Bidders Are Setting New Records at Tea Auctions This Spring

JORHAT, Assam

Halmari tea estate in India's Assam set a world record price of $10.50 (INRs700) per kilogram for crush, tear, curl (CTC) at the Calcutta auction last month. The tea was purchased by Kolkata-based J. Thomas & Co., and Mahabod Tea House in Kolkata purchased 307 kilograms. The tea is expected to sell for between $15 and $30 at retail. The price for the Halmari first flush broken orange pekoe (BOP) beat the garden's own second flush price of INRs600 ($9 per kilogram) set in July 2016. Teas in this grade generally sell for under $5 per kilogram. Buyers from the United Kingdom, France, and Germany are also splurging on first flush Darjeeling tea driving prices 10 percent higher and bringing succor to the planters who had feared in the beginning of the season that Darjeeling tea would lose out to Nepal teas in the global market due to limited production. Japan In Japan, trader Lee Rhoads cited a single kilo of hand-rolled that earned $10,200 (INRs685,850) on April 26 at an auction that drew 1000 bidders to Shizuoka. Kazuhiko Takeda, 59, a local tea producer, said, "This year's tea is so aromatic and full-bodied, and the quality is outstanding." Rhoads writes that tea sold at auction in prefectures such as Kagoshima and Miyazaki averaged $34 (3,715 Japanese yen) per kilo. China

Tea consumption will remain dominated by Asian consumers, particularly China and India, which together accounted for an estimated 57 percent of global demand in 2017, up from 48 percent in 2010. In China, The Economist’s Intelligence Unit “expects tea demand growth to continue to rise firmly, by an average of 4.8 percent per year in 2018-19.” Ten years ago the Chinese tea market was in a pricing bubble with fine teas selling for six times the price of a kilo of gold. An austerity program that resulted in fines and incarceration of thousands quashed that trend. Tea globally has seen very little price fluctuation after spiking in 2014, averaging $2.30 per kilogram world wide according to the World Bank. The World Bank forecasts an average auction price of $2.81 in 2018, $2.83 in 2019 and $2.84 in 2020. According to a report in Sixth Tone “Five hundred grams of West Lake Long Jing tea, picked during the mid-March first harvest in eastern China’s Zhejiang province, wholesaled at between 1,800 and 2,500 yuan ($260 to $360) this year. After it is repackaged and sold to consumers, West Lake Long Jing will retail domestically at between $870 and $1,150 (6,000 and 8,000) yuan per 500 grams.” Pricing is much more favorable for growers in China where tea is not auctioned. The early teas (pre-Qingming) enjoyed favorable weather in much of China. Sri Lanka “Tea production in Sri Lanka bounced back strongly after landslides and severe flooding in May 2017, with full-year production actually rising by 5 percent, despite alarmist warnings of a collapse in output following the heavy rains. With early indications of favorable weather conditions Sri Lanka's tea production will rise by an annual average of 1.8 percent in 2018‑19. Sharp wage rises and low mechanization mean that production costs in Sri Lanka are some of the highest among the world's main tea producers. As a result tea prices, which averaged $4.27 in 2017, are higher at the Colombo auction then any other major tea trading city. India India’s tea exports rose 3 percent in the first two months of 2018 from a year ago following an increase in the prices of Sri Lankan and Kenyan teas that made Indian teas more competitive in the global market. Sri Lanka’s premium orthodox teas are priced at $5 per kilogram while Indian varieties are 20 percent cheaper on average, at $4 per kilogram. India’s black CTC sells for $3 per kilogram on average, lower than $3.50 per kilogram charged for Kenyan CTC. Azam Monem, director of McLeod Russel India, the world’s largest integrated tea company said India has an edge over both Sri Lanka and Kenya in tea exports. “Although prices of Kenyan tea, our biggest competitor in the world export market, have seen a correction of 20-30 cents per kilo, they are still higher,” Monem told the Economic Times. “Orthodox tea is expected to be a game changer this year for Indian tea exports,” said Monem, who is also the chairman of Indian Tea Association. “Iran and Iraq will be the two major destinations for orthodox teas this year. China and Egypt are also emerging as major black tea markets for India. So this year we can expect a good market,” he said. Darjeeling “The weather God has been kind to us... there has been adequate rainfall and sunshine and the first flush harvest is very good… we are getting some of the best teas this season,” an official at Namring tea estate told The World Tea News. Of the annual Darjeeling tea production of 8.5 million kilograms, nearly 1.7 million kilograms are harvested from the first flush during the first two months of the new season. Tea produced from the younger more delicate and tender tea produces a light, floral, fresh, brisk tea with pleasant astringency. First flush Darjeeling teas are generally less oxidized during processing and may appear more greenish in color than typical black tea. Raju Lama, a tea exporter in Darjeeling told The World Tea News that he has been getting good response from buyers across the world, mostly the UK, Germany and France for the first flush Darjeeling tea. “Although there have been bargaining from a few regular buyers I am getting good prices from my teas, better than what I used to get before,” he said. Darjeeling planters are also hopeful that the hill district would have normal tea production of 8.5 million kilograms if the weather remains favorable. Production declined by 70 percent in Darjeeling as operations in all the 87 gardens were suspended for four months from June to September due to an indefinite shutdown called by the Gorkha Janmukti Morcha demanding a separate Gorkhaland state. Banks have been reluctant to advance credit to Darjeeling planters because of the severe losses they faced last year. Darjeeling tea producers also burnt cash for the revival of gardens and payment to workers without revenue generation. Assam Assam is the world’s largest tea producing region, but teas there generally do not command prices paid for the high mountain teas of West Bengal. Halmari general manager D.K. Arora said the record setting tea was made March 27. “This batch of tea was made out of tea leaves which had experienced congenial weather conditions in the preceding fortnight. It was an ideal mix of sunshine and rain which proved a catalyst in producing a unique blend of strength, body and flavor in it." J. Thomas & Co. Pvt. Ltd. chairman and managing director Krishan Katyal said the price was quite a "phenomenon" and that Halmari was in a different realm now. "It is just brilliant and they make some superb first flush teas too," Katyal told The Telegraph. In 2017, India tallied the highest tea exports in 36 years, at 241 million kilograms, with a year on-year increase of 8.2 percent. The country last exported 241 million kilograms of teas in 1981. The total value of tea exports in 2017 stood at $705 million (INRs 4,732 crore), up 5.9 percent or $40 million for the year. Sources: World Tea News, The Economic Times, The World Bank