Erratic weather disrupts tea production, drives up auction prices

• Irregular rain patterns and heatwaves hit tea production
• Auction prices are high, supply is limited
• Doubts are growing about reaching the tea board's production target
• Production has decreased, but demand for exports has increased

Tea production in Bangladesh has hit a slump this year due to erratic weather patterns, raising concerns about meeting annual targets and driving up auction prices. 

Despite setting a goal to surpass last year's record output of 10.29 crore kilograms, plantation owners are struggling with production losses that have affected the domestic market.

Between January and August 2024, tea output stood at 4.95 crore kg, 52 lakh kg less than the 5.47 crore kg produced during the same period in 2023. 

With the peak production season underway, doubts are growing about whether the industry can reach the 108 million kg target set by the Bangladesh Tea Board.

Erratic weather hampers production

According to plantation owners, tea cultivation in Bangladesh heavily depends on favourable weather conditions, particularly during the June-October monsoon, when most production occurs. 

However, this year's weather has been far from ideal. While tea thrives on moderate rainfall and sunny days, erratic rain patterns and heatwaves have disrupted the production process.

June saw moderate rainfall, which helped boost production to 1.29 crore kg, a 28 lakh kg increase from the same month in 2023. 

However, heavy rainfall in July and August reversed this gain. July's production dropped to 1.14 crore kg, down from 1.36 crore kg in 2023, while August saw 1.38 crore kg produced, compared to 1.44 crore kg last year.

Kamran Tanvirur Rahman, chairman of the Bangladesh Tea Association, told TBS, "Although it rained, the pattern was irregular. We received heavy rainfall in short bursts instead of the steady, moderate rain necessary for optimal tea growth. As a result, plantations couldn't reach expected production levels." 

Despite the setbacks, he noted that ongoing rains towards the end of the season might help recover some of the lost output.

Auction prices surge amid supply constraints

The production shortfall has led to reduced supply at tea auctions, driving prices up sharply. Last year, the average auction price of tea was Tk171 per kg. In contrast, the average price over the past five auctions this year has reached Tk204 per kg. 

In the 21st auction of the season, tea fetched an average price of Tk218.45 per kg, though it slightly decreased to Tk215 per kg in the 22nd auction. Brokers highlighted that minimum price thresholds introduced this season have stabilised prices, preventing them from dropping below Tk200 per kg.

Anup Chowdhury, senior manager at Purba Bangla Brokers, noted, "High auction prices are a natural outcome of limited supply. When prices rise, plantations typically send more tea to auction. However, weather disruptions have constrained production, limiting supply. This has sustained strong demand, with 70-75% of tea being sold at each auction."

Exports surge despite production drops

While domestic production has declined, exports have more than doubled compared to last year, driven by robust international demand. Bangladesh exported 21.8 lakh kg of tea in the first eight months of 2024, surpassing the 10.4 lakh kg exported throughout 2023.

The surge in exports has provided some relief to tea producers, who are benefiting from higher global prices despite challenges at home. This focus on international markets may help offset the reduced supply available for domestic auctions.

Cautious optimism for the future

Looking ahead, plantation owners remain cautiously optimistic that favourable weather in the coming months could mitigate the production shortfall. "There's still hope we can close the gap," said Kamran Tanvirur Rahman. "If the rains continue as they have recently, we may see an uptick in production."

However, with only a few months left in the growing season, achieving the 10.8 crore kg target seems increasingly unlikely. As of August, total production stands at 4.95 crore kg, significantly behind last year's 5.47 crore kg for the same period.

The combination of lower production and sustained auction demand means that tea prices are likely to remain high for the rest of the season. "Buyers are stocking up to ensure they have enough supply until the end of the year," said Anup Chowdhury. "We expect continued strong demand at auctions, especially with reduced availability during the peak season."

While plantation owners hope for favourable weather to close the production gap, the likelihood of hitting the annual target remains uncertain. In the meantime, both buyers and producers are preparing for sustained high prices at auctions.