Date:26/12/2005 URL: http://www.thehindubusinessline.com/2005/12/26/stories/2005122600750700.htm

Back Tea prices down on fall in exports, rise in output

G.K. Nair

"If the falling trend continues, the average price for 2005 is not likely to be more than Rs 40 a kg and the price trend is indeed gloomy."

Kochi , Dec. 25

RISE in production coupled with a drop in exports has resulted in a declining trend in tea prices this year in the country.

"If the prices were to improve, both exports and domestic consumption have to rise and at the same time, quality has to be improve as good teas both orthodox and CTC are fetching good prices even now," the head of a corporate group's tea plantation told Business Line.

The low prices have forced many growers to neglect the plantations. They do not follow the farm management practices such as timely application of fertilisers and pesticides. As a result, the quality of the leaf becomes inferior. "Of course, it is a fact that high wages and input costs have put many plantations under stress," he said.

Notwithstanding, certain companies do fairly well through high productivity, cost control and by producing good quality teas.

According to the United Planters' Association of Southern India statistics, production has gone up by 54.3 million kg (mkg) to 751.5 mkg in January-October 2005 from 697.2 mkg in the corresponding period last year.

Southern India output increased to 157.3 mkg from 153.6 mkg.

Global production during January-August/September 2005 also increased to 1,390.2 mkg from 1,320 mkg in the same period the previous year.

Meanwhile, exports from the country have dropped to 148.5 mkg from 164.2 mkg, while the domestic consumption in 2004 is estimated at 735 mkg up by 21 mkg from that of the previous year.

Exports to the country's traditional markets in the CIS countries fell to 27.44 mkg in January-August 2005 from 36.05 mkg in the same period last year, probably because of the consumers' shift towards good quality orthodox teas at competitive prices from other origins.

However, exports to Pakistan have risen to 5.81 mkg from 2.51 mkg. Imports this year (January-September) are down at 12.55 mkg (22.75 mkg). The decline could be attributed to the high unit value, which was Rs 57.75 a kg compared to Rs 45.34 a kg.

Given this scenario, there is a possibility of increased availability this year and that assumption is probably stopping the prices from moving up, he felt.

The South India average price, which was at Rs 68.80 a kg in 1998 fell to Rs 41.63 a kg in 2002 and to Rs 39.90 in 2003. However, it moved up to Rs 47.01 a kg in 2004. But it again fell to Rs 42.61 a kg in January-Oct 2005 from Rs 46.62 a kg in the corresponding period the previous year.

"If the falling trend continues, the average price for 2005 is not likely to be more than Rs 40 a kg and the price trend is indeed gloomy", a senior official of the Association of Planters of Kerala said.