Tea auction prices fall to 12-year low despite record production in 2023

Tea prices dropped to a 12-year low at an average of 171.24 taka at auctions, ending on 8 April, despite the record production in the country’s history in 2023.

Tea production in Bangladesh goes back to the year 1840. As per the tea marketing rules, tea garden owners pick leaves, process those and then send tea to warehouses, from where broker houses collect samples and set the tea quality. After that, tea goes under the hammer weekly and is sold to the highest bidders. Buyers then collect tea from warehouses after paying taxes. Other than this, tea garden owners can sell tea at markets by packaging after paying a 25-per cent tax on produced tea.

There are currently three tea auction centres in Chattogram, Sreemangal of Moulvibazar and Panchagarh. Data from these three auction centres showed the record production and lowest price. Broker houses also released the information in their reports.

A total of 94.8 million kg of tea was sold at 50 auctions in Chattogram in the 2023-24 season, fetching an average price of 171.91 taka per kg while 1.34 million kg of tea was sold at 25 auctions in Sreemangal of Moulvibazar at an average price of 171.38 taka per kg and 960,000 kg of tea was sold at 14 auctions in Panchagarh at an average price of 105.19 taka per kg.

Altogether, 97.1 million kg of tea were sold at the three auction centres at an average price of 171.24 taka per kg – the lowest since the 2011-21 season when the average tea price, according to data from Bangladesh Tea Board and brokers houses, dropped to as low as 156.14 taka a kg.

During this period, tea prices reached a maximum of 262.69 taka per kg in the 2018-19 season, totalling 20.86 billion taka from auctions.

Tea production was more than the demand in the outgoing season plus the quality of tea from plain lands was not good, triggering a fall in tea prices at auctions, a trader told Prothom Alo. However, the prices of tea with good quality were better. Average and low-quality tea prices were low.

The tea industry sees a rise in production costs due to increased wages and equipment prices. According to the tea garden owners’ organisation Bangladesh Tea Association (BTA), tea prices were lower at auctions than production costs, thus, tea growers face losses.

BTA said in a letter to the Bangladesh Trade and Tariff Commission on 20 November 2023 that the average cost of tea production was 217 taka per kg in 2022. Production cost rose further in 2023, BTA president Kamran T Rahman said. According to the meeting minutes of a committee on fixing the minimum price of the tea board, tea production faced a loss of 4.65 billion taka in 2023.

As tea prices at auctions were less than production costs, the tea board set a floor price for auctions for the 2024-25 season on a trial basis and the season’s first auction was held on Monday.

Data from broker firms showed 1.4 million kg of tea were up for auction with 720,000 kg of tea being sold at an average price of 270.98 taka per kg whereas tea fetched an average price of Tk 249.23 taka per kg at the first auction in the last season. It indicates the tea board’s step brought fruit.

Six floor prices or minimum prices have been fixed based on tea liquor. Broker firms will rate tea liquor after garden owners send samples to them. The minimum price of regular quality tea has been set at 160 taka per kg and the price ceiling will rise with the tea quality to 210 taka, 227 taka, 245 taka and 270 taka per kg gradually while the price of best quality tea has been fixed at 300 taka per kg.

BTA president Kamran T Rahman told Prothom Alo prices at auction are yet to meet the production costs. However, the step of the tea board is a positive sign and if it remains in place throughout the season then the tea industry can be saved.

* This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna