Tea stocks rally up to 16% as tea prices likely to soar further

Tea stocks, including Jay Shree Tea, Warren Tea, Rossell India, and McLeod Russel India, jumped between 6%-16%, with Rossell India scaling to its new 52-week high of Rs 663 on BSE today due to soaring tea prices driven by heatwave and floods reducing output.

Tea prices have been affected by the heat and rain concerns in key producing regions and with the government’s decision to ban 20 pesticides, stated Reuters, citing Prabhat Bezboruah, a senior tea planter and former chairman of India’s Tea Board.

The upside in tea prices started after a heatwave reduced production from April onwards amid good demand, added Reuters quoting Kalyan Sundaram, secretary of the Calcutta Tea Traders’ Association.

After an improvement in tea production in June due to good rainfall that alleviated the heatwave, flooding in July has once again limited plucking in many districts of Assam.

In the last week of June, average tea prices surged to Rs 217.53 per kg, marking a near 20% increase from a year before, according to data compiled by the Tea Board.Also read: Mphasis to trade ex-dividend tomorrow; last chance to be eligible for Rs 55 dividendThe price increase could potentially aid the struggling Indian tea industry, which has been dealing with rising production costs and stagnant tea prices over the past decade. However, the financially weak and indebted producers are still struggling to bargain with powerful buyers in peak production months, added Reuters.India’s tea production in May plunged more than 30% from a year earlier to 90.92 million kg, its lowest for that month in more than a decade, hurt by excessive heat and scant rainfall.

In the north-eastern state of Assam, which accounts for more than half the country’s output, more than 2 million people have been affected by severe river flooding in July.

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