Market outlook 2011: Tea and edible oil

KOLKATA: Tea prices are expected to remain firm in 2011 as global tea deficit may reach as much as 130 million kg by April 2011 compared with the 110 million kg forecast in September 2010. The shortage in tea production in India alone is likely to reach 80-100 million kg in the new season beginning April 2011, which will push up prices.

Average price in Assam, which accounts for more than half of production, may reach Rs 180 per kg by April from Rs 150 per kg, said Azam Monem, director at McLeod Russel India (MRIL). “We’re at the thin edge where any inconsistency in weather or cropping pattern has an immediate spiking effect on prices,” said Mr Monem.

In fact, tea production in India during the initial part of 2010 was higher but fell during the second part of the year due to pest attack in North-eastern states. Production in south India dropped during the third quarter of the year due to incessant rains.

According to Tea Board, production during the first ten months of 2010 stood at 813 million kg as against 830 million kg during the same period of last year. CK Dhanuka, chairman of Dhunseri Petrochem and Tea, said: “Tea production in the world’s three major producing nations namely India, Kenya and Sri Lanka is not expected to go up significantly next year. On the contrary, consumption of black tea in the world market is expected to increase.

In India alone, the black tea consumption is expected to grow 3.5%. Therefore, there will be a pressure on the supply which is expected to push up prices.”

Globally, tea prices have seen a rally on the back of a lower production. In Africa, tea prices rose to a record $3.12 a kg at the world’s largest auction of the leaves in Mombasa, Kenya. Kenyan tea output dropped 9% to 278 million kg in the first 11 months of the year, the Tea Board of Kenya said.

Similarly, prices of Sri Lankan tea has remained firm over the last few months. Sri Lanka produced 263.8 million kg tea in the 11 months to November — 12% less than the year ago production — according to the Sri Lanka Tea Board.

In India, prices of quality tea had fetched Rs 15-20 higher per kg in 2010 compared to the previous year. Aditya Khaitan, MDof MRIL, feels that tea is the lowest priced commodity in the country. “Input and labour costs have gone up significantly. In this backdrop, tea price should go up.”