India’s tea shortfall won’t hit the British brew

A cup of tea may be as British as fish and chips but the drink’s popularity in Blighty dates to the nation’s links with India. Black tea continues to be popular there too, so much so that falling domestic production has sent local prices soaring. Shares in listed producers jumped on Tuesday: Bombay Burmah Trading rose 18 per cent to a record high; Harrisons Malayalam and McLeod Russel were up by a 10th. 

That didn’t look sustainable and the stocks fell back on Wednesday. Fears that price rises will ripple out to the rest of the tea-drinking world are also misplaced.

The situation in India is reminiscent of Sri Lanka’s experience in 2021. Agricultural production collapsed then after bans on the use of chemical fertilisers and pesticides. Tea exports, the country’s biggest cash crop, fell by 19 per cent to a 20-year low and global prices jumped in response. In India, floods and heatwaves in the Assam region are being blamed for this year’s shortfall. Production was estimated to be 30 per cent lower year on year in May. A pesticide ban is also contributing and local tea prices are up about 20 per cent from last year.

Unlike single harvest crops such as wheat or soyabeans, tea harvests are more of a rolling process. In India the hot, hard and poorly paid work is done during a first flush of new growth early in the year and into a second flush in May and June. Crops improve if the weather conditions do, which one tea broker expects to have already happened given better weather in June. 

In Africa, another important black tea producer, harvests happen year round. If anything, that continent may be facing a glut of supply as farmers in Kenya and Uganda have been encouraged into the cash crop. African black teas tend to be lower grade, thanks to growing varieties and production techniques. Those blends are more likely to end up in tea bags destined for Europeans.

Higher quality Indian and Sri Lankan black teas are more likely to be found in loose leaf tea markets, either locally or in countries like Turkey, Iran and Russia. 

The typical European tea bag might contain just 30 per cent of higher quality Indian tea. The commoditisation of bland European tea bags is a source of angst for growers and industry experts alike. And a wider gap between the prices for higher and lower grade blends will only accelerate this process.

This Indian tea rally may prove fleeting for the share prices of local growers — and will do nothing to improve the prospects of a better British brew.

andrew.whiffin@ft.com