February 8: Forward deals, often resorted to by producers, sometimes work out to be loss-making propositions, especially for a commodity like tea, which is susceptible to seasonal fluctuations on a global scale.In an interview with The Financial Express, PK Sen, chairman-and-managing director of J Thomas, the world's largest tea broking firm, said: "Over 90 per cent of the producers who entered into forward contracts in the last six months lost phenomenal amounts, at times to the tune of almost Rs 20 per kg"."In tea, a gain of Rs 5 per kg translates into extremely profitable gains for a producer. Producers who sold forward for Rs 69.23 on October teas got almost Rs 20 less as the same teas were sold at auctions at Rs 90.57 in November. This proves to be quite an unjudicious move on the part of producers at times", said Sen.
According to Sen, the present year is one of opportunity as far as the tea industry is concerned as the tea markets are expected to remain buoyant till June. Tea prices have been onan increasing trend since August last year but have steadied down to certain levels off late. In fact, although CTCs continued to register slight increases, orthodox prices had come down in recent weeks due to less buying by Russia.
Teas at nearly all auction houses have been very low with increasing exports and no carry-forwards for the ensuing season. "At J Thomas, we are short of nearly 90 million kg this year", said Sen. Auction teas sold on an all-India basis was 457 million kg in 1997 compared to 443 million kg in 1996. North Indian auctions offered lesser teas of 305 million kg in 1997 compared to 313 million kg the previous year. South Indian auctions (Cochin, Coimbatore, Coonoor) offered 151 million kg in 1997, which was higher by 22 million kg compared to 1996.
Prices have eased somewhat as catalogued and printed teas have remained in the system. This was possible via a recent Tea Board stricture asking tea broking firms to do away with the retention of outlots. "But some heat remains asavailability of teas is less at present", said Sen.
It is time for all tea producers and traders to rebuild their stock positions as there has been a running down of inventory levels for most tea companies in the present season.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
