Tea prices are likely to rally higher on short supply and increased exports, says a note prepared by the United Planters? Association of South India (UPASI). In the note prepared by Peter Mathias, chairman of UPASI Tea Committee, it is said that increased domestic demand has resulted in the higher domestic prices, in spite of higher domestic crop and lower exports.
The domestic tea production during the first eight months of 2011 was higher by 33.7 million kg, favored by the higher crop from North India (38.0 million Kgs.), while in South India, production was lower by 4.3 million kg. Globally, tea production has been on the lower side due to adverse weather conditions.
UPASI?s initial estimate for September 2011 anticipates a lower crop on account of non-conducive weather pattern. Excessive rains with low sunshine hours prevailed in the growing regions. Tea sold through auctions in South India during was 106.3 million kg as compared to 111.8 million kg during the corresponding period of last year, which shows a decline of 4.9%.
?This is mainly due to the lower crop production. Since exports from South India are lower, increased domestic demand has consumed the majority of the South Indian crop,? Peter Mathias said.
To satisfy increased domestic demand, some of the corporates have changed their product mix and produced more of CTC tea and reduced the production of orthodox tea, which are primarily exported. The UPASI note says that so far CTC tea have been fetching relatively better prices than the orthodox tea in the auctions. The average price realisation in South India is R69.27 per Kg for the period of January- 20th September 2011, compared to R66.74 per kg. during the same period of last year, which shows an increase of R2.53 per kg. With imports to India also lower for the study period, UPASI estimates more demand in the coming days.
Exports are also estimated to increase in the last quarter with payment problems from Iraq getting resolved, says the note.
