Dry spell in North-Eastern India to diminish the tea output by 25%

Tea woes continue due to late monsoon

Wuyi Mountain Tea Industry

The ongoing dry spell in Assam and West Bengal is likely to bring down India’s tea production by 25% from a year ago. This is the time of the year when production of second flush tea, which constitutes the bulk of the country’s tea crop, starts picking up.

Why is this important

According to Indian Tea Association, the prices of quality teas have risen by ~10-15%. However, prices of medium and lower end quality teas remain flat due to an oversupply by the unorganised small tea growers.

Tea Prices

In May 2017, Assam’s tea estates produced 62.53 million kg of tea while the estates in West Bengal produced 33.17 million kg. Total production in May 2017 was 123.51 million kg. In 2017, India had produced a record crop of 1,321.76 million kg, the breakup of which is:

Tea production 2017

Second flush production, which is mainly exported and also consumed domestically has been late this year due to bad weather. Exports pick up from June for second flush teas. In 2017, India exported 251.9 million kgs of tea. According to Calcutta Tea Trader’s Association (CTTA), the demand for quality tea is healthy and as the second flush teas enter the market, prices will improve further.

Stocks to be impacted

Tata Global Beverages (CMP : Rs. 262, Market Capitalisation: Rs. 16,554 Crore,
FY2020 PE: 24.6)
Goodricke Group (CMP: Rs. 292, Market Capitalisation: Rs. 630 Crores,
FY2019 PE: 6.9)
Mcleod Russel India (CMP: Rs.150, Market Capitalisation: Rs.1641 Crore,
FY2020 PE:10.6)
CCL Products (India) (CMP: Rs. 301, Market Capitalisation: Rs.4004  Crore,
FY2020 PE: 17.8)

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