India produces one-third of the world’s total tea production. And now tea growers in India are suffering, thanks to changes in temperature and rainfall caused by climate change. Consider the north-eastern states (one of the largest tea-growing regions), for instance. Temperatures in the region have gone up, dry spells are now longer and rainfall patterns are changing. The dry spell makes the bushes prone to pests, for which the gardens have to use more pesticides and that means higher costs for the tea growers. Then thanks to a much longer dry period and heavier rainfall within a short span of time, several large tea gardens have started using irrigation systems to get better yields. That is also an expensive proposition.
According to Indian Tea Association, Assam produced nearly 620 million kg of tea last year, up from 590 million kg in 2012. The Tea Research Association of India, on its part, has conducted its own studies and found that many tea garden areas were seeing drop in rainfall and rise in temperature.
What has really aggravated the problem is the inability of the Indian tea traders to raise prices, even after production cost has gone up considerably. This is because of stiff competition in the international market. India’s main competitors in the international market are Kenya and Sri Lanka.
In fact, in end-March, average tea prices in India, the world’s second-biggest producer, dropped on subdued demand for poor quality supplies. The CTC (crush-tear-curl) grade leaf was sold at Rs 101.09 ($1.68) per kg, down 3.8 per cent from the previous auction, while prices of the dust grade dropped 11.7 per cent to Rs 109.37 per kg on thin supplies.
That’s not all. Large amount of stocks remained unsold. Buyers were not interested in poor quality tea. According to an official communiqué from Tea Board of India, India’s tea exports in 2013 nudged higher by nearly 2 per cent to 211.86 million kg, thanks to higher purchases by Iran. India mostly exports CTC (crush-tear-curl) grade tea to Egypt, Pakistan and the UK, and the orthodox variety to Iraq, Iran and Russia.
This drop in prices notwithstanding, leading tea growers in India are expecting a correction and an upward revision in the prices of Indian tea. Companies like McLeod Russel in fact expect tea prices to increase by 5-10 per cent over the next one year and tea prices to remain strong throughout 2014.
Significantly, India’s tea production in February jumped 10.4 per cent from a year earlier to 15.30 million kg due to higher plucking in the southern state of Tamil Nadu, according to the Tea Board. Production in Tamil Nadu rose 15.5 per cent from a year earlier to 10.19m kg, the board said.
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