The Hindu Business Line : Tea prices weakening

Even as there seems to be no let up in the drought conditions persisting in the tea growing pockets of Kenya, prices have been easing at the domestic tea auctions. "Prices at the tea auction held today have retreated by Rs 3 to 4 per kg," Mr Anil Kumar Prabhu, Member of the Kochi Tea Traders Association, said from the auction floor.

"Exporters and domestic players are present at the auction and though both have been active, they have preferred to take a cautious approach."

The situation was quite different a fortnight back, when exporters had to cover their positions and live up to their export commitments, despite rising prices. Having lived up to their export obligations, they can now adopt a wait and watch attitude, Mr Krishna Kumar Shah, President of the Kochi Tea Buyers Association, said.

However, there is a shortage of tea in both the national and international market.

"The drought in Kenya had resulted in a production shortfall of two million kg in November, which grew to eight million kg in December and 25 million kg in January," Mr Ulhas Menon, Secretary-General of United Planters Association of Southern India, said.

The Tea Board of Kenya said: "With hot and dry weather expected to persist as per the predictions of the meteorologists, tea output for February and March is expected to drop further." Earlier estimates had talked of a production shortfall of 85 million kg. Revised reports limiting the extent of production shortfall in Kenya have also resulted in easing of prices in the Indian markets.

While earlier reports talked about a 24 per cent shortfall in production, the Tea Board of Kenya has now indicated that the shortfall is expected to be around 16 per cent, from 328 million kg recorded last year to 276 million kg this year.

Also, reports of sporadic rains in South Indian plantations will bring a new flush of leaves, augmenting supplies in April, Mr Shah said. He said there could be one more correction, before the market stabilises around their current levels.