Photo courtesy of Doke Tea Estate, Bihar
India Tea Prices Plunge as Demand Dissipates
By Dan Bolton
Industrious growers across India increased production 4% in 2019 but prices are falling as domestic consumption stagnates and exports fall. Depressed demand, shipping delays, and travel restrictions are driving down prices and adding to a global tea glut.
In the past few weeks, India’s tea exporters witnessed dramatic declines in bidding at tea auctions across the country. Record amounts of tea on offer remain unsold due to a virtual shutdown in purchases by Iran, which annually imports around 50 million kilos (m.kg) of India CTC (cut, tear, curl) black tea. In 2019, sales to Iran surpassed Russia, growing 74% to 53.5 m.kg at prices that averaged US$3.73 (INR276) per kilo. The promising Chinese export market for milk tea blends that grew by 30% to 13.5 m.kg last year is now flat. No tea has been exported to China since January. Prices declined 40% in Kolkata from INR200 (US$2.70) to INR120-130, and volume was down 65% at the Kochi tea auction the second week of March. In Kochi, bid- ding was vigorous only at the low end, where plain grades sell for $0.93-$1.05 per kilo. The best-quality leaf teas were auctioned at $3.13 per kilo, well below last year’s prices for specialty grade teas.
Indian Tea Exporters’ Association chair Anshuman Kanoria said that, “Iran is a critical market for us. There is a concern about demand for new-season tea from the Persian Gulf nation due to the coronavirus outbreak.”
Japan, which buys about 5 m.kg of Darjeeling tea, unexpectedly canceled a scheduled exhibition of Indian teas. In the year ahead, a combination of developments could make the situation dire. These include: greatly reduced exports to Pakistan, which was the fourth-largest importer of India tea before hostilities over Kashmir last year; Brexit, which has led to a 25% reduction in exports to the UK; lower demand in the Middle East, not only in Iran but also in war-torn Syria, Libya, and Iraq — all complicated by a likely global recession.
Travel and transport travails
March is when sales representatives at thousands of tea companies plan their travel to export destinations to present the new harvest to commercial buyers. Spring is also the time when specialty tea buyers travel to origin to sample and negotiate directly with growers. Supplies typically are depleted by June.
Neither buyers nor sellers are likely to be airborne through early summer. India significantly restricted the issuance of visas for travelers from Europe and Japan, two of the largest trading regions. First-flush buyers usually include a visit to Darjeeling, where 20% of the annual 8 m.kg command the highest prices, accounting for more than 60% of total sales for the year.
A disaster is in the making, according to the Darjeeling Tea Association: “The buyers from Japan and EU won’t be able to fly down to India due to visa revocation by the government. The cancellation of flights by the airlines to affected countries means tea cannot be airlifted to importing countries. If foreign buyers cannot come, they are unable to taste, select, and buy tea of their choice.”
Government subsidies
India announced it would distribute $600,000 in subsidies to 1,344 tea ventures, including 1,091 small tea growers. About $285,000 was to be deposited into their registered accounts with a similar amount given to 32 factories to begin producing orthodox tea. The subsidies include aid to children of tea workers, which have been pending for some time. Warehouses are holding a 50 m.kg surplus into the new harvest year. With exports likely to decline, the Tea Board of India is trying to increase domestic consumption, which has stagnated, exacerbating difficulties as production increased by 4% last year to a record of 1,390 m.kg.
Additional funds were allocated to producers to increase domestic consumption in regions including Odisha, Gujarat, Rajasthan, Bihar, and Haryana, where tea consumption is lower than in producing regions like Assam and West Bengal.