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Domestic oversupply pressures Indian tea prices

March 6, 2020

1 mins read

Indian CTC tea maintained downward price momentum through February on the back of robust supply. The monthly average price fell 22% m-o-m and 17% y-o-y to $ 1.35/kg. The CTC benchmark has shown steady downward movement since H2 2019, in line with seasonal trends, while output flourished on good weather conditions. The Indian Tea Board states local production grew by 3.8% y-o-y in 2019, contributing to regional oversupply.

The Indian Tea Board directed gardens to stop plucking after 10th December 2019 to tighten the supply of low-quality teas. However, prices continued to slide through January and February, as is typically the case until the first flush crops hits the market at the start of the second quarter. Price weakness is also partly attributable to the impact of coronavirus on international trade patterns, in addition to currency devaluations in key Asian exports markets.

On a bullish note, the Indian rupee has depreciated almost 4% against the US dollar since mid-January 2020. The US imports the bulk of its tea from China. However, trade tensions between the two countries resulted in heavy import taxes on Chinese tea in September 2019. The USA halved the import tax to 7.5% in mid-February, although tax-exempt Indian tea will still be comparatively more competitive.

Despite the pressure on the CTC market, the loose tea benchmark increased by 1% m-o-m in March and 19% y-o-y. The loose tea benchmark has diverged from the CTC benchmark since April 2018, which points towards a growing trend for luxury teas among aspirational consumers.

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Ibi Idoniboye
Ibi Idoniboye

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