Tea Commodity Price Remain Firm as Tea Production loom

Commodity tea prices are likely to remain firm as production shortfalls loom large before Indian and global tea markets. Global tea production had dipped by 11 million kg by July on account of huge shortfall fromKenyaandUganda. A dip in tea production fromIndiacould further tilt the delicate demand-supply balance in the global markets.

Indian tea production was higher by close to one million kg while Kenya reported a huge shortfall of 31 million kg. Ugandan production had slipped by over 5 million kg. Latest reports also indicate that persistent rains have begun to affect the tea crop from Sri Lanka. The island nation's tea production was up by close two million till July 2011. Sources in the trade said that all that could now change.

Along withIndia, tea production short falls in Kenya,Sri Lanka and Uganda are likely to drag global tea production lower. After the sharp rise in tea prices during 2009, there was a dip in 2010 and the tea prices are continuing to rule at last year's levels. The emerging trends in global prices could become evident depending on the world production trends in the coming months.

The surfeit tea production fromNorth Indiamade up for the sharp tea production shortfalls from South, said Mr R. Sanjith, Head of Commodities, United Planters Association of Southern India (UPASI).

The incessant rains had affected plucking tea operations inSouth India. But it does not seem likely that the increased North Indian tea production, which had helped to buttress the slippages fromSouth India, is likely to continue into the next few months.

Tea exports from big producing countries, excludingChinaandSri Lanka, had dipped during the current year. Indian tea exports witnessed the steepest decline on 17.5 million kg till July 2011, whileUgandarecorded an export shortfall of six million kg andKenyaclose to five million kg. The decreased tea arrivals in the coming months could mean that the prices are likely to remain firm.

While several countries recorded fall in tea exports, China reported brisk growth by close to 14 million kg by June 2011.Kenyawas the biggest tea exporter in the world last year, accounting for over 25 per cent of the global tea trade, followed by China and Sri Lanka with over 17 per cent and with India with over 11 per cent.

Persistent rains over the tea growing regions ofSouth Indiaduring August and September is likely to adversely impact the crop. Though the rains seem to have abated by the third week of September, sources said, much of the damage has been done.

Category: global tea market, global tea production, indian tea, kenya tea, Tea, tea price 2011, tea price 2012