Report Predicts India’s Tea Exports Will Surge This Year

JORHAT, Assam, India

Workers in a tea garden plucking tea leaves. Photo credit: ThinkStockPhotos.com

With Kenya and Sri Lanka, the major exporters of bulk tea in the global market, witnessing an erratic cropping pattern, the export prospects for Indian tea appear bright, according to a recent report published by the ICRA, an Indian independent and professional investment information and credit rating agency.

According to Tea Board of India figures, India had recorded total tea production of 1,233.14 million kilograms during the financial year 2015–16, which was the highest ever recorded by the country. As compared to 2014–15, the total tea production registered an increase of 35.96 million kilograms, 3 percent more than the previous year.

Indian tea had achieved another milestone during the financial year 2015–16 when it registered export figures of 232.92 million kg valued at INRs 4493.10 crores (about $687 million), breaching the 230 million kilogram mark after 35 years. From 1980–81, India had exported 231.74 million kilograms. Prior to that, in 1976–77 and 1956-57, India exported 242.42 and 233.09 million kilograms respectively, the Tea Board report stated.

A Press Trust of India (PTI) report quoted Kaushik Das, ICRA vice-president and sector head (corporate sector ration) as saying “With the likelihood of a lower tea production outside India in 2017 and given the trend in international prices, the prospects of exports from India in the current year appear favorable.”

It also said that there would also be a positive impact on the domestic market prices of Indian tea as well. The ICRA report said that Kenya and Sri Lanka have been witnessing erratic cropping patterns and the demand for Indian tea has already increased in the global market.

Export volumes during the first four months of 2017 rose by around 5.7 percent and the realizations also saw an increase, albeit modestly at 5.6 percent, according to the report.

“The continuation of such a favorable export scenario going forward will have a positive impact on domestic prices as well. However, continuing cost pressures primarily attributable to the increase in wage rates would keep margins under check,” the report stated.

In the first four months of 2017, black tea production in the major growing countries of India, Kenya, and Sri Lanka witnessed a de-growth of 11 percent, primarily due to significant drop in Kenyan production.

This decline in crop availability has led to a firming up of prices at most auction centers globally. The auction prices in USD terms in Sri Lanka and Kenya have increased by 44 percent and 24 percent respectively, the report said.

Prices of Sri Lankan teas, which are mostly the orthodox variety, have surged to touch USD 4.08 per kilogram during the first four months of 2017, compared with USD 2.84 per kilogram in the corresponding months last year; while Kenyan tea prices, which are entirely of the CTC variety, touched USD 2.98 per kilogram, vis-à-vis USD 2.41 per kilogram, it said.

India exports only around 20 percent of its domestically produced tea. However, exports play a vital role in maintaining the overall demand–supply balance, and consequently price levels, in the domestic market.

On the domestic front, during the first four months of 2017, prices witnessed a largely stable trend, while prices at North Indian auction centers saw some softening on account of the sale of carry-forward teas from the previous season. On the other hand, prices at South Indian auction centers firmed up, the rating outfit said.

Domestic production witnessed a rise driven by the surge in production in April, which offset the declining trend in the first quarter of the year, it said.