offer for sale.

The second reason for muted opening prices, according to Atul Asthana, managing director at the Camellia Plc owned Goodricke, is lack of demand from the buyers.

“A lot of buying activity had taken place by December last year and the buyers are well stocked", he said.

Industry officials suggested that after the Tea Board mandated closure of gardens and factories throughout the winter season, the tea producing companies eagerly liquidated their stock by the time winter had set in.

“The buyers were flooded with available tea during early December which kept prices muted in December’s private sales too. Then, there was excess tea available in the market than the buyers could absorb", an industry official from one of the larger tea companies said.

Tea companies expected a bumper opening in private sales owing to projected improved quality but now have been faced with disappointment.

However, producing companies expect that once the tea starts hitting the auction centres in larger proportions, prices may see an uptick.

Initial disappointment

Major companies register 10-15% lower opening prices

 Prices suffer due to carryover stock and low demand from buyers

 Guwahati tea auction centre yet to offer new tea for sale

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