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Aggregate Global Black Tea Production Likely To Contract 3% On YoY Basis: Report

The rating agency said that below-average production in CY2022 to result in a tightness in pipeline stock and is likely to support prices in the new season

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Amid the supply chain disruptions across the globe due to geopolitical crisis, aggregate global black tea production is likely to witness around a 3 per cent contraction on a year-on-year (YoY) basis, said rating agency Icra in a report on Friday.

The rating agency in its latest quarterly report on bulk tea has highlighted that three consecutive years (2020 to 2022) of sub-normal production, along with a higher volume of export from India are expected to result in a significant tightness in pipeline stock, which is likely to provide some support to bulk tea prices going into the new season.

The economic crisis in Sri Lanka has led to a production loss in the island nation, the largest exporter of orthodox (ODX) tea globally. This has kept the supply tight in the international market in CY2022, which not only led to higher volumes of export from India but also drove the prices of ODX tea in the domestic market upward.

Cumulative prices for North India (NI) as well as South India ODX teas during 7M FY2023 increased by 32 per cent to Rs 300/ kg and 9 per cent to Rs 154/ kg respectively on a YoY basis. 

The price rise, in the case of NI ODX teas, was much higher compared to SI ODX teas because of the formers’ superior quality. 

The rating agency expects the prices of ODX teas in the domestic market, for the full year, to remain at a substantially higher level, compared to the FY2022 levels, as Sri Lanka is likely to suffer further production losses, albeit at a decreasing rate, for the balance period of the year.  

Kaushik Das, Vice President and Co-group Head, Corporate Sector Ratings, Icra said, “The shortfall in production in Sri Lanka has enabled Indian producers to increase exports to meet the steady demand for ODX teas in the global market. In the nine months of the current calendar year, tea export increased by ~16% in volume terms with ODX volumes increasing by 22 per cent.” 

Das said that in value terms, while the value of crush-tear-curl (CTC) export is marginally down, that of ODX export increased by 22 per cent. Export prospects of ODX teas look favourable in the near term as well; the long-term sustainability of high volumes, however, remains to be seen.

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Black Tea global production ICRA Report