Soaring Tea Prices: India's Production Faces Heatwaves and Floods

India's tea prices are skyrocketing due to heatwaves and floods cutting down tea output in key regions. The surge in prices may help the struggling tea industry facing rising production costs. Extreme weather and government pesticide bans have severely impacted tea production, with significant shortfalls expected in 2024.

India's tea prices are on the rise and are projected to remain high, as heatwaves and floods during the crucial harvesting season have reduced output in major producing regions.

The price increase might provide some relief to the troubled Indian tea industry, which has been grappling with escalating production costs amid stagnant tea prices over the past decade. 'Extreme weather events are hampering tea production. Intense heat in May, followed by persistent flooding in Assam, are cutting output,' stated Prabhat Bezboruah, a senior tea planter and former chairman of India's Tea Board.

Additionally, production has been hampered by the government's ban on 20 pesticides, according to Bezboruah. India's tea production in May plummeted by more than 30% year-over-year to 90.92 million kg, the lowest figure for that month in over a decade, impacted by excessive heat and insufficient rainfall.

In Assam, a northeastern state accounting for over half of the country's tea production, over 2 million people have been affected by severe river flooding in July. Tea prices began to climb following a heatwave that reduced production starting in April amid strong demand, explained Kalyan Sundaram, secretary of the Calcutta Tea Traders' Association.

In late June, average tea prices surged to 217.53 rupees ($2.61) per kg, nearly a 20% spike from the previous year, as per Tea Board data. Production improved in June due to favorable rainfall, but new flooding in July has again restricted plucking activities in many districts of Assam, reported a Jorhat-based tea planter.

'July is typically a peak production month, but this year we foresee a shortfall of 15 to 20 million kg,' the planter mentioned. India produced a record 1.394 billion kg of tea in 2023, but production could drop by approximately 100 million kg in 2024, according to Bezboruah.

The production shortfall is expected to push prices significantly higher, but financially weak and indebted producers are struggling to negotiate with powerful buyers during peak production months, noted a Kolkata-based trader. More than half of India's total tea production is harvested between July and October.

Average tea prices in 2024 could be 16% to 20% higher than last year, yet the rise is unlikely to impact tea exports as many buyers are increasing their purchases following the pesticide bans, remarked Bezboruah. India's tea exports in the first four months of 2024 jumped 37% year-over-year to 92 million kg, according to the commerce ministry.

The country primarily exports the CTC (crush-tear-curl) grade to Egypt and the United Kingdom, while the orthodox variety is shipped to Iraq, Iran, and Russia. ($1 = 83.4575 Indian rupees)

(With inputs from agencies.)