Increase in tea prices to offset impact of wage rate hike in WB, Assam: ICRA
- An increase in
tea pricesfollowing global supply issues is likely to offset the impact of increased wage rates.
- However, prices of South India (grown in Kerala, Karnataka and
Tamil Nadu) CTC teas remained lower.
- Sri Lanka's economic crisis also contributes to the high price of ODX tea.
AdvertisementAn increase in tea prices following global supply issues is likely to offset the impact of increased wage rates in West Bengal and Assam, according to a report. The increase in wage rates in the current calendar year in North India (NI),
The report stated that the ODX tea prices are ruling at an all-time high level on the back of a demand-supply mismatch in the international market due to production disruptions in Sri Lanka. Sri Lanka, the largest exporter of ODX teas globally, witnessed disruptions in production due to the current economic crisis. The production loss in Sri Lanka is likely to continue for some more time, which would keep supply tight in the international market, thus supporting prices of Indian ODX teas, said the report. Prices of NI CTC tea are also up by 5 per cent y-on-y basis, primarily driven by the sharp rise in auction prices in August 2022. The uptrend in NI CTC prices is supported by lower-than-expected production, particularly of quality estate teas, in the current season and increasing demand for good quality teas, it noted. Price premium for top quality CTC tea is likely to sustain going forward, given the limited supply base of the same, it added.
However, prices of South India (grown in Kerala, Karnataka and Tamil Nadu) CTC teas remained lower compared to the previous two fiscals due to sustained production levels from bought leaves in NI, a direct competitor of SI CTC teas in terms of quality. “With ODX prices expected to sustain at a significantly higher level on a y-on-y basis, some quality producers have increased ODX production. Consequently, production of quality CTC is likely to remain flattish, which will continue to support prices of such teas as well. An analysis of tea prices indicates that the price differential of NI CTC teas, manufactured by the top 50 estates over average auction prices, increased to 137 per kg in the first 8 months CY2022 from Rs 122 per kg in CY2021,” Icra Vice President and Co-Group Head, Corporate Sector Ratings, Kaushik Das said. Till May 2022, cumulative all-India production was up 16 per cent to 320 million kg on a y-on-y basis.
However, crop loss in June and July 2022, due to unfavourable weather conditions and floods, led to a 2 per cent drop in the all-India production to 614 million kg in the first seven months of CY2022 on a y-on-y basis. Given that 54 per cent of the annual production typically takes place during the last five months of any calendar year, Icra expects the overall production in CY2022 to remain flat compared to last year, although the same would remain dependent on the cropping levels till October, after which production will start to fall. In CY2021, all-India production was up by 7 per cent to 1,343 million kg on a y-on-y basis, recovering from the lows of the pandemic-impacted CY2020 season. However, it still remained 3 per cent lower compared to the record crop of CY2019, the Icra report stated.
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