Higher sales brewing for India’s tea exporters as drought grips Kenya

Tuesday, 21 April 2015 00:38 - - {{hitsCtrl.values.hits}}

Indian tea exports expected to jump about a tenth this year
Tea prices seen up on expected Kenyan supply tightness
Higher revenue hopes boost Indian tea companies’ shares

MUMBAI (Reuters): Lagging rains, output and demand were just some of the things worrying Bidyananda Barkakoty, a small tea garden owner in a north-eastern Indian state, until about a month ago. A recent dry spell in distant Kenya has since given him a reason to smile. Barkakoty is hoping the crop-damaging drought in top tea exporter Kenya will open a window of opportunity for Indian planters like him as rains improve output prospects at home. Industry sources are projecting a rise of about a tenth in exports this year from India, the world’s No.2 tea producer. “The shortfall in Kenyan production is pushing up prices there and it will start reflecting in the Indian market in coming months,” Barkakoty said. The hope that export revenues will soar as tighter Kenyan supplies boost prices have started filtering down to the share prices of Indian tea firms, such as McLeod Russel, Jay Shree Tea & Industries and Harrisons Malayalam , which have surged 10-14% so far this month. McLeod Russel’s Chief Financial Officer Kamal Baheti, expects India’s overseas tea sales to rise by 15-20 million kg in 2015, as dry weather drags down production in Kenya from a record high of 444.8 million kg in 2014.

“We will regain lost quantity this year,” Baheti told Reuters, referring to the 8.2% drop in the country’s exports to 201 million kg last year. “This year, since Kenya has been hit by drought, global and local prices will improve.” Sensing tight supply in the East African country where processing factories are receiving fewer deliveries from fields each week, tea prices in local auction centres in India have started climbing, Baheti said. The average tea price in 2015 is likely to be higher than last year, he added. All eyes now on may While the stage is set for higher Indian exports of the beverage, the focus is now on the month of May which should yield more clues on overseas demand, industry sources said. “Export orders are likely to increase from mid-May. By that time there will be more clarity on production in Kenya and India,” said Gopal Poddar, chairman, Limtex India, a producer and exporter based in the city of Kolkata. India ships CTC (crush-tear-curl) tea mainly to Egypt, Pakistan and Britain, and orthodox tea to Iraq, Iran and Russia. Planters had been expecting another year of low output due to dry weather in top producing state Assam in the northeast, but rains in the past two weeks have improved the situation, said an official with the Indian Tea Association. Output from India, where tea plucking gains momentum from June to November, eased 1.3% to 1,185 million kg in 2014. “It is difficult to estimate output since peak season hasn’t started yet. But certainly in 2015 production would be higher than last year,” the official said.