According to a report, the increase in tea prices following global supply issues is likely to offset the impact of increased wage rates in West Bengal and Assam.
According to a report, the increase in tea prices following global supply issues is likely to offset the impact of increased wage rates in West Bengal and Assam.
Icra said that the increase in wage rates in the current calendar year in North India (NI), Assam and West Bengal in the current fiscal is expected to be nil due to good realization of tea, especially growers who focus on production of quality tea. are focused, Icra said. in a report.
In FY12, players' operating margins (OPM) declined due to moderation in realization and increase in pay rates. “Despite the impact of higher wage rates, the financial performance of quality producers is likely to see improvement in FY23 on a year-on-year basis. Increase in quality crush-tear-curl (CTC) and orthodox (ODX) prices Sujoy Saha, Vice President and Sector Head, Corporate Sector Rating, ICRA said that the tea would enable growers to absorb the higher cost of production due to the revision in wage rate.
ODX tea prices are trading at an all-time high due to a demand-supply mismatch in the international market due to production disruptions in Sri Lanka, the report said. Sri Lanka, the largest exporter of ODX tea globally, saw production disruptions due to the current economic crisis.
The report said that the production loss in Sri Lanka is likely to continue for some more time, leading to tight supply in the international market, which will support Indian ODX tea prices. NI CTC tea prices have also increased by 5 per cent on a year-on-year basis, mainly driven by a sharp increase in auction prices in August 2022.
The rise in NI CTC prices is supported by lower than expected production in the current season, especially quality tea and rising demand for good quality tea. It added that the price premium for high quality CTC tea is likely to continue as well, given its limited supply base.
However, the prices in South India (grown in Kerala, Karnataka and Tamil Nadu) remained lower as compared to the previous two financial years due to the consistent production level from leaves procured in NI, a direct competitor of SI CTC tea in terms of quality.
With ODX prices expected to remain fairly high on a year-on-year basis, some quality producers have increased ODX production.
Consequently, production of quality CTC is likely to remain flat, which will continue to support the prices of such tea as well. Analysis of tea prices indicates that the price differential of NI CTC tea, produced by top 50 estates at average auction prices, increased to Rs 137 per kg in the first 8 months of CY2022 from Rs 122 per kg in CY2021, ICRA Kaushik Das, Vice President and Co-Group Head, Corporate Sector Ratings, said.
By May 2022, the cumulative all-India production grew by 16 per cent on a year-on-year basis to 320 million kg. However, crop losses in June and July 2022 due to adverse weather conditions and floods, led to a 2 per cent decline in all India production in the first seven months of CY2022 to 614 million kg on a year-on-year basis. ,
Considering that 54 per cent of annual production typically occurs during the last five months of any calendar year, ICRA expects overall production in CY2022 to be flat compared to last year, though it will remain at the harvest stage by October. Will depend After which the production will start falling.
In CY2021, the all-India production grew 7 per cent on a year-on-year basis to 1,343 million kg, recovering from the low of the pandemic-hit CY2020 season. However, it is still 3 per cent less than the record crop of CY2019, said the Icra report.
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