Tea auctions in Chattogram see drop in sales, prices

Anxiety has gripped tea producers in Bangladesh as both sales and prices at the weekly international tea auction in Chattogram city are experiencing a drastic fall this season.

And considering the rising production cost fuelled by an increase in wage, energy and other associated expenses, tea garden owners fear a grim future for the industry.

Tea traders say demand is lower as peoples' purchasing power has reduced amid the ongoing inflationary pressure.

They also blamed surplus supply and an overall drop in quality resulting from the smuggling of low-quality tea into the market for the consistent fall in sales and prices.

However, they said good quality tea leaves and tea dust, a by-product of the refining process, are both bagging higher prices and good sales.

According to brokers at the Chattogram Tea Auction Centre, usually a maximum of 25 percent of the tea remains unsold after each weekly auction.

The remaining tea is then kept for the next auction, leading to a gradual increase in stores in absence of sufficient sales.

And since the start of the 2023-24 auction season in April, weekly sales have registered a record fall as huge portions of tea remain unsold.

A total of 23 weekly auctions have been held in Chattogram as of October 2.

Upon analysing available data, it was found that an average of around 35 percent of the tea remained unsold after each auction.

The 21st and 22nd auctions saw sales drop by 50 percent and 53 percent respectively, which was the steepest decline so far this year.

However, data on the 23rd auction was not available at the time this report was filed.

A total of 45.25 lakh kilogrammes (kgs) of tea was up for sale at the 22nd auction held on September 25 with more than 24 lakh kgs remaining unsold.

But apart from poor sales, tea garden owners have also been left frustrated over the sudden and drastic fall in prices at recent auctions.

Data of the Chattogram Tea Auction Centre shows that the average price of tea during the first 14 weekly auctions stood at Tk 212.24 per kg while it was Tk 199.50 at the same time last season.

However, tea prices in the last eight auctions ending with the 22nd had come down to an average of about Tk 188 per kg while it was more than Tk 203 at the same time the year prior.

Tea sold at the 22nd weekly auction fetched an average of Tk 176 per kg, down from Tk 249.24 in the first sale of the current season held on April 17.

At the 22nd weekly auction last year, the average price of the same tea was Tk 200.24.

Kamran Tanvirur Rahman, chairman of the Bangladesh Tea Association, said the sector has been dealt a heavy blow by the poor prices and sales as production costs have increased.

"It is difficult to make profit with such low prices," added Rahman, who fears that many tea gardens may shut down if prices and sales do not go up at the auctions.

Referring to the rising production at tea gardens this year, he said the surplus supply could become a liability for producers if sales and prices remain unsatisfactory.

Shah Moinuddin Hasan, chairman of the Bangladesh Tea Traders Association, said the poor demand for tea is mainly due the ongoing inflation and huge supply of substandard, low-quality and smuggled tea in the market.

"A section of unscrupulous traders is selling such substandard tea by packaging them with fake brand names while many tea vendors prefer to buy these at lower prices to cope with the higher prices of milk and sugar," he said.

"Due to such availability of substandard tea, most tea traders are facing poor sales and it is forcing them to buy less quantity from the auctions," Hasan added.

Mobile courts of the Bangladesh Tea Board conducted drives in the port city till October 5, seizing 10 tonnes of substandard, smuggled tea and fined five traders about Tk 2 lakh each for selling it.

Hasan said although tea production has increased, the overall quality is not that good.