The Chairman of the Indian Tea Board, PK Bezboruah, expects domestic output to contract by around 10% y-o-y in 2020 because of the impact of the global coronavirus pandemic. The first flush plucking should be underway in Assam and West Bengal, the two main tea producing regions of the country. However, with the country in lockdown since 22nd March, tea gardens will remain out of commission until mid-April at the earliest, although even this date seems optimistic. Bezboruah reported that no first flush leaves have been picked and that social isolation will most likely limit the size and quality of the second flush, which runs through May to June. He expects up to 150,000 tonnes of tea could be lost the calendar year.
On a positive note for Indian exporters, Bezboruah’s expectations may help reverse the downward price trend of Indian teas. Mintec recently reported that oversupply and soft tea prices resulted in enforced production curtailments in key producing regions of India. Indeed, the average auction price of Assam leaf fell by 40% to INR96/kg ($1.33/kg) between July 2019 and March 2020. However, a tighter supply outlook, plus firm expected demand, should prove price supportive. Europe – and the UK in particular – is a major export destination. It is conceivable that the global lockdown will increase tea consumption, due to the convenience of people working from home. Likewise, the positive associated impacts of tea on health and mental alertness may prove attractive, given the coverage of mental and physical wellbeing in the media during this time. The depreciation of the rupee provides some upside price risk for Indian exporters.