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Tea traders have been complaining that there is a slowdown in tea sales in the market. However, despite the slowdown in tea sales in the retail market, both the price and sales of tea at auctions have increased. This is what was found in a review of the data from 21 auctions of the current season.
Tea producers or tea garden owners are getting higher prices than before at auctions. On the other hand, the price increase at auctions has also affected the retail market. Tea marketing companies have reduced the discounts for retailers. As a result, the price of tea per kg has increased slightly.
Tea that is sold in packets and loose tea in the market is usually purchased from auctions. Apart from this, garden owners collect a small amount of tea directly from the gardens and package it for marketing. Tea is sold at auctions in these three places in the country - Chittagong, Srimangal, and Panchagarh. Last season, 97 percent of the total tea sales took place at the Chittagong auction center. The Chittagong auction center mainly sells tea produced across the country.
According to the Chittagong Tea Auction Center, 43 million kg of tea was sold in the first 21 auctions of the current season. 35.1 million kg was sold in the same period last season. Accordingly, tea sales have increased by 15 percent compared to last time.
On the other hand, in the first 21 auctions of this season, tea was sold at an average of 237 taka per kg. In the same period last season, this price was 211 taka 36 paisa. Accordingly, the price of tea per kg in the auction has increased by 25 taka 67 paisa or more than 12 percent compared to last time. The price of tea in the auction is still rising.
The 21st tea auction was held in Chittagong on September 29. The average price of tea per kg in that auction was 244 taka 82 paisa. The average price of tea per kg in the auction at the same period last season was 208 taka 63 paisa. Accordingly, the average price of tea per kg in the latest auction is 36 taka higher than last time.
Tea traders say that many small buyers have now increased the amount of tea they buy from the auction. As a result, tea sales at auctions have increased. However, many big buyers have reduced their purchases at auctions.
Why are prices increasing
For several consecutive years, the average price at auctions was lower than the cost of tea production. Due to this, tea producers were in crisis due to continuous losses. In this situation, the Bangladesh Tea Sangsad, an organization of tea garden owners, appealed to the government to save the tea gardens from losses.
In response to the appeal of tea garden owners, a 'floor price or minimum auction price' for tea was fixed in the tea auction in April last year, like the stock market. After fixing the minimum price at the auction, the decline in tea prices stopped. The price also started increasing little by little. In the current season, the minimum price of tea at auctions has increased from 10 to 85 taka per kg.
On May 14, a meeting chaired by the Trade Advisor was held to revise the minimum auction price of tea. In it, the cost of tea production was fixed at 245 taka per kg. Based on that, the minimum auction price of the lowest grade of tea in the Sylhet and Chittagong regions has been fixed at 245 taka per kg for the current season. And the minimum auction price of northern botleaf tea is set at 170 taka.
* The average price per kg has increased by more than 25 taka.
* However, the smuggling of tea from neighboring countries is now a big threat.
* The minimum auction price has prevented a price drop.
* Tea is also coming to the market illegally from some gardens.
Setting the minimum auction price means that tea cannot be sold at auction for a lower price. To import tea, you have to get approval from the Tea Board. The Tea Board controls this approval. As a result, tea traders have to buy tea at the minimum price.
Kamran T. Rahman, president of the Bangladesh Tea Parliament, an organization of tea garden owners, said that the gap between the production cost of tea and the auction price that existed before has narrowed due to the imposition of a minimum price for the sale of tea at auction. However, he claimed that tea is still being sold at auction below the production cost.
Tea traders say that although auction sales have increased so far, it may decrease in the future. Because a large amount of tea was unsold in the last auction. Tea traders and producers believe that there are three reasons behind this. First, the demand for tea in the retail market is low. Second, tea is coming from neighboring countries through smuggling. Third, tea is also coming to the market illegally from some gardens.
This picture has also been found in the information from the Tea Board's inspections and mobile court operations. The Tea Board regularly inspects the factories in the gardens and runs mobile courts. Last July, three companies were fined for selling tea illegally in Srimangal. Again, the Tea Board temporarily suspended the operations of two factories this year for marketing tea illegally. Later, the suspension order was lifted after imposing fines.
What are garden owners and traders saying
Shah Moinuddin Hasan, chairman of the Tea Traders Association of Bangladesh, an organization of tea traders, said that on the one hand, tea is being sold at higher prices than before due to the increase in the minimum auction price; on the other hand, tea is entering the market illegally. This is harming the real traders.
Bangladesh Tea Parliament President Kamran T. Rahman said, "Currently, the biggest problem in the tea market is the smuggling of tea. This has increased the rate of tea withdrawal from auctions. If the smuggling of tea is stopped, the government will benefit. The gardens will also survive. If the gardens survive, the workers will survive."
Source: Online/GFMM
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