Tea Shortage Driving Record Prices

KOLKATA, West Bengal, India

Twice in row an Assam garden set record prices at the Kolkata Tea Auction Center, evidence that efforts to raise the standard of quality is that regions is paying off.

The INRs 3,300 ($59.85) offered by German buyers for the 110 kg. lot of Halmari Orthodox is also evidence supplies of premium teas suitable for export are tightening.

McLeod Russel CFO Kamal Baheti told Bloomberg Business Week that his company expects a 20 percent income boost based on his estimate that prices will rise an average 25 rupees per kilo this year. McLeod is the world’s largest tea grower.

Demand has far outstripped supply he said. Dry weather locally has cut yields in Assam, South and North India as well as Sri Lanka and the ongoing African drought has depressed yields in Kenya, Uganda and Rwanda.

India’s already huge and expanding domestic market, growing at 3 percent further complicates efforts to meet demand. India residents drank 856 kgs. of tea in 2011.

The Tea Board of India calculates a loss of 60 million kilos due to weather and a “pipeline deficit” that could total 130 million kgs. The harvest is down 14 percent compared to last year.

Tea production in Kenya, the largest exporter of black tea, are also down 14 percent to 127.8 million kgs. In Sri Lanka the Tea Board reports output of $135.6 million kilos, down 3.8 percent compared to last year.

 “I don’t think there’s much chance to recover the loss in production as well as the shortage in pipeline stock,” Baheti said. “Prices will continue to remain firm for the rest of the year.”

McLeod own 38,000 hectares (93,900 acres) of tea plantations in India, Vietnam and Uganda and expects to harvest 104 million kilos, a 2 percent increase compared to 2011.

Source: Bloomberg Businessweek, The Hindu Business Line

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