Financial Daily from THE HINDU group of publications
Wednesday, Mar 24, 2004
Agri-Biz & Commodities
Tea prices may rise on lower output in Assam
Kolkata , March 23
AFTER many years, the domestic tea industry may expect a slight hike in prices as production in some parts of Assam till the middle of March is down by 20 per cent, constricting supplies to some extent.
Industry sources said poor rainfall had been registered in lower Assam and in parts of Cachar and Terai. As a result, production of tea in this region was affected.
While elaborating, another source said the tea gardens located in the northern bank of the river Bhramaputra had done well, but those based in the southern bank were hit by the poor rainfall.
"We also came to know that production of Tata Tea in this region is almost down by 50 per cent. From the beginning of 2003, till March 15 of the year, Tata Tea's production was 2,89,624 kg. However, in the corresponding period of this year, production was only 1,26,009 kg", sources told Business Line.
A section of the broking community felt that this tea shortage might actually bring in some good news for the producers, as prices are likely to rise. Everyone is waiting for the next Monday's auction in Kolkata.
"The coming auction will be crucial for the tea industry in the State. It is likely to set the benchmark prices for the first flush teas and we know that first flush teas are already affected in some places," sources said.
It was learnt that some gardens in Assam are getting reasonable prices for their first flush teas in private sales. According to tea brokers, the current average prices of this variety of tea in the private market is Rs 110-125 per kg.
This development will certainly affect the industry. One section of the industry is of the opinion that it is a boon for the sector. They believe that Indian tea sector suffers from excess production, and any correction, even if it is an act of nature, is a welcome development. "Tea prices in the auctions are likely to start on a steady note," sources said.
The other section of industry feels that this development would harm the producers' interests. "First flush and second flush teas are sold at a premium. This is when the producers make money. Now it appears that first flush is affected. If this low rainfall continues, then the second flush would be affected too," sources said.
It may be noted that Calcutta Tea Traders Association, the organisers of the Kolkata tea auction, was forced to cancel three sales, which were supposed to take place in the second and third week of March.
The official reason cited by the auction house is that arrivals were poor and there was no significant amount to conduct auctions. A section of broking community felt it is due to the shortage of crop.
Another section held a different opinion. According to them, 133 million kg of tea was sold through the Kolkata auction centre during 2003. It is the highest quantity sold through this centre, since 1991.
"As of now, there is no tea stock to be sold through the auction mechanism. That's why the organisers were forced to cancel the three sales," sources said.
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