Foreign tea buyers may bargain hard on prices this year

KOLKATA: Foreign buyers of Indian tea are likely to negotiate hard on prices this year. A weak rupee has already put Indian tea exporters in an advantageous position and the buyers may use this as a point for hard bargaining.

As of now, the buyers, who are largely from Europe, are entering into future contracts for quality second-flush teas at higher prices compared to previous year. At today's (Wednesday) rupee-dollar exchange rate, Indian tea is commanding a price of $4 -$4.4 per kg in the international market. The second-flush teas will be available from the third week of May.

Globally, there is a shortage of nearly 30 million kg tea that has firmed up the prices. Though Kenyan prices went down for a week, the prices have again gone up at the Mombasa auctions in the last two sales.

In the last sale, price of Kenyan tea has gone up to $3.13 per kg. The average auction price of all African teas is around $2.81 per kg. Kenyan tea production is down by 8 million kg whereas Sri Lankan production declined by 12 million kg. North Indian production has gone down by 10 million kg.

AN Singh, MD & CEO of Goodricke Group, said: "Buyers are very smart these days and the moment they come to know that exporters are in an advantageous position due to exchange rate fluctuation, they start hard bargaining. The buyers have already sent us feelers on price as rupee has weakened against dollar. However, till date, they are willing to pay a little higher for quality teas."

CS Bedi, chairman of Indian Tea Association, said: "If rupee continues to fall, then we can see some hard bargaining from buyers. However, a strong domestic market will help the industry tide over this sort of a crisis."