The United Planters' Association of Southern India (UPASI) has outlined the world tea supply situation.

In a statement issued at Coonoor on Tuesday, UPASI Tea Committee Chairman Peter Mathias said the prospects for tea exports were picking up. Listing out the reasons for his optimism and referring to the trends in the tea sector in the first half of the current year, he said out that there was a shortage in the world supply.

The subdued supply level in the world tea market was a result of lower Kenyan crop by 34.5 million kg. Though this was partially compensated by higher North India crop of 23.9 million kg, world tea production in the first half was lower by 20.6 million kg. In the South, the crop was down by 4.6 million kg due to dry weather in the first quarter of this calendar year.

The price realisation across auction centres around the world was more in the first half due to the tight supply situation. In South India, the average price realisation was higher by Rs.1.92 a kg and accordingly the average realisation was Rs.71.17 a kg during January-June 2011. Despite a decline in production, the quantity of tea sold at south Indian auction centres was higher by 2.3 million kg compared to the corresponding period of last year. In the orthodox category, sales have come down by about 17.3 per cent. But increasing export demand for this is expected to have a positive effect on the prices. The increase in the price realisation from South India despite lower exports of 9.7 million kg is mainly on account of an increase in the domestic demand for CTC teas.

The lower export (16.2 million kg) from India in general and South India in particular was on account of disturbance in the West Asia North Africa (WANA) region and also due to payment problem with Iran. As the situation is improving in the WANA region, export to the region is bound to pick up in the second half of 2011.

A close scrutiny of offering in major auction centres such as Mombasa and Colombo suggests that the quantity offered at the forthcoming auctions are low, implying tighter supply position in the short-run.